The new week did not produce a continuation of the bullish momentum that began to re-assert itself last week. The indices either ran in place or slipped back towards key moving average levels. As if to highlight the indecisive nature of yesterday’s trading the S&P 500 (^SPC) registered a fairly narrow range which almost qualified as an inside day. The index settled exactly at the 200-day EMA level and now sits ensconced between this and the 50-day EMA.



The banking sector index (^BKX) was rebuffed at the 50-day EMA level which, as the chart illustrates, tracks very closely with the descending trendline through the highs since early October. Among the many cross currents that face the sector and could well lead to some erratic price action is the mounting evidence that the interbank money markets are seizing up again, as evidenced by nine-year highs on the two-month and three-month LIBOR rates.

Nevertheless there is evidence, from volume analysis of many individual banking charts, of early accumulation which points to the fact that the institutional bias may have switched towards one of finding value in the sector, rather than shunning it in favor of the large technology stocks for example.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY DECEMBER 4, 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.

The chart for MEMC Electronic Materials (WFR) reveals two striking shooting star candlesticks at the $78 level and a possible double top formation.



Northrop Grumman (NOC) climbed above two moving averages on decent volume and a continuation back towards the early November highs seems to be probable.



Northern Trust (NTRS) has evidence of dissipating momentum and money flow.



GMarket (GMKT) appears to have reached the upper limits of a bearish pullback channel.



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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