In yesterday’s commentary I discussed the market’s resilience, in particular that shown by the Nasdaq 100 (^NDX). Early in the trading day yesterday I began to sense that this comment might have been a case of poor timing as it seemed that the fund managers who have been piling into the large techs could be starting to lose their nerve. In fact, the index showed heroic resilience yet again as it almost erased all of the early losses from the session to come to rest very close to the gap-down opening price. This is all the more remarkable in that certainly some fund managers were dumping constituents of the index, as can be seen in the carnage for Broadcom (BRCM) down 17%, Altera (ALTR) down 15.7% and Amazon (AMZN) down 12%.

The restorative powers of the potential for further fed easing are providing a powerful astringent to the bears, who keep trying to get some momentum going on the downside. Even with Merrill Lynch’s disturbing news about write-offs and equally disturbing news about plummeting housing prices and sales levels, the Dr Pangloss adherents keep reminding us that all this bad news can only be good news for the markets.



The S&P 500 (^SPC) also experienced a strong reversal as the intraday low yesterday penetrated below Monday’s low, but again the index closed more or less at the opening price and right in line with the 50-day EMA. As noted yesterday the index could run into some chart resistance at the 1530 level which marks the 20-day EMA and above that at 1540 which represents last Thursday’s closing value.



The FTSE 100 index is off to a strong start in Thursday’s trading and is up by more than one percent after hesitating on October 12 within two points of its June high. As the chart reveals, the index came down to a pivotal level yesterday that, if it were to break, would violate the up-trend line through the lows since mid August.

The Bank Of England published its periodic Stability report today (available at the Bank’s website) and it contained some unusually pointed comments regarding the risks that it perceives are facing the UK economy. The real estate woes that are now manifesting themselves in the US could be on the horizon for the UK and the growing evidence of tighter credit conditions will not be good news for the over-leveraged UK consumer sector.



TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 25, 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.

Wynn Resorts (WYNN) is revealing a succession of lower highs.



Schlumberger (SLB) is gradually pulling back from Monday’s plunge and the stock will be on my radar in coming sessions for evidence that the bounce is faltering.



The monthly chart for Freddie Mac (FRE) shows that the stock has now broken down to levels not seen since 2003.



The chart for Apple (AAPL) over the last two sessions reveals a very similar pattern to that for the Nasdaq 100 (^NDX) and in some ways the stock embodies the hopes and aspirations for the technology sector as a whole.

There is no denying that Steve Jobs’ Apple is a wonderful business success story but we'll have to see whether iPods and iPhones and other examples of leading technology can lead the market through the minefields of dollar weakness, troubled real estate loans and SIV’s that will have to mark their holdings at some point to the market rather than their more benign scenario models.



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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