The S&P 500 remains confined within the channel between 1260 and 1280 that we discussed yesterday. The index tested the 200-day EMA and came close to the lower level of the channel yesterday with an intraday low of 1261. Trading conditions are likely to continue to be challenging with few opportunities to ride any trends until we can move, in either direction, beyond this channel.

The Russell 2000 cash index (^RUT) moved back down to 680 in yesterday's trading, a level that it had managed to avoid for three weeks. Support appeared and the index managed a 0.8% gain for the session but in similar fashion to the S&P 500 the index has been essentially within a confined range since mid May and there will be difficult resistance to overcome at 700 and 720.

The consumer staples sector fund, XLP, performed a sharp reversal yesterday and finished at a new multi year high. The fund, however, still has further gains to make before it attains the levels seen in early 2001.

The exchange traded fund for materials sector, XLB, registered a tiny range session yesterday and is approaching the apex of a very well defined triangular pattern.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY AUGUST 11, 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.

Excelon (EXC) is showing signs that it may be close to a correction.

EMC moved up 2.6% on above average volume yesterday but we would suggest not being too ambitious regarding a short term profit target.

Gilear Sciences (GILD) has consecutive Shooting Star formations near an area of overhead resistance.

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.