The S&P 500 made another failed attempt to break above 1280 yesterday and closed at 1266 which coincides with the 50-day EMA. The intraday reversal underlined the generally negative reaction to the FOMC decision on Tuesday and came despite positive news from Cisco. The index has been confined to a channel between 1260 and 1280 for more than two weeks and seems to have real difficulty in breaking through the top layer and may now want to test the lower level.

The Nasdaq 100 (^NDX) recorded a tiny gain from yesterday's trading but the earlier gains that stemmed from the Cisco earnings were given back in later trading yesterday.

The Dow Jones Transportation Index (^DJT) continues to plummet and sank another 2.9% to close down for the year.

The exchange traded fund for the consumer discretionary sector, XLY, produced one of the weakest charts yesterday and the violation of the recent trend line through the lows highlights the concerns of a real slowdown ahead. Homebuilders were big casualties yesterday and with other consumer sectors in decline - RTH the retail sector fund dropped 1.6% on above average volume - and the weakness in the Transports it definitely seems that many asset managers are taking money off the table.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY AUGUST 10, 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.

Wyeth (WYE) could be vulnerable at current levels as it may again fail to break through overhead resistance at $50. Yesterday recorded an NR7and Doji formation.

The chart for Walgreen (WAG) is showing a momentum peak and negative money flow divergence.

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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