Following Tuesday's break down towards the recent lows the indices began yesterday's trading with further weakness as it appeared that several mid June lows would be re-tested. The Nasdaq 100 (^NDX) declined in early trading to 1520.93, its intraday low, which was its lowest point since June 13. Support appeared in midday trading to arrest the decline and the index managed to rally back to 1538 for a 0.7% gain. The trendlines on the chart clearly highlight how the index has reached an important inflection point, which has to be resolved in the next few sessions.

The Russell 2000 (^RUT) also found support at the 680 level as it probed lows below Tuesday's sell off low. It completed the session yesterday with a small body hammer candlestick, and once again this index is at a point where range expansion is imminent.

The ETF for the materials sector, XLB, could be near the trigger point for a second bearish pullback channel formation.

The Amex Oil index (^XOI) has broken above the trendline through the recent highs. As the markets digest the implications of the FOMC decision the focus will be on the most interest rate sensitive areas of the markets - the banking sector, utilities and homebuilders, but we should not forget to keep an eye on the energy related stocks as many of them appear to be preparing for another move upwards.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JUNE 29, 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.

Big Lots (BLI) looks vulnerable and may be ready to revisit $15 in coming sessions.

The chart for Owens Illinois (OI) shows a tiny Doji candlestick with some positive divergences indicating that this stock could be poised to move up towards the 50 day EMA.

KLA Tencor (KLAC) registered a tiny body, hammer candlestick after probing towards the recent lows.

Carnival Cruise Line (CCL) has a bullish channel formation.

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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