Equities continued to slide yesterday as worries about the implications of credit market issues came to the fore and the slump in the banks continued. The Nasdaq Composite (^IXIC) fell back by 0.6% but positive earnings reports may bolster sentiment in the short term. In the intermediate term it would not be surprising to see a test of the breakout level from the first day of trading in October which saw the index supersede the previous multi-year highest close from mid-July at 2720.



The S&P 500 (^SPC) recorded a 0.7% decline yesterday and has slipped back below the mid-July highs but came to rest at almost exactly the level of the 20-day EMA.



The banking index (^BKX) discussed here yesterday, as it dropped below two key short-term moving averages on Monday, continued downwards by another 2.1% in yesterday’s trading. This puts the mid-August closing just below 102 in play. A failure to rebound at this level would be a bearish development for the overall market.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 17, 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.

Citigroup (C) closed at its lowest level since July 2006. The chart is instructive for it shows a clear inability of the stock to rise above its 200 day EMA since the August sell-off.



The long tails above the price action of the last few days show a strong overhead resistance for GMarket (GMKT) and the stock could correct towards the $24 level.



Many stocks are revealing some rather striking negative divergences including Wynn Resorts (WYNN). Another that was mentioned in Monday’s column is Synaptics (SYNA).



Syntax-Brillan (BRLC) dropped back by more than five percent yesterday but this was on very subdued volume. The retreat to the 20-day EMA may have brought the stock back to a point where a renewal of the buying interest exhibited on October 5 could appear.



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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