The lack of any surprises connected with the FOMC announcement provided the excuse that traders have been looking for to rally the S&P 500 back to the May high. The index closed within half a point of the May 5 high. The moderation in geopolitical concerns and the continuing weakness in the energy sector are providing an underlying positive sentiment that could see the indices continue their upward bias into the end of the quarter.

The Russell 2000 (^RUT) responded positively to the broad market rally yesterday and registered a gain of 1.3% but was still slightly overshadowed by the performance of the Nasdaq which tacked on 1.4%. Over the last couple of years, until the May correction, the tendency was for the small caps to consistently outperform the broad Nasdaq index on trend days but this pattern seems now to be in abeyance.

The Treasury market explored its recent lows in yields in yesterdayââ,¬â"¢s trading in the wake of the FOMC announcement. How much is attributable to a benign view of inflation and how much is due to an anticipation of an eventual Fed easing as the economy slows is hard to read. But we do seem to be in the midst of a "rosy" soft landing scenario.

The oil index continued its path downwards towards a retest of the levels of mid-June. From its intraday high of 1232 achieved on August 9 to yesterday's close at 1033 the index has corrected by more than 16%. As a review of the individual charts reveals there has been a major exodus of capital from the major oil stocks and the subsequent re-allocation has been a major contributor to the newly found strength in the Nasdaq stocks.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY SEPTEMBER 21, 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.

Sanmina (SANM) looks poised to break out from an ascending wedge formation.

Rediff.com (REDF) has displayed several Doji candlesticks recently after it was turned back at the 200-day EMA. The stock is worth monitoring in coming sessions for signs of how the indecision about the way forward will be resolved.

Applied Micro Circuits (AMCC) may be entering an ascending channel formation following the recent downward thrust on heavy volume. Closes above $2.80 would seem to offer a good trading opportunity on the short side.

Standard Pacific (SPF) has been in a sideways pattern for three months but the recent chart pattern in the context of range constriction suggests that higher prices may lie ahead.

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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