The indices continued their decline yesterday and the S&P 500 closed down 0.6% to close at 1301 which is more or less at its 20 day EMA. We are continuing to monitor the financial sector and the Treasury market. Reviewing the charts for some of the banks and financial services companies we are seeing some confusing patterns in which some could be shaping up for a rally but some of them seem to be under pressure. 

 

The yield on the ten year Treasury note continued its ascent yesterday breaking above the small area of resistance that we have highlighted. As we have commented before if yields continue their recent inexorable rise this will have asset allocation repercussions that could prove troublesome to equities down the road.

The gold index (^GOX) seems to have recovered from last Fridayââ,¬â"¢s big retracement and could be preparing for another move upwards.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY APRIL 26, 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.

Advanced Micro Devices (AMD) will probably encounter further selling at it approaches the circled area on the chart below.

We were filled yesterday on National City Corporation (NCC) as it met our entry level target. In light of our comments regarding the financial services sector we shall monitor this position as a failure from this formation would be a significant signal itself.

Fastenal (FAST) looks vulnerable following a lower high and declining momentum

One of the financial stocks that looks vulnerable is Commerce Bancorp (CBH).

Although we have no new recommendation we have included the chart for a recent short recommendation that we made for Fording (FDG). The chart illustrates how sessions with dramatic range expansion and heavy volume, possibly involving gaps, are often precursors to coherent patterns that can take an extended period to unfold.

One of the topics that continues to intrigue us is what might be called the "time to wait" element of position management. The issue has to do with when to exit and when to re-enter positions that have behaved in accordance with the expected initial forecast, but then enter recovery phases that then prove to be only temporary reprieves before another major move in the same direction.

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.