Most of the stock market's gains were the result of a massive bounce in the financial sector, which has been beaten blind, but we were simply not interested in playing the dangerous game of "bottom fishing."

Although the the market is presenting few bullish setups, sector ETFs with newfound relative weakness (as mentioned above) may present select short selling opportunities on a bounce. One such ETF is the Market Vectors Steel (SLX), which fell below its 200-day MA as the overall market rallied last week:



Rather than selling short SLX at current levels, it's a better play to wait for a bounce into resistance. Specifically, a rally that probes above the 200-day MA would present a decent short opportunity. Along with the 200-day MA now acting as new resistance, the prior lows from early July also converge in that same area.

The seemingly unstoppable agriculture/fertilizer sector may also have formed a significant top. After consolidating in a tight range, at its recent lows, for the past two weeks, Market Vectors Agribusiness (MOO) broke down below its 200-day MA last Friday. As its chart pattern is now similar to that of SLX, MOO can be sold short on any decent bounce into resistance of its prior base of consolidation and 200-day MA:



In the pre-market, Swiss pharmaceutical giant Roche Holdings announced an offer to acquire all outstanding shares of Biotech company Genentech (DNA), at a significant premium over current market price. As of last Friday's close, DNA held a 40% weighting of the Biotech HOLDR (BBH). As such, we expect BBH to open much higher today. We'll probably sell BBH into strength of the opening gap, as we don't like to remain in stocks or ETFs that are driven by news, especially takeover candidates that can get jerked around by rumors. Still, we're probably looking at a gain of nearly 10% since our original entry on July 2. Especially in this market, we're certainly not going to complain!

Open ETF positions:

Long - BBH, GLD, RSX
Short - (none)