After registering strong gains in Monday's trading the Russell 2000 (^RUT) was more subdued yesterday's rally continuation. It edged up only 0.2% compared to the 0.4% gain for the S&P 500 (^SPC) and the candlestick formed was a tiny body Doji with the upper tail peeking above the 800 level.

One news item that caught our attention today was the statement from HSBC, the third largest bank in the world rated by Tier 1 capital, that it believe that economic activity is peaking presently in the US and UK markets. It also reported escalating problems within its loan portfolios to UK consumers and its exposure to the US mortgage market.

The Nasdaq Composite (^IXIC) put in a very similar performance to the small cap Russell 2000 index as it also edged ahead 0.2% and stalled just below the recent multi-year high that was achieved on November 22.

The ETF for the energy sector XLE closed at an all-time high yesterday. The sector fund includes not only several of the biggest oil stocks but also some exposure to gas and the oil services sector.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY DECEMBER 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.

Robert Half International (RHI) experienced a bout of selling yesterday on heavy volume which at one point brought the stock down to the 50-day EMA. Support appeared and a long lower tail was recorded but we will be watching the stock in coming sessions for further signs of weakness

Teekay Shipping (TK) looks poised for an upward breakout.

Advance Auto Parts (AAP) has a clearly defined bear flag formation and the stock closed at the intersection of the 50- and 200-day EMA's. There could be further movement up the channel toward the 20-day EMA but we suspect that further selling will emerge in the days ahead.

Weyerhauser (WY) provided a strong validation for the break out pattern on Monday as it added another 2.5% on twice the average volume.

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.

Disclaimer
The purpose of this article is to offer you the chance to review the trading methodology, risk reduction strategies and portfolio construction techniques described at tradewithform.com.  There is no guarantee that the trading strategies advocated will be profitable. Moreover, there is a risk that following these strategies will lead to loss of capital. Past results are no guarante of future results.  Trading stocks and CFD's can yield large rewards, but also has large potential risks. Trading with leverage can be especially risky. You should be fully aware of the risks of trading in the capital markets. You are strongly advised not to trade with capital.