Stocks oscillated in a relatively narrow and choppy range before finishing yesterday flat to modestly higher. The major indices built on their recent gains in the morning session, but sellers arrived in the afternoon and reversed the early strength. A bounce during the final thirty minutes of trading lifted the indices off their intraday lows. The S&P 500 was unchanged, the Nasdaq Composite ticked 0.1% higher, and the Dow Jones Industrial Average gained 0.2%. Small and mid-cap stocks showed a bit of relative strength, as the Russell 2000 rallied 0.4% and the S&P Midcap 400 0.3%.

Total volume in both exchanges was 1% higher than the previous day's levels. Technically, the gains on higher volume gave the Nasdaq its third straight "accumulation day," but a 0.1% gain on 1% higher volume was hardly enough to label it a session of institutional buying. Because yesterday was basically a session of sideways consolidation, it actually would have been much better if volume had declined instead of increased. When stocks trade in a sideways holding pattern, lower volume is a healthy sign that the bulls are taking a break and the sellers are staying away as well. However, if volume increases without a corresponding rise in price gains, it often indicates "churning" that is indicative of institutional selling into strength. This did not seem to be the case yesterday, but it is something to be on guard against, especially if volume rises again today without any corresponding gains.

One ETF that just broke out of a long base of consolidation was the Biotech HOLDR (BBH), which surged 2.7% yesterday. We have not discussed BBH for many months because it has been in a choppy, sideways range since April of this year. But it busted through a major area of horizontal price resistance and its 200-day moving average yesterday. Looking at the daily chart below, notice how BBH finally broke out above the 182 level, an area that stopped previous rally attempts numerous times over the past six months:

The longer a stock or ETF has been in a sideways range, the more explosive the move will be when the break out eventually occurs. Therefore, we expect BBH to trend steadily higher over the next several weeks. For a low-risk entry point on the long side, we would either want to see a price retracement of about one-third of yesterday's range or a sideways consolidation for another day or two. If it consolidates, we would buy the first breakout above the high of the consolidation on an hourly chart. On the other hand, if it gaps up and immediately rallies today, we will not chase an entry on the long side. If we get a proper entry in BBH, our initial stop would be near yesterday's low, just below the 200-day MA. An initial target would be the $195 area, which equates to a 76.4% Fibonacci retracement of the entire move down from its all-time high.

As for the broad market, both the S&P and Dow have held at fresh multi-year highs for the past two days. The Dow is also less than one hundred points away from its all-time high. It certainly has made quite a stealth recovery off its July low. The biggest problem holding down the Nasdaq has been the relative weakness in the Semiconductor Index ($SOX), which became notable more than a week ago. Yesterday, for example, the $SOX lost 0.7% while the Nasdaq gained 0.1%. If the $SOX gets in gear, it could easily propel the Nasdaq back up to its 52-week high as well, but for now the index remains 5% below it. The new highs in the S&P and Dow are definitely devoid of any overhead supply that could act as resistance, but history has shown us that rallies that are not led by the Nasdaq are often short-lived. For that reason, our overall market bias remains mostly neutral in the short-term.

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.