Equities closed mixed on the session as volume spiked. With the exception of the Nasdaq the major indices finished higher on Friday. The Dow Jones Industrial Average, S&P 500, S&P MidCap 400 and small-cap Russell 200 posted gains of 0.4%, 0.3%, 0.2% and 0.1% respectively. However, technology stocks continued to get punished as the Nasdaq dropped 0.3% for the day.
Friday's mixed internals suggest the market may be trying to stabilize. Volume was up across the board. Turnover on the Big Board was up by an impressive 34.0% while it spiked by 22.0% on the Nasdaq. However, declining volume outpaced advancing volume on the Nasdaq by a ratio of 1.6 to 1 as the NYSE saw advancing volume outpace declining volume by a factor of 2.0 to 1. While technology stocks moved lower on increasing volume, large and mid cap stocks moved higher on increasing volume. This price and volume action indicates that distribution was still present on the Nasdaq while the NYSE may have seen an accumulation day. Regardless, the significant increase in volume suggests that institutions were actively participating in the market action yesterday.
On Friday we opened a long position in the Direxion Daily Energy Bear 3X Shares inverse ETF (ERY). We liked both the price action and the risk/reward potential for this ETF so we decided to take a half position on what we considered an early entry. Since there was no definitive buy trigger we reduced our size. We may add to this position should it break above current resistance levels. For our members, trade details are available in the open positions segment of the newsletter.
The iPath DJ-UBS Livestock Total Return Sub-Index ETN (COW) recently lost support of its 10 month uptrend line on May 3rd and sold off sharply. Over the past two weeks COW has recovered from the lows but is now at resistance of its 50-day MA, 200-day MA and the former uptrend line. Now that COW is testing resistance we will be watching carefully for a reversal candle and other signs that the downtrend may continue. 
The SPDR KBW Regional Bank ETF (KRE) rallied strongly above its 200-day MA yesterday but was met with stiff resistance and quickly retreated below this key mark. A volume assisted move back below Friday's low of $24.71 may present a shorting opportunity in this ETF.
Overall the market seems to be having difficulty in finding traction. Nonetheless, it is our belief that the market will likely seek higher ground over the next few days. However, if the market is unable to bounce and continues to consolidate at the current levels we will likely see a significant and rapid selloff.
NOTE:Regular subscribers to The Wagner Daily receive daily updates on the open positions above, as well as new ETF trade setups, including trigger, stop, and target prices. Intraday Trade Alerts are also sent via e-mail and/or mobile phone text message on as-needed basis.
Deron Wagner is the head trader of Morpheus Capital Hedge Fund and founder of Morpheus Trading Group (morpheustrading.com), which he launched in 2001. Wagner appears on his best-selling video, Sector Trading Strategies (Marketplace Books, June 2002), and is co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. He is also a frequent guest speaker at various trading and financial conferences around the world. Wagner is currently working on this third book, scheduled for publication in early 2008.For a free trial to the full version of The Wagner Daily above, which includes detailed ETF trade setups and daily position updates, or to learn about our other newsletters, visit morpheustrading.com or send an e-mail to deron@morpheustrading.com