The Russell 2000 (^RUT) put in the best performance of the major broad market indices in yesterday's trading as it managed a 1.4% gain for the day. There does seem to be an attempt to build on the 710 support level and in assessing the likelihood that the bulls may have of regaining some control of the agenda in the near term, the direction of the small cap index will be a source of vital clues.
The Nasdaq Composite (^IXIC) registered a small green inside day candlestick yesterday at it gained 0.7% for the day. The index is down almost ten percent from the recent high of 2370 that was achieved on April 19th and our daily scanning still reveals very few signs of enthusiasm for the well-known technology stocks.
The yield on the ten year Treasury note (^TNX) has moved back up after flirting with the five percent level in recent sessions. The announcement that the FOMC discussed the possibility of a one half percent increase at its last meeting could further unsettle traders who will probably want to push yields back to the recent high of 5.2% recorded on May 12th.
The gold and silver index (^XAU) is in a pullback channel from its recent weakness and as it approaches the intersection of the 20 and 50 day EMA's in a bearish flag formation, we would be looking at the charts for individual components of the sector for possible trading opportunities. Newmont Mining (NEM) has a similar pattern as we shall see below.
TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JUNE 1, 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.
The housing sector index (^HGX) has been one of the major casualties of recent market weakness and may be approaching levels where the constituent stocks are sold out.
As we already discussed Newmont Mining (NEM) could be vulnerable to resumed selling as the bearish channel formation approaches the intersection of two EMA's
One of the few Nasdaq 100 stocks that looks constructive is Dell Computers (DELL) and it may have sufficient relative strength to perform well even while the index of which it is a part continues to languish.
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.
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