The Russell 2000 (^RUT) was the worst performer amongst the major indices yesterday as it retreated by 1.3% and is at a fairly important juncture as indicated by the trendlines we have drawn on the daily chart.

Last week we made the point that financial contagion episodes often manifest themselves in the first instance in emerging markets and in overnight trading in Asia there was a rather ominous reminder of the 1997 crisis sparked by the collapse of the Thai baht. Thailand's benchmark SET Index plunged as much 19.5 percent during trading on Tuesday (19th) before recovering somewhat to close down 14.8 percent. According to SET officials it was the market's biggest drop ever and was attributed to efforts made by the Thai government to mitigate speculative efforts involving the baht. However this time the speculation has been forcing the currency upwards quite dramatically against the dollar. Other Asian economies were also hit quite hard and we review the Indian benchmark exchange below.
 
 

The Nasdaq Composite index (^IXIC) has so far notably failed to follow in the footsteps of the DJIA and S&P 500 in attaining a new high during the month of December. The most recent high dates back to November 22.

The daily chart for the Bombay Stock Exchange Index (^BSESN) is displaying some large intraday movements. We have commented previously on the abrupt decline which began seven trading days ago and the index has recorded another long red candlestick as it pulled back again in an almost three percent movement for the Asian trading day (19th) which has just closed.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY DECEMBER 19, 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.

We mentioned the descending triangle pattern for Google (GOOG) in our weekend commentary and the stock gave way to the downside in yesterday's trading.

Cisco Systems (CSCO) registered a Doji/shooting star formation yesterday and we will be watching today for signs of a possible intermediate term retreat.

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.