Overall the markets responded favorably to the Fed chairman's comments regarding the future direction of short term rates. One of the big winners in yesterday's trading was the banking sector as we shall see below.

The Nasdaq 100 index (^NDX) also moved up just less than 1% following several days of consolidation. Reviewing the chart for this index in April we are struck by the amount of whipsaw moves which has made recent trading in the big growth and tech stocks even more difficult than normal.

We shall be observing the European May Day holiday on Monday and will resume publication next Tuesday morning.

The banking index (^BKX) surged ahead yesterday as the markets adjusted their expectations regarding the future direction of interest rates. Treasury yields dropped and there was widespread strength amongst the banks. Some of the major banks made some very strong moves, in particular BAC and WFC were two big beneficiaries of the more benign view of the interest rate outlook.

While Bernanke seemed to provide soothing commentary that pleased the US financial sector, the Bank of China hiked its short term rates by 28 basis points and this caused turmoil in the industrial commodities sector. One casualty yesterday was the exchange traded sector fund, XLB which dropped on heavy volume.

The chart for the Nikkei 225 (^N225) shows that a corrective phase appears to be under way. The overnight drop of another 200 plus points, which was again partly attributed to the Chinese rate hike as well as the declining dollar against the yen, puts the index at a fairly important juncture and we will be keeping a close eye on this index in coming sessions.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY APRIL 28, 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.

Wells Fargo (WFC) broke above its recent trading range in a decisive move yesterday. The positive money flow over the last few weeks indicates that during the quiet price phase there was ongoing accumulation.

Interpublic Group (IPG) is also showing very positive MFI.

We would also favor a long position for Pfizer (PFE) which also has unusually positive money flow characteristics.

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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