The DJIA yesterday recorded a new six year high and closed the day at 11416 for a 0.6% gain on the day. The index is now less than 3% from its all time closing high and one has to believe that a test of this milestone is on the agenda in coming sessions.

From the chart below for DIA, the exchange traded proxy, the recent price movement appears to be well supported by the volume and money flow behavior and we would expect to see further upward progress in coming sessions.

It is a little unsettling that we are seeing such divergences between the DJIA and the Nasdaq and we would also become a little cautious as we approach the old high because we would be very surprised to see a smooth ride through the barrier.

The S&P 500 also managed to close at a multi-year high yesterday and matched the DJIA in also rising by 0.6%.

The close at 1313 also provided us with the fifth actual close above 1310 since this area of resistance has been confronted, and we may be slowly wearing away the supply that has confined us below current levels for most of the last two months.

The Nasdaq 100 cash index (^NDX) continues to underperform the S&P 500 and DJIA and managed only a marginal gain yesterday that still left the index below the 20 and 50 day moving averages. There is clear support at 1680 but this index as well as the Nasdaq Composite are clearly getting left behind as the DJIA strives to put in a new high.

The Russell 2000 moved up 0.9% yesterdary showing the largest gain amongst the major indices and a clear flag or pennant pattern is forming. The all time high lies just over 20 points from yesterday's close.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 3, 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.

LSI Logic has recovered from the strong sell-off on April 20th and is now poised at the juxtaposition of two moving averages. It may attempt to fill the gap left on the move on the 20th but there could be sellers ready to test the downside again.

Schering Plough (SGP) has taken its time to carve out a pullback channel but it may have reached a possible trigger point and yesterday's Spinning Top on slightly higher volume may be the catalyst for another move up.

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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