Stocks closed in mixed territory last Friday with minor gains and losses in the major averages. The Nasdaq Composite was able to recover from a midday selloff and close in the top 30% of the day's range, forming a hammer candle at the highs on higher volume. A hammer in an uptrend is known as a hanging man candle, which suggests weakness (but the weakness must be confirmed). If the price action break's Friday's low, then we could potentially see a short-term pullback develop.

Apple ($AAPL) flashed a warning signal on Friday, with heavy volume stalling action and a close in the bottom third of the day's range. A break below the two-day low could lead to a test of the rising 10-day MA. Given Friday's weakness in the Nasdaq, a potential short-term selloff in $APPL would most likely drag the Nasdaq lower (to rising 10ma as well?).



The Russell 2000 is consolidating in a tight range at the 50-day MA, but has yet to push through the average with conviction. The S&P 400 is also in a tight range but above the 50-day MA. It will be tough for the market to launch a sustainable rally with so much divergence among the major averages. Eventually, these averages will join the S&P 500 and push higher, or begin to crack and drag the S&P 500 lower.

In last Friday's report we mentioned platinum and palladium ETF ($SPPP) as a potential pullback entry as it comes in off the recent swing high on lighter volume.

Friday's undercut of the rising 10-day MA and prior day's low was bullish, as the price closed off the lows and near the middle of the day's range. The lighter volume and undercut action was ideal and sugests that the uptrend should resume soon.



Over the past few weeks, $SPPP has held the above the 10-day MA on each pullback, so we look for the price action to hold once again until it proves us wrong.
 
Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.