Stocks finished up a choppy and erratic week with another session of the same action last Friday. Stocks closed modestly higher, but the intraday action resembled a roller-coaster ride. Like the previous session, small caps showed relative strength and enabled the Russell 2000 Index to gain 0.8%. The index also finished at a new all-time high. The Nasdaq Composite gained 0.6%, the S&P Midcap 400 advanced 0.5%, and both the S&P 500 and Dow Jones Industrial Average eked out gains of 0.1%. For the week, the S&P 500 fell 0.3% and the Nasdaq Composite closed higher by the same percentage. Traders were rather noncommittal throughout last week, as the broad market moved sideways in a relatively narrow range and closed the week near the middle of that range as well.

Turnover was mixed overall last Friday, but the S&P registered a marginal "accumulation day" due to a 7% increase in the NYSE total volume. In the Nasdaq, however, total volume was 4% lower than the previous day's level. Market internals were solid across the board, as advancing volume exceeded declining volume by a margin of 2 to 1 in both exchanges. Volume in the NYSE was below its 50-day average level every day last week, so it's not surprising that we saw a lack of follow-through in either direction. In the Nasdaq, volume exceeded its average on two of the five days.

Entering the new week, the S&P 500 is sitting right in the middle of its two-week range. Unfortunately, we expect trading to remain choppy and indecisive until the index makes a move out of that range. A quick look at the 15-minute intraday chart of the S&P shows how easy it has been to be whipsawed out of both long and short positions over the past week in particular:

Zooming out to the daily chart of the S&P, the range of the chopfest is more easily defined. Support is currently at the 1,295 level, which represents support of the prior high which the S&P recently broke out above. Resistance is at 1,310, which is the intraday high of the two-week range. As long as the S&P remains between that range, we recommend taking it easy with entering new positions. Otherwise, it will be very easy to churn your trading account. We have illustrated these support and resistance levels on the daily chart below:

Trading action in the Nasdaq Composite has been equally erratic as of late, although the index has begun to shake off its relative weakness to the other major indices. The magic number to watch in the Nasdaq is 2,333, as a close above that level would represent a breakout to a new 52-week high. As you may recall, the Nasdaq made an attempt to rally above its prior high last week, but reversed exactly at resistance of that level. Conversely, support will be found at last week's low of 2,282, which also converges with the 50-day moving average:

The Feds kick off a two-day meeting on interest rates today, with the usual announcement of any changes to be made tomorrow at 2:15 pm EST. Unlike recent FOMC meetings, economists are a little more divided over whether or not the Federal Reserve Board will raise interest rates to the 5% level. Therefore, expect a substantial amount of institutional positioning ahead of the announcement, which can only serve to build on the market's recent lack of direction. Fortunately, however, there is a good chance that a strong reaction to tomorrow's Fed announcement will push the major indices out of its range. Either direction is fine with us, as we would simply welcome relief from the lack of follow-through on attempts at trending.

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.