The report on November's retail sales that was released before the market opened showed surprising strength which produced initial strength in the indices. As the day progressed the early enthusiasm faded and the closing prices for the equity indices were largely unchanged from Tuesday's session. The S&P 500 has produced three upper tails in the last few sessions and we will be watching for further signs of overhead resistance.

The semiconductor sector fund SMH dropped below all three moving averages yesterday. In reviewing the daily chart below it is quite clear that the sector has been meandering within a confined range since early September and the sector seems to be headed for another test of the lower boundary.

The increased volatility on the chart for the yield on the ten year Treasury note over the last few sessions shows that the market is finding it difficult to digest the ambivalent economic data. Sentiment is quite fragile and there could be more whipsaws while traders try to get clarity on the health of the consumer sector.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY DECEMBER 14, 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.

Baker Hughes (BHI) appears to be poised for an upward breakout.

We have had several profitable short trades with Ford over the last few weeks and we suggested a week ago that the $6.60-6.50 region was a likely target. The stock has continued to erode and the target is close at hand.

Hilton (HLT) peeked above an ascending triangle yesterday on strong volume.

The chart for JB Hunt (JBHT) shows a succession of lower highs and the bearish action yesterday brought the stock below all three moving averages on strong volume.

Smurfit Stone Container (SSCC) has a bull flag pattern but if the stock dips below $10.75 we would move to the sidelines.

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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