Stocks gapped higher out of the starting gate yesterday morning, enabling the major indices to touch new multi-year highs, but traders immediately sold into strength. The broad market filled its upside gap within the first forty-five minutes of trading, but stocks subsequently drifted higher throughout the remainder of the session. In the end, it was a day of clear price divergence. Both the Nasdaq Composite and S&P Midcap 400 indices rallied 0.5%, but the Dow Jones Industrial Average was unchanged. The S&P 500 and the small-cap Russell 2000 gained only 0.2% and 0.1% respectively. Strength in tech stocks helped the Nasdaq to finish near its intraday high, but the S&P and Dow showed much less closing conviction.

As we often see ahead of a holiday, turnover was very light. Total volume in the NYSE declined by 13%, while volume in the Nasdaq was 9% lower than the previous day's level. In both exchanges, it was the lightest volume day since October 9. Volume levels in both the NYSE and Nasdaq have also been below their 50-day average levels in each of the past three days. Astute traders should view this week's broad-based gains with an ounce of caution because they have occurred on declining and minimal overall turnover. When stocks rally on declining volume, the problem is that it only takes one day of institutional selling to wipe out many days of gains. But so far, the bears have pretty much remained in hibernation.

In the November 21 issue of The Wagner Daily, we pointed out a bullish setup and in the CurrencyShares Euro Trust (FXE). Specifically, we were anticipating a break of its downtrend, which is exactly what happened in Wednesday's session. Here is an updated look at its weekly chart:

Unfortunately, nearly all of Wednesday's gain was the result of a large opening gap. Though we planned to buy the breakout with a trigger price above the November 10 high, the large upside gap reduced the risk-reward of the trade. We therefore passed on this trade, but a sideways consolidation here at the June high would allow FXE to set up for a new breakout entry to a fresh all-time high over the 130 level.

One ETF that is likely to break out in the coming days is the Oil Service HOLDR (OIH). Recently, we netted a large profit in a long position of OIH, but our trailing stop was triggered after it ran into its 200-day moving average. Over the past four days, OIH has recovered from that correction and is once again poised to break out above its 200-day MA. Take a look at the chart below:

As you can see, yesterday was the fourth time this month that OIH has touched its 200-day MA. Each subsequent tests of that resistance level increases the likelihood of a breakout. As such, we feel odds are pretty good that OIH will make a substantial upward move over the next week. Regular subscribers will see our trigger, stop, and target price for the setup below.

Remember that the stock market is closed all day today (Thursday), and concludes at 1 p.m. EST on Friday. Volume is likely to be very light today, and false breakdowns and breakouts are common in such conditions. Therefore, daytraders may want to stay away from the market altogether today. Swing traders should use caution with entering new positions as well. Happy Thanksgiving Day!

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.