The sector re-allocation that began in Monday's session with the steep losses in the energy and commodity related stocks continued yesterday as fund managers moved aggressively into technology and consumer related stocks. The S&P 500 pushed ahead by one percent yesterday and now lies just one further percent from its multi-year high achieved in May just above 1325.

Ten percent of the 500 most liquid stocks that we track daily produced gains of more than five percent yesterday and only one, Kroger (KR), produced a loss of more than five percent.

The Nasdaq 100 (^NDX) was one of the stronger performing indices as it gained two percent yesterday. The close left the index above the 200-day EMA but the chart hurdle at 1620 now needs to be confronted. From a longer term perspective this index, unlike the S&P 500 and DJIA, still has a lot of territory to cover to regain the multi-year high achieved in January close to 1760.

The chart for the banking sector (^BKX) continues to intrigue us as the triangular pattern that had built up during August appeared to be breaking to the downside late last week but yesterdayââ,¬â"¢s long green candlestick raises the specter of an upward breakout. If this index is on the verge of showing its true intentions it will provide some very useful clues as to the intermediate direction of the overall market.

The consumer discretionary sector (XLY) has gained more than four percent in the last four sessions and now is set to challenge the cluster of "breakout" highs from early May. The confidence that is now being placed in the consumer sector may have as much to do with fund managers needing an alternative home for the capital that had previously been committed to the energy and commodity sectors.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY SEPTEMBER 13, 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.

The retail sector (RTH) enjoyed strong gains (2%) yesterday but the close just below $98 puts the sector back to the same level that acted as a barrier in March, April and May.

Home Depot (HD), mentioned on the long side in yesterday's column, produced another nice gain of 4.6% on twice the average daily volume.

Citigroup (C) failed to participate in yesterday's rally and registered a tiny body Doji formation that could be an element within an early stage bearish flag formation.

Pulte Homes (PHM) gained 6.7% yesterday and looks set to test the price level preceding the gap down in early June. After three months of sideways movement and with homebuilders being shunned and shorted in the interim the recent signs of accumulation appear to have triggered some panic buying.