After opening substantially lower, it initially looked as though the major indices were headed for another day of range-bound, indecisive action, but a late-day rally enabled stocks to reverse early losses and finish much higher. The Nasdaq Composite began the day with a 1.1% loss, then closed the session with a 1.1% gain. The S&P 500 and Dow Jones Industrial Average followed similar intraday patterns before climbing 1.4% and 1.2% respectively. Relative strength in small-cap stocks, which we pointed out in yesterday's commentary, became glaringly apparent today, as the Russell 2000 motored 2.8% higher. The S&P Midcap 400 advanced 1.3%. All the main stock market indexes closed convincingly at their best levels of the day.

Sharply higher volume accompanied yesterday's gains, enabling both the S&P 500 and Nasdaq Composite to score their second "accumulation day" within the past four sessions. Total volume in the NYSE surged 31%, while volume in the Nasdaq rocketed 40% above the previous day's level. On July 17, two days after the broad market formed its recent bottom, stocks gained on increasing volume. Over the next two days, while the main stock market indexes consolidated in a sideways range, volume declined. Then, as stocks resumed their recent bullishness yesterday, higher turnover again matched the gains. This is precisely the type of volume pattern stocks exhibit in healthy markets. Based purely on the recent buying by mutual funds, hedge funds, and other institutions over the past week (the two "accumulation days"), it appears overall sentiment in the market is changing (at least for the near-term).

Yesterday, we illustrated how UltraShort Oil & Gas ProShares (DUG) had pulled back to support of both its 10-day moving average (MA) and its intermediate-term uptrend line. As anticipated, the 10-day MA "did its thing" by prompting DUG to resume the direction of its relatively newly established uptrend. Although DUG performed as expected, we passed on "officially" buying it as a new ETF trade. Upon further analysis of the oil and oil service sector charts, we came to the conclusion that DUG was more likely to chop around in a range in the near-term, rather than actually resume its uptrend. Nevertheless, DUG presented a low-risk intraday trade for traders who followed our idea to buy yesterday's open. The bounce off the 10-day MA is shown on the daily chart below:

While on the subject of pullbacks to the 10-day MA, you may find it interesting to know that yesterday morning's low in the S&P 500 coincided with a touch of its 10-day MA as well.