Bullish momentum from the S&P and Dow's recent breakouts to new multi-year highs continued yesterday, enabling the major indices to post their fourth consecutive day of gains. Though most stocks traded within their previous day's ranges, the broad market recovered from mid-day weakness to finish higher and near its best level of the session. The S&P 500 gained 0.2%, while both the Nasdaq Composite and Dow Jones Industrial Average advanced 0.3%. The S&P Midcap 400 managed to rally 0.1%, but the small-cap Russell 2000 was unchanged.

Volume in the Nasdaq came in 9% lighter than the previous day's level and total volume in the NYSE declined by 13%. The ease in turnover caused the NYSE volume to fall below its 50-day average level, but Nasdaq volume remained above average for the fourth straight session. Looking at market internals, advancing volume in the NYSE was nearly the same as declining volume yesterday. The Nasdaq ratio was positive by less than a 3 to 2 ratio.

During yesterday's session, we sent two different intraday e-mail alerts informing subscribers of new ETF trade entries. The first was a long position in the Biotech HOLDR (BBH), which we analyzed in detail yesterday. As anticipated, BBH retraced just over one-third of the previous day's range yesterday morning, providing a low-risk entry point for new long positions. It subsequently acted well throughout the remainder of the day and is presently showing a small marked to market profit.

In addition to BBH, we also entered a new short position in the Utilities HOLDR (UTH). The DJ Utilities Average ($DJU), which UTH follows closely, suffered from a failed breakout in the end of August. Its inability to sustain its breakout to a new all-time high led to a rapid reversal of momentum. From September 1 through 22, the index fell 4.6% from its high and closed lower in 13 of 15 trading sessions. As you may recall, we netted a solid profit in the S&P Select Utilities SPDR (XLU) throughout the decline. Because it began to appear a bit "oversold," we took profits by closing our short positions in the Utilities sector last week and decided to wait for the next bounce to re-short. The correction off the lows came right on time, as the index began to recover on September 25. In the first three days of this week, the $DJU bounced nicely, right up to resistance of its 61.8% Fibonacci retracement. It also rallied back into resistance of its 50-day moving average. Not surprisingly, it began to head back down yesterday:

Because the steady selloff throughout the first three weeks of September left a lot of overhead supply in its wake, the $DJU rally into the 61.8% Fibo retracement and 50-day moving average provided a low-risk re-entry point on the short side. As such, we sold short the Utilities HOLDR (UTH) yesterday, with a stop over the September 1 high. Several other Utilities ETFs are just as viable alternatives to UTH.

The broad market remains impressively resilient, but, as it often does, divergence between the major indices may soon lead to choppy and indecisive trading. The Dow probed above its all-time high yesterday and finished just a few points below it. But the Nasdaq Composite continues to trade well off its 52-week high. A handful of industry sectors are breaking out to the upside, but several are also setting "lower highs" and are poised to roll back over. For this reason, we are simultaneously long and short four different ETFs. Note that today is also the last business day of the month and the calendar quarter. As such, we may see a bit of institutional "window dressing" that occurs when fund managers attempt to make their portfolios look good through buying the best performing stocks and ETFs of the quarter.

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.