Like the previous day, stocks gapped down on yesterday's open, but the pre-Fed jitters were assuaged when the afternoon announcement on interest rates contained nothing surprising. After the typical wild price swings in both directions, the major indices found their footing and finished the day moderately higher. The Nasdaq Composite gained 0.2%, the S&P 500 0.3%, and the Dow Jones Industrial Average 0.4%. Small and mid-cap stocks perked up for a change. The Russell 2000 rallied 0.5% and the S&P Midcap 400 advanced 0.7%.

Slightly higher volume accompanied yesterday's gains, helping to minimize the effect of the previous day's "churning." Total volume in the Nasdaq increased by 9%, while volume in the NYSE was 3% higher. Turnover in the Nasdaq returned to above average levels, but the NYSE volume remained below its 50-day average for the sixth consecutive session. Advancing volume in the NYSE exceeded declining volume by a margin of 2 to 1. The Nasdaq ratio was positive by just under 3 to 2.

On the international front, the iShares Hong Kong Fund (EWH) closed at nearly a 10-year high yesterday. Volume was also more than double its average level. Unlike many of the international ETFs that are already extended within the context of their uptrends, EWH is now positioned for a clear breakout:



As you can see, EWH had a substantial correction in early March, dipping down to support of its 200-day moving average. We like that because it increases the chances of a subsequent breakout holding up. After recovering from its March low, notice how EWH also tested and held support of its 50-day moving average in the latter half of April. This further provided confirmation of the renewed bullishness in EWH. Barring a sudden correction in the U.S. markets, EWH should breakout higher in the short-term.

Several weeks ago, we suggested that the S&P 500 was not likely to see a significant correction until the index at least tested resistance of its all-time high that was set back in March of 2000. So far, that analysis has proven to be correct. Given that yesterday's close of 1,512 was only one percent below the historical closing high of 1,527, we very well may see a test of that high in today's session. If we do, prepare for a potentially volatile and erratic ride, as there surely are an abundance of stop orders near that level.

The initial knee-jerk reaction to yesterday's FOMC announcement was favorable. The Feds essentially didn't say anything different from the last meeting, so traders and investors breathed a sigh of relief. But as we point out every time, remember the market's real reaction to these interest rate announcements usually follows one to days later. Obviously, the market remains in a solid bull trend with no imminent signs of correction, but that is all the more reason to avoid complacency with long positions. As long as you remain vigilant about keeping protective stop orders in place, go ahead and keep riding out the momentum.

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.