The S&P 500 cash index (^SPC) registered an inside day in Friday's fairly uneventful session. It is not uncommon to see the tone for the fall being set during the second half of September and the market is interestingly poised at a juncture where a decision is required as to whether or not to embark on a new leg up to multi-year highs.

Small cap and growth stocks will continue to be subject to concerns about the housing market and the vulnerability of the consumer sector. In addition these will jostle with the ever present anxiety about any pick up in inflation. If forecasts for a 2007 slowdown become increasingly pessimistic fund managers have to decide between the merits of a more benign interest rate scenario versus contractions in the credit and capital investment cycles.

The Nasdaq Composite (^IXIC) moved up 0.5% on Friday to close at 2165 but in the process an inside day was recorded. The index is still marginally below the 200-day EMA and faces congestion patterns in the vicinity of 2200.

The Russell 2000 (^RUT) closed the week at 708 in a very narrow range session. The index has moved sideways in a well defined channel since the May sell-off and all three moving averages have now converged in the middle of the channel. The eventual breakout from this channel will provide valuable clues as to the longer term direction of the overall market.

The gold and silver index (^XAU) dropped below the 50-day EMA on Friday and continued the swift correction that began on Wednesday after the index seemed to be poised to take on the May highs. The index lost more than seven percent in the last three sessions of last week and the chart for major component NEM shows increasing volume as the stock gapped down in both Thursday's and Friday's trading.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY SEPTEMBER 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.

American Tower (AMT) could be struggling as it revisits the $37 price level where it topped out in early May.

Bank of America (BAC) is drifting sideways as the momentum and money flow are fading.

The chart for Comcast (CMCSA) is displaying several long upper tails as it contends with resistance at the $35 level.

On Friday we mentioned the distribution pattern that is evident in the chart for Overseas Shipholding Group (OSG). The stock dropped 3.7% on Friday and closed below its 50 day EMA.

Schering Plough (SGP) has pulled back from its recent range expansion upwards on heavy volume and may be preparing to resume its push toward higher prices.

We would favor a long position for Stem Cells (STEM) as the retracement from the recent strong upward trend day on heavy volume appears close to having run its course

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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