The Russell 2000 (^RUT) began the session with a gap downwards as the opening price was below Monday's low and this was a common feature of many charts yesterday. The index dropped towards the 50-day EMA but buying support emerged enabling the index to close at the same level as Monday's close. The DJIA managed to close at an all time high despite the unsettled nature of trading in other global markets following the remarkable events in Thailand.

The Thai government appears to have alleviated much anxiety but the incident illustrates the interdependence of asset markets where large hedge funds exposed in one particular sector or country sometimes have to implement dramatic cross hedging reversals.
 
 

The Euro moved up quite convincingly yesterday after its retreat to the $1.31 level, and a return to the $1.33 is to be expected. As we move into thinner trading conditions at the end of the year currency movements can often be quite volatile.

The ETF for the homebuilding sector, XHB, has reached an important chart level as it recorded a tiny body hammer candlestick at the intersection of the 200- and 20-day EMA.

The CBOE Volatility index (^VIX) has been acting quite erratically since Thanksgiving in contrast to its steady decline during the fall.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY DECEMBER 20, 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 pattern for News Corporation (NWS) appears to be supportive of further gains ahead.

The chart for Syntroleum (SYNM) provides evidence of quiet accumulation while the stock was in the narrow basing pattern that we have highlighted on the chart. It would of course have been more helpful to have commented on this yesterday morning!

Corning (GLW) has continued to slide and has proved quite profitable on the short side for us and we sense that a retest of the $18 level lies ahead.

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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