The 1310 resistance on the S&P 500 cash index (^SPC) was not tested yesterday with an intraday high that stopped short at 1307. The long green candle reversed the negative performance from Monday and the index managed to close at its highest level since March 17th.

We may find out today whether the bulls can find the appropriate impetus to push this market through the overhead resistance, but we sense that there are a lot of traders looking to exploit any signs of weakness and vulnerability .

The S&P Midcap index (^MID) closed at 793 for an all-time high yesterday. The continuing outperformance of the small and midcaps points to the fact that the capital markets are awash with liquidity and that, as the low levels on the VIX are also suggesting, asset managers seem very unconcerend about amassing large positions in equities that have higher bear market betas and that could suffer the most if, for any reason there was a rush for the exits.

After several weak sessions the Banking sector (^BKX) has reversed rather strikingly and with bond yields now approaching the top of their assumed range near five percent there may be further follow through in the financial sector.

Goldman Sachs (GS) amongst the investment banks continues to dazzle and, in general, this sectorââ,¬â"¢s superlative performance is yet further evidence of the massive overhang of liquidity that has been accumulating since 2002.

The energy sector, as represented by the sector fund XLE, has been building in a clear buy channel recently and as the MFI chart reveals there has been steady accumulation.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY APRIL 5, 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.

Applied Materials (AMAT) could be ready to rally.

American Pharmaceuticals (APPX) is poised for a decisive breakout from its very narrow voaltility bands and the money flow indications suggest that we are headed higher.

Foundry Networks (FDRY), also mentioned in a recent Watch List analysis, seems to have succumbed to its negative divergences.

Tellabs (TLAB) is also displaying negative divergences but the pattern is a little confusing as the early March gap down has been followed by a rally to a new high.

LSI Logic (LSI) has been rising with evidence of fading money flow and momentum

EBAY has a bullish looking formation but the 200 day EMA could cap the initial move.

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 guarante 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 you cannot afford to lose. This article is neither a solicitation nor an offer to buy or sell securities.