As we suspected in our weekend commentary the recent corrective action has proven to be beneficial for the bulls and yesterday several broad indices registered new multi-year highs. Included amongst them was the S&P 500 which gained 0.9% to close at 1440 and as the green candlestick shows the cash index (^SPC) opened on its low for the day and closed on its high.

The Nasdaq 100 (^NDX) benefited from a re-thinking of the rather negative sentiment that had beset some big tech stocks; perhaps short covering is a better description. The index has another three percent to make up before it challenges its early 2007 high.

One of the best performers yesterday was the broker/dealer sector index (^XBD). As we have commented many times, there is probably no better guide to the benign influence of ubiquitous liquidity than the performance of the investment banks.







Over the last two sessions the price of gold has been one of the beneficiaries of recent weakness in the dollar but as the chart shows there is an important threshold to be crossed at the highs from late November.



TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JANUARY 25, 2007

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.

Our commentary last Friday mentioned the negative divergences on the chart for Pactiv (PTV). The stock plunged by 8.5% yesterday on more than three times its average daily volume.



Northern Trust (NTRS) appears to be in the process of forming a bear flag/pullback pattern and may find it difficult to make much progress beyond $61.



As if to reinforce our comment about the broker/dealer sector, Goldman Sachs (GS) pushed to another all time high in yesterday's trading.



Following up on another of our recent short recommendations QLogic (QLGC) has continued to plummet and yesterday gapped down as it lost another five percent. It may have reached a level where a recovery effort is to be expected.



Tiffany (TIF) has some of the same characteristics that were observed with PTV that were discussed above.



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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