After a choppy morning session, stocks sold off throughout much of the afternoon, then bounced off their lows in the last half hour of trading. With the exception of the S&P Midcap 400, yesterday's selling pressure forced all the major indices to retreat back below their 50-day moving averages after holding above for just two days. The Nasdaq Composite lost 1.7%, the S&P 500 2.1%, and the Dow Jones Industrial Average 2.5%. The small-cap Russell 2000 and S&P Midcap 400 indices fell 1.5% and 1.8% respectively. Overall, broad market losses were moderate, and the bullish short to intermediate-term trends remain intact.

The bullish volume pattern in the Nasdaq continues, as total volume decreased 6% below Wednesday's pace. However, total volume came in 2% higher on the NYSE, registering the second bearish "distribution day" in recent weeks. While the higher volume is a bit of a concern, the major indices are still holding above their December 12 "swing lows," so the current rally still has good odds of pushing higher over the next week.

In November, Gold (GLD) bottomed out on the weekly chart, around $70.00, then had a strong run-up to resistance of its primary downtrend line. Yesterday, GLD entered pullback mode. Here are a few gold-related setups with potential pullback entry points:



As the chart above shows, GLD has backed off from resistance after a sharp rally off the lows. A little more time will tell just how this pullback should be played. We are expecting either a shallow bull flag pattern that consolidates just below the 200-day MA, or a deeper retracement to support of the prior swing high, around $82.00.

The Gold Miners ETF (GDX) is another way to participate in the recent strength in gold. Powerful moves in stock tickers such as NEM, RGLD, GOLD, and ABX fueled the recent downtrend line break in GDX. A pullback to the $27.00 - $28.00 area is a low-risk entry point:



The Powershares Precious Metals Fund (DBP) broke out above its downtrend line on December 16 (note the heavy volume on the chart below). While this is not a pure play on gold (the weighting is 80% gold and 20% silver), the recent strength in silver (SLV) makes this an attractive buy on a light volume pullback to the $28.00 - $28.50 area:



With crude oil (and USO) closing at a new 52-week low yesterday, a few energy setups we were considering for potential breakout entries above their 50-day MAs came under heavy selling pressure:





Whether or not these breakdowns are just a shakeout beneath the lows of a tight range, or the beginning of the next leg down remains to be seen. We still have no clear trigger for a long entry, so we will continue to monitor the action from the sidelines.

With the broad market range bound over the past two weeks, yesterday's selling had little effect on the technical picture. Broad market indices were able to find support from their 20-day EMAs, sitting right below the 50-day MAs. Barring any future distribution days, the short to intermediate-term outlook remains in good shape. Note that today is "triple witching" options expiration day, so be prepared for more volatility than usual, especially in the afternoon.

Open ETF positions:

Long - FXI, INP, SMH, QLD
Short - (none)

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and Morpheus Trading Group, a trader education firm launched in 2001 that provides daily technical analysis of the leading ETFs and stocks. For a free trial to the full version of The Wagner Daily or to learn about Wagner's other services, visit MorpheusTrading.com or send an e-mail to deron@morpheustrading.com.