The adverse reaction to Tuesday's FOMC announcement seems to have provided the necessary jolt that awakened traders from their recent idecision and procrastination. Although the initial reaction from stocks and bonds was negative, and the Treasury market continued its decline yesterday, equity asset managers seized the opportunity, as we approach the end of the quarter, to inject some big name tech exposure in their portfolios. As we anticipated in Tuesday morning's commentary the semiconductor sector helped to propel the Nasdaq 100 substantially higher and the Nasdaq Composite to a new multi-year high.

Equally as impressive as the Nasdaq 100's gain was the standout performance of the Russell 2000 which powered ahead by 1.7% to achieve yet another all time high at 764. Those money managers that have been steadily accumulating the small cap stocks during this quarter will be more than satisfied from this index's continuing outperformance.

The Nasdaq 100 was the best performing index yesterday and moved exactly to the top of the range that extends back to early February. This index still has the furthest ground to make up to regain its earlier highs from 2006 and could well be benefitting from end of quarter window dressing but if yesterday's momentum is sustained we seem destined for a test of multi-year highs on all the major indices and perhaps a new all time high on the DJIA in coming weeks.

Tuesdayââ,¬â"¢s commentary drew attention to the iShares sector fund, IGW, which represents the semiconductor stocks. Our view had become bullish based on the unusually positive money flow characteristics, and, although Tuesday produced the FOMC related downdraft, we came back with a vengeance yesterday registering a 2.8% rise on the day.

The equity indices got over their disquiet about Tuesday's interest rate decision remarkably quickly but the Treasury market continued its sell off yesterday with the Thirty Year bond seeing the largest gain in yields to a new 2006 high of 4.84%.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY MARCH 30, 2006

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.

Impac Mortgage Holdings (IMH) was one of the market's best performers yesterday and delivered an almost 12% to our online portfolio as it gapped on the open above our profit target.

Wendy's International (WEN) appears to be struggling to regain its composure following last week's heavy volume sell-off.

Dell Computer (DELL) looks as though it has based successfully and may be headed higher.

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
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