Tuesday's late reversal which left many charts with long lower shadows did not lead to any follow through in yesterday's trading. Despite some indications in the early going that we may be preparing for a relief rally, there was further weakness across the board for all of the broad indices. But, and this may be significant, we did not go back down to Tuesday's lows for any of the major indices.

The S&P 500 closed below its 200 day EMA but notably stopped short of Tuesday's low of 1254 and the previous low on May 24th of 1245. Further severe weakness has been seen in overseas trading with the Japanese market down more than 3%, the Indian market down almost 5% and, as this is being written, London's FSTE is off about 100 points or 1.7%.

The Nasdaq Composite index (^IXC) slid another 0.5% yesterday but stopped short of Tuesday's low. As the chart below shows the index has retraced almost the entire bull move since last October's sell-off and traders and fund managers alike may feel that we will need to eventually re-examine those lows from last fall.

The proxy for the Russell 2000 index, IWM, has, relatively speaking, one of the better looking charts for the major indices. There is some minor evidence that momentum and money flow could be turning slightly positive and unlike most other charts we seem to be hanging on to the 200 day EMA.

The Nikkei 225 had a very negative session in overnight trading falling by more than 500 points at one point and closing only marginally above its session low, for a loss of 3.1%. The chart bears some strong resemblances to the chart for the Nasdaq Composite that we discussed and once again the comment applies that we have almost retraced the entire bull move from last October's lows.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JUNE 8, 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.

In last weekend's commentary we suggested that companies like MMM could be vulnerable to concerns that economic growth may be slowing down and pointed to the tiny Doji candlestick that was formed on June 2nd as a possible precursor to a lower high on the chart. The stock has acted poorly since and after yesterday's drop confirmed Tuesday's move below the 50 day EMA we would not be surprised to see a return to the $78 level from where it gapped up in early April. Opinions about the state of the real economy are becoming almost as volatile as the state of the capital markets.

Merrill Lynch has some indications that a tradeable plateau may be forming and the MFI is quite positive.

Much the same can be said for Lehman Brothers (LEH).

Intel (INTC) continues to show ongoing weakness as it retreats to levels not seen since April 2003 and fund managers that still have it as a core holding must be thinking about re-purposing the capital to a more productive use.

We have mentioned it a couple of times but EBAY may be ready to move out of its bullish flag formation given any respite in the selling.

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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