The DJIA moved up another 55 points yesterday as traders home in on the 11722 target level. But the other indices continue to diverge as the other major indices either stood still or slipped back slightly. The S&P 500 registered another small candle that left the index essentially unchanged.

One of the big stories from yesterday was the movement in gold. The precious metal moved above $700 in New York trading Tuesday, with June futures at the NYMEX hitting a peak of $702.20 an ounce before settling at $701.50 an ounce, up $21.60 on the day. As this is being written the metal continues to hold above $700 in Asian trading. This brings it to levels not seen in more than 25 years and perhaps underlines the concerns about continuing stregth in commodity prices and the weakness of the US dollar.

How concerned the Fed is about these issues may be revealed in the FOMC statement later today.

The Nikkei 225 closed Wednesdayââ,¬â"¢s session with a 238 point decline and a close below the 17000 level. Since early April this index has been creating a broadening channel that coincides with a continuing corrective pattern. We have marked the line through the highs in the corrective phase and at some point this index will need to penetrate this barrier if it is to regain its bullish tone. It would be a matter for concern if we make a new low for this recent pattern.

The ETF for the basic material sector, XLB, has rallied firmly above the levels that preceded the the sell-off on April 27th. The volume and momentum characteristics do not appear to be confirming the move.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 10, 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.

Digital River (DRIV) has rallied back to the levels that preceded the April 27 gap down and there are questions about how well supported the move has been from a money flow and volume perspective.

SSCC may meet some resistance at current levels following its recovery from an abrupt sell-off.

Texas Instruments (TXN) has retreated to a level of chart support and may be looking at another breakout effort in coming sessions.

Ashland Oil (ASH) could be vulnerable to further weakness.

Foundry Networks (FDRY) exemplifies a pattern that can be seen for many stocks today as it has recovered on modest volume following gaps down or significantly weak sessions over the last four weeks.

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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