In Good Morning, Traders. In Thursday morning's commentary we discussed the recent "inside days" in the S&P that have followed some majorly bearish days down. As you can see from the snapshot of the daily above, Thursday's trade did not really add too much to the picture as we printed another doji on the dailies corresponding with the near-flat market action ahead of the three-day weekend. All three major averages closed flat and within a hair of Wednesdays close. Although this type of lackluster price action ahead of a holiday is usually par for the course, it should be noted that we are still consolidating by time and not price. This means that at the trendline support (blue) we continue to make dojis on the dailies, rather than "bounce" or offer some sort of retracement. This week should be rather pivotal for the markets as we finally decide whether or not this trendline support will hold here at the 1290 area in the S&P or send us lower. So far, the disconnect between earnings acceleration and equity appreciation continues. Numbers are for the most part quite positive as usual, yet there is no doubt the market feels heavy. Overall bias is still upwards with near-term bias sideways to down. Be careful out there as the first full week of earnings season gets underway today. Expect results from Citigroup (C), Wachovia (WB), JB Hunt Transportation (JBHT), and others to roil the markets.

Let's take an opportunity to show some sector charts that could be in play in the weeks to come.

$DJUSCA - Dow Jones U.S. Gambling Index
Industry - Gaming
Side - Long
Notes

• I loves this sector. Its the strongest chart out there and the fundamentals support further up movement; however, its a little overextended here. ShadowTrader is cutting back on the gaming stuff at this juncture to take some off the table and will wait for a little correction to get back into these stocks.

$DJUSHB - Dow Jones U.S. Home Construction Index
Industry - Homebuilders
Side - Short
Notes

• People have been asking for some time now, "when is the other shoe going to drop" in this sector. If you take a look at the chart above, the answer may be "soon". We have recently started to put in definite lower highs on the weekly (blue circled areas above), resulting in a descending triangle pattern. Watch housing stocks closely as this sector chart gets closer to the 800 level.

$OSX - Amex Oil Services Index
Industry - Oil Services
Side - Long
Notes

• For now, you missed it. Its probably going higher but notice the cup and handle that is forming? We have already formed the right side of the cup, so now we have to "handle". The ShadowTrader Focus List remains bullish on this sector but its in a holding pattern for now.

$GOX - Amex Gold Index
Industry - Metals and Mining
Side - Long
Notes

• Same situation as Oil Services chart above. More than likely headed much higher along with the metal. BUT, recent price action suggests a little more pause in this area before the next leg up. Unless your outlook is really long term and you don't trade much, why tie up capital?

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.