The Nasdaq 100 index (^NDX) barely moved in yesterday's trading and registered a tiny Doji formation at the top of the 50-day volatility band and in the vicinity of the multi-year highs from earlier this year. The indices have met with remarkably little resistance since early September and one senses that the markets could be quite vulnerable to a coordinated assault by the bears perhaps in conjunction with a further move up in the energy sector.

The Russell 2000 (^RUT) continued its ascent back towards the May high and close just 12 points from the all time high of 781 that was achieved on May 5.

The oil index (^XOI) has pushed broken free of all three moving averages and the recent rally appears to have surprised some traders who had been aggressively shorting energy stocks.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY OCTOBER 17, 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.

Archer Daniels Midland (ADM) which we discussed yesterday made a three percent bounce off its 200-day EMA.

Amazon (AMZN) has a lot of resistance to overcome just above current levels and may find that the path of least resistance is down in the near term.

The chart for BP illustrates the transformed money flow which has helped to drive the energy stocks higher.

Colgate Palmolive (CL) may not find sustainable support until it test the $59 level.

After gapping down in late May, Palm has spent the last three months in a sideways/basing pattern. The two range expansion sessions last week enabled the stock to cover a lot of ground quickly and were accompanied by a pick up in volume and a break thought the volatility bands but the stock has met resistance as it has tried to break above the 200=day EMA. A pullback pattern may lie ahead but it seems probable that further buying pressure will emerge 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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