The S&P 500 retreated slightly in yesterday's subdued trading. Although it is not apparent on the chart for the cash index the chart for SPY reveals a tiny candlestick which had three characteristics - it was the narrowest range in seven sessions, an inside day and a Doji. This unusual coincidence can sometimes portend a big move ahead but in this case it could simply be attributed to the quietness of a Monday in late August.

The Russell 2000 (^RUT) is not revealing the relative strength that helped propel the index to a succession of all time highs over the last couple of years. The action seems confined within a trendline of clear support at the 670 but with a reticence to move out from the descending trendline through the highs since May. The lack of leadership reflects the new tone to the markets since the realization that it is not higher interest rates that may be problematic for the small caps but declining economic growth.

The banking sector (^BKX) is in a similar position with respect to the early May highs that the S&P 500 and DJIA find themselves except that it already made an effort to regain those levels in early August and fell short.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY AUGUST 22, 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.

Bell South (BLS) has evidence of a bearish ascending channel which has been accompanied by modest volume since the heavier volume downward move on August 9.

Mylan Labs (MYL) has a large challenge ahead to keep moving upwards following its recent plunge.

Yahoo (YHOO) faces the same problems as Mylan Labs and may struggle to get above $30 in the intermediate term.

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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