The S&P 500 cash index (^SPC) registered an inside day formation with a very narrow intraday range yesterday. The index opened on its high for the day at 1318 and less than five points separated the high from the intraday low.

Our intuition is that economic data relating to the solidity of the consumer sector has been interpreted more favorably in recent sessions owing to the major retreat in the energy sector but the risks remain of a deeper retrenchment in consumer spending than is currently being discounted by the market.

A very similar candlestick formation to the above was recorded on the chart for the Russell 2000 index (^RUT). The index needs to rise above 740 and build a base there to convince us that the previous all time highs that were achieved earlier in the year are back in play.

The broker/dealer sector (^XBD) has made some impressive gains this week following on from strong earnings reports from Goldman Sachs and Lehman Brothers. The chart shows evidence of a break above the recent resistance levels and could be ushering the way toward a return to the mid-April high just above 240.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY SEPTEMBER 15, 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.

We would expect Adobe (ADBE) to see $36 in coming sessions following yesterday's hammer formation on twice the average volume.

Hewlett Packard (HPQ) is in a rising wedge formation but we would suggest monitoring the price action today for any signs of a possible break down as there are indications that distribution is taking place.

Automatic Data Processing (ADP) is in the final stages of a pennant formation with negative money flow characteristics.

Xilinx (XLNX) moved up four percent on very strong volume yesterday and the 200-day EMA would be a likely target in the next few sessions.

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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