The S&P 500 maintained the very positive tone that was shown on Tuesday and moved up another 0.8% that enabled it to close above the intraday high of 1292 from August 4. The 1300 level may confine todayââ,¬â"¢s upside activity but a revisit to the early May highs above 1320 now seems to be on the cards before Labor day.

The chart for the Nasdaq 100 (^NDX) is one of the more impressive from yesterdayââ,¬â"¢s action. The index gapped up on the open and put in a 2.3% gain. Having moved above the 20- and 50-day EMAââ,¬â"¢s this week the index now faces the stiffer hurdle of moving through the 200-day EMA in the vicinity of 1593.

The Russell 2000 (^RUT) closed above its 200-day EMA with a 1.4% gain but unlike the S&P 500 it failed to revisit the intraday from August 4. We need to monitor this index closely over the next few weeks to see whether the overall market can continue to rely on a strong showing from the small caps that helped to power previous rallies.

Treasury yields continued their steep decline again yesterday. We feature the five year note below which seems to have reached a pivotal level in yesterdayââ,¬â"¢s trading.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY AUGUST 17, 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.

Sometimes patience is required with flag formations. Over the last week or so we have mentioned XLNX twice and yesterday we saw the surge that the pattern was pointing to.

QCOM that also featured here twice recently produced a more than six percent gain yesterday.

Chubb (CB) has a clear pullback channel that suggests a bearish flag formation.

Baxter International (BAX) has negative divergences on the momentum and money flow charts.

Chevron Texaco (CVX) began a decline yesterday that could have further to go towards $62 at least.

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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