The S&P 500 opened on its low for the day and traded within a narrow of only eight points and closed in the middle of its range at 1274. Yesterday's inside day pattern reflects the tentative nature of trading ahead of the monthly employment data and the very recent chart formation is pointing to a miniature version of the triangular or pennant pattern that preceded the recent range expansion. Most of the evidence suggests that another upward thrust is being anticipated by the market.

The Dow Jones Industrials (DJIA) provided one of the best gains amongst the indices yesterday as it moved up 0.7% to close at 11225. In reviewing the chart for the proxy DIA the volume yesterday was the heaviest since June 15th which coincided with the longest recent green candlestick. The cash index faces quite a bit of overhead resistance in the region just above 11300 but it would seem that another run at the all time high of 11722 may be on the agenda.

The chart for the banking index (^BKX) is pointing towards another set up for a strong range expansion day.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JULY 7, 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.

Overstock (OSTK) looks ready to rally from an extended basing pattern.

We cited Stem Cells (STEM) in our weekend commentary on the basis of last Friday's heavy volume and suspected that a breakout may be imminent. The stock obliged with an almost 13% move yesterday.

Dreamworks (DWA) is showing evidence of positive MACD divergences and accumulation.

Overseas Shipholding Group (OSG) has had a strong upward move recently but is showing some candlestick patterns that could be pointing to a corrective move ahead.

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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