Although Tuesday's bearish reversal positioned the market for tradeable follow-through to the downside, the major indices resumed their pattern of indecision by recovering a majority of their losses from the previous day. The S&P 500 gained 0.6%, the same amount it fell in the prior day. The Nasdaq Composite again lagged behind and gained only 0.4%. The Dow Jones Industrial Average advanced 0.7%, the S&P Midcap 400 rallied 0.8%, and the small-cap Russell 2000 closed 1.2% higher. Inverse of the previous day's action, each of the major indices closed near their intraday highs.

Unfortunately for the bulls, turnover unilaterally declined yesterday. Total volume in the NYSE was 10% lighter than the previous day's level, while volume in the Nasdaq was lighter by the same amount. Internals were positive, although more so in the NYSE than the Nasdaq. Advancing volume exceeded declining volume by nearly 7 to 2 in the NYSE, but was only positive by about 1.4 to 1 in the Nasdaq. The fact that volume declined when the markets rallied is bearish, especially considering that the previous day saw a session of distribution in both exchanges.

When the U.S. markets enter longer-term choppy and indecisive periods, better ETF trading opportunities can be found in the international sectors. Unfortunately, however, most of the international ETFs have broken out long ago and do not provide a positive risk/reward ratio for entry at current levels. But one exception is EWM, the iShares Malaysia Index. As the longer-term weekly chart below illustrates, EWM has been consolidating in an "ascending triangle" chart pattern for the past two years:

EWM has clearly had trouble with breaking out above the $7.50 area, but each attempt has been followed by a "higher low." In the big picture, we view this is a bullish consolidation that may soon lead to a long-term breakout to new highs. A rally above the July 2005 closing high of $7.56 would represent the breakout point. Just be sure to keep in mind that you are looking at a weekly chart and not a daily chart. As such, this type of trade setup is more ideal for longer-term accounts, such as an IRA, as opposed to an actively traded "swing" account.

As for the shorter-term in the broad market, it is positive that the S&P 500 initially bounced off support of its prior high at the 1,295 level. The problem, however, is that the other broad-based indices have a more convoluted technical picture that is looking more indecisive every week. The Nasdaq, in particular, has become a major "chop-fest" that has been whipsawing traders on both the long and short side. Obviously, we will eventually see broad market follow-through in the form a break out or break down, but it is imperative to avoid aggressive trading with a lot of positions until that happens. This is one of those periods where patient traders who do nothing are eventually rewarded, while those who overtrade will inevitably regret it.

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.