The S&P 500 (^SPC) broke above its recent consolidation pattern yesterday and added 0.9% on its way to a new six year high. Investment banks are reporting record earnings, bankers are celebrating opulent bonuses and the global economy is awash in liquidity - it certainly appears to be the season to be jolly.

The Nasdaq 100 (^NDX) and Nasdaq Composite (^IXIC) still have some further to go to regain their recent multi year highs. As can be seen from the pattern of the Nasdaq 100 chart below the triangular formation is quite dissimilar to the S&P 500.

The banking index (^BKX) continues to extend the recent breakout pattern as it registers another all-time high.

One of the most remarkable charts is for the CBOE Volatility index which continues to surprise us by its swift reversion to historically low levels of implied volatility. Just over a week ago the index surged 12% higher in one session (December 7), breaking through its 200-day EMA level, since when it has retreated steadily and in yesterday's trading new multi-year lows were explored in intraday trading.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY DECEMBER 15, 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.

In yesterday's commentary we suggested that "Baker Hughes (BHI) appears to be poised for an upward breakout" and the pattern could have further to go.

Another recent setup that we commented on is for Ross Stores (ROST) which has a bull flag formation that is still intact and which could be heading towards an upward breakout.

Another of our setups from yesterday Hilton (HLT) decisively pushed above an ascending triangle yesterday on strong volume.

The chart for Weyerhauser (WY) reveals a very good example of why the bull flag formation is one of the more reliable chart patterns.

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
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