The indices followed through yesterday in a constructive fashion following on from Tuesday's powerful surge with some new multi-year highs being registered in certain sections of the market. The S&P 500 closed with a small gain just below the 1310 level which as the chart reveals has presented quite strong resistance going back more than a month.

We continue to be fascinated by the fact that just about everything is going up - stock indices, bond yields, gold, oil, and industrial commodities all seem to be in bull markets. Of course the opposite side of the coin to increasing bond yields is that prices of Treasuries are themselves in a bear market and we continue to believe that, if they continue to act poorly, this is the one asset class that the stock market cannot ignore indefintely.

The Russell 2000 (^RUT) pushed further into record high territory yesterday and has gained almost four percent in two days. We have taken a longer view on the daily chart to show the extent of the rise that we have seen since the lows from last October. The index is up more than 23% since then and we have highlighted all of the turning points where the market wobbled close to its 50 day EMA, only to be followed by swift reversals.

The current reversal pattern is actually the most aggressive and suggests that traders are becoming ever more confident in this index's ability to outperform. One trading strategy that would have proven highly profitable with minimal risk, would have been to go long the IWM and short SPY each time the IWM touched its 50 day EMA.

While this strategy continues to pay off, the overall market should retain its bullish tone, but when it starts to fail this could suggest that we will be entering a more difficult time for equities.

The Nasdaq Composite (^IXIC) closed at 2370 for a new multi-year high yesterday but the Nasdaq 100 continues to have difficulty regaining the highs from early 2006. We have included the QQQQ chart to show the recent volume and money flow characteristics. Yesterdayââ,¬â"¢s volume was notably subdued and dwarfed by the down volume from Mondayââ,¬â"¢s weak session.

The chart below shows the steep rise in the yield on the Treasury's longest dated security - the thirty year bond. The 65 basis points rise in yields from the February lows just below 4.5% illustrates the recent bearish activity for bond prices and it is also worth pointing out that in recent weeks the long end of the yield curve has been suffering more than the shorter end.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY APRIL 20, 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.

Andrew Corporation (ANDW) could represent an opportunity on the short side.

Commerce Bancorp (CBH) has a clearly defined bear flag formation.

Seagate Technology, STX, featured yesterday in our Watch List to subscribers. The large gap down did not allow for an effective entry point but the chart reveals the series of lower highs that attracted our attention and the 6% move down yesterday was on more than twice the average volume

ISIL has a similar pattern to the one we just reviewed for STX and the candlestick formation could be construed as a Hanging man formation which can indicate a possible turning point.

F5 Network (FFIV) has a bearish ascending channel formation.

General Motors (GM) is poised at a pivotal level.

We have discussed the Hikkake pattern recently and we include candidates for the pattern, both bearish and bullish setups, in our daily scan patterns available at the website. One candidate that showed up on the possible bearish setup was for Google. The pattern rules suggests that a fall below the low for the session preceding the inside day (i.e $400.84) would trigger a short sale.

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.