Monday’s strong rally to kick off the fourth quarter saw some follow-through yesterday but one of the leading indices appears to be stalling. The Nasdaq 100 index (^NDX) recorded a doji star formation which was also an inside day pattern. Some consolidation would seem to be imminent and I would not be at all surprised to see a bout of "profit taking" ahead of the employment data on Friday.

As this is being written the Hang Seng index (^HSI) experienced an abrupt intraday reversal. After reaching a historic high the index reversed in the latter part of the session to close with a 2.5% decline. The performance of this index, along with many emerging market indices, has been quite breathtaking recently and underlines the activities of global asset allocators who are counting on a de-coupling of the US and the rest of the world economic prospects. When a correction does take hold in some of the Asian and Latin American markets there could be some newsworthy falls that may spook the markets in the "old world" economies.



The Russell 2000 (^RUT) was the outperformer on the upside yesterday as it continued its advance towards its summer historic highs. As the chart reveals there will be a lot of overhead resistance in the vicinity of 840.



There are signs that the oil services sector fund, OIH, is experiencing a waning of momentum and may have reached a temporary plateau.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 3, 2007

The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.

In line with our comments on the sector, Diamond Offshore Drilling (DO) is revealing the same plateaus in momentum and money flow.



Easy profits were available yesterday as Garmin (GRMN), discussed here yesterday, continued its downward trajectory by another six percent and the open, which did not produce any gap down, provided a perfect entry opportunity.



International Paper (IP) has straddled the converged moving averages for many sessions in a rising wedge formation. This pattern often precedes an upward price breakout.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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