The S&P 500 slipped back 0.4% to close at 1263 after pushing to its highest intraday level in three weeks. The index is sitting just above all thre moving averages and the probing of new multi-period high suggests that traders are preparing for an assault on the 1280 level. At some point soon this hurdle will need to be crossed or the path of least resistance will be a retreat to the June lows.

The Nasdaq 100 (^NDX) continues to languish close to the June lows and the 1550 level would need to be crossed before the tone of the chart would begin to look more constructive. A move beyond 1550 towards the 200 EMA will require a major catalyst and it is hard to see where that leadership might come from at the moment.

The retail sector index (^RLX) is struggling just above the June lows. Increasing inventories of unsold homes and concerns about consumer weakness are obviously undermining sentiment for the sector but the important question is how much of this weakness is already priced into the sector?

In yesterday's column we indicated that it is not only the US indices that are having difficulty breaking above the trendline through the highs of the last three months and we pointed to a similar chart formation on the Nikkei 225. One chart that looks to have made the decision to push ahead is for the UK's FTSE 100. The index will almost certainly run into resistance at the 6000 level but the recent price behavior looks well supported.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JULY 28, 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 chart for Four Seasons Hotels (FS) reveals a good example of a bearish pullback channel that failed at a key resistance level. We commented on the stock on July 14th at the time of the outbreak of hostilities in the Middle East and the recovery channel that has formed since came undone at the 200-day EMA leading to a 6.4% drop yesterday.

Foundry Networks (FDRY) made a big move up on Wednesday on heavy volume and then retreated by 3.6% yesterday. It is likely that there will be further attempts to move up out of a basing pattern.

We mentioned Mellon Financial (MEL) earlier in the week and would repeat that is showing signs that it is ready to move higher.

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.