The spinning top pattern from yesterday's trading for the Russell 2000 index (^RUT) is quite intriguing as it spans the intersection of the 20 and 200-day EMA's (the blue and green lines on the chart respectively). The intraday low just failed to reach down to the 50-day EMA (red line) which sits astride the pivotal 720 level that I discussed in Monday's column as a probable target for this recent corrective episode.

I would not be surprised to see a more robust testing of this level before the bulls try to regain the upper hand but one other notable characteristic of the chart below is that the 20-day EMA is now about to cross above the 200-day EMA, a position it has not been in since last October.



The euro has been consolidating in the $1.47 region over the last few sessions and the hourly chart shows some constructive divergences but there is a strong area of overhead resistance to contend with at the $1.49 level.



One of the more attractive trades in the forex market from an intermediate term perspective is to be long the Japanese yen and short the Australian dollar.



A correction is under way in the biotech sector and the chart for IBB suggests that a momentum top may be in place. An attempt to rally back to the $90 level is to be expected but any failure to break above the intraday high of August 15 would signal a potential drop back to the 50-day EMA. The MFI chart indicates that distribution was taking place during the recent rally.



XLB appears to be in a technically weak condition with the possibility of a downward staircase pattern emerging.



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.

Disclaimer
The purpose of this article is to offer you the chance to review the trading methodology, risk reduction strategies and portfolio construction techniques described at tradewithform.com. There is no guarantee that the trading strategies advocated will be profitable. Moreover, there is a risk that following these strategies will lead to loss of capital. Past results are no guarantee of future results. Trading stocks and CFD's can yield large rewards, but also has large potential risks. Trading with leverage can be especially risky. You should be fully aware of the risks of trading in the capital markets. You are strongly advised not to trade with capital.