More than the equity markets it was the Treasury market that showed the most acute reaction to the employment data - the ten year note lost almost a full point and its yield jumped during the course of the session by twelve basis points from where it had opened.

The S&P 500 closed with a spinning top formation that straddled the 20-day EMA. For now the market seems to be taking the view that the chances of Fed easing ratcheted down a notch after stronger data than hoped for, but the prospects remain high of a sudden re-evaluation of that judgment.

The Russell 2000 (^RUT) managed to produce a positive close on Friday with a small gain of 0.3% but our suspicion is that we may see a retesting of the 740 level in coming sessions.

Traders had positioned the yield on the ten year Treasury note at the bottom of the recent range prior to the employment data but following the substantial revisions of previously released data there was an abrupt rethinking of the likelihood of imminent Fed easing. The next text will be for the upper boundary of the recent range just above 4.8%.

The retail sector fund RTH has been coming under pressure in recent sessions and the daily chart illustrates the lack of enthusiasm behind the upward drift in prices during much of October.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY NOVEMBER 6, 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 chart for Autozone (AZO) shows negative divergences and the steep upward trendline has been violated. While an effort to rally back towards the recent high would not be surprising, we would be looking for a short entry signal above $112.

Darden Restaurants (DRI) looks as though it will want to test the 200-day EMA level at $38.

Symantec (SYMC) has a bearish ascending channel formation.

The chart for Covance (CVD) shows the negative divergences that presaged the recent collapse in the stock and we sense that the $60 level will prove to be a difficult hurdle for the stock to cross.

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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