The intraday high for the S&P 500 cash index (^SPC) yesterday was marginally higher than Friday's, but the index registered its second long upper shadow. The closing price at 1321 positions the index within five points of the May 5th high as we head into Wednesday's FOMC announcement.

We would become more confident that the overall market can move decisively into higher territory if The Russell 2000 (^RUT) can establish a new support level at 740 as it reaches back towards the May highs.

The yield on the ten-year note has consolidated just above 4.75%, but over the last two sessions the long upper and lower tails to the two candlestick formations shows a spread of ten basis points between the high and low values. This could portend some further volatility in the wake of Fedââ,¬â"¢s deliberations.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY SEPTEMBER 19, 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.

Valero Energy (VLO) could be preparing for a rally back towards the 200-day EMA at $58

JP Morgan (JPM) registered an Evening star formation following the recent breakout above $46.

Frontline (FRO) would appear to be vulnerable to further weakness and we would be looking for an entry point on the short side in the neighborhood of the 50-day EMA at $40.

Expeditors International (EXPD) put in a strong performance early last week and the slight retracement could be the prologue to further upward momentum.

Devon Energy (DVN) experienced a 12% gain on September 5 on very heavy volume and the recent pullback pattern may have set the ground for another leg upwards in coming 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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