The S&P 500 cash index (^SPC) lost ground yesterday closing at 1285, below its 50 day EMA, but in the middle of its intraday range. The low for the day brought the index into contact with the pivotal 1280 level, but in reviewing the chart formation we doubt that traders will be satisfied that this test was conclusive and would expect to see a more vigorous test later in the week.

The broad background for equities is becoming more difficult with bond yields above 5% and record oil and other commodity prices exacerbating inflationary fears (crude oil futures closed at a new record high of $70.40 per barrel). The benchmark index does appear to be under some duress at current levels, but tempering any tempation we have to alter our intermediate view is the fact that the noticeable troughs following the employment reports issued in February and March lead to swift recoveries (including some obvious short squeezes), and we could be carving out another similar trough at the moment.

The S&P Midcap index (^MID), along with several other indices, could be in the early stages of builidng a bearish flag formation as it clings to the upward trendline through the lows.

The Russell 2000 (^RUT) has a similar look to the chart above and we would become a lot more concerned about the direction for the overall market if a valid bearish flag formation goes on to produce a drop below the very clear trendline we have drawn.

The Gold index (^GOX) broke out from a possible double top formation yesterday and the metal itself closed at $618.40 per ounce which puts it at its highest level in 25 years. Newmont Mining (NEM) was one of the day's biggest movers with a 6% gain and silver closed at a new 23-year high of $13.38 per ounce

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY APRIL 18, 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.

Apple Computer (AAPL) has a well defined bullish channel formation and the volume during the pullback has been modest, which suggests that we may see a resumption of the recent two session buying strength we have highlighted.

Adobe (ADBE) also has a bullish formation and we would suggest a target price in the region of $39.

We are already holding Lyondell Chemical (LYO) as a long in our portfolio and the flag formation has unfolded to the point where it should trigger soon.

Schnitzer Steel (SCHN) could be vulnerable to further selling in coming sessions.

CECO conforms to the bullish pullback channel pattern

Maxtor (MXO) has pulled back on modest volume from the heavy volume upsurge that we have highlighted.

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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