Monday's trading was very much a repeat performance of the pattern from Friday with another diverse showing by the major indices and again a relatively better performance from the Russell 2000 (^RUT). The S&P 500 (^SPC) produced an almost identical candlestick formation to Friday's as the index tags the 20-day EMA for another session. The underlying market appears to be churning and index traders are in a holding pattern as they await cues from the FOMC meeting.

We normally feature the yield on the 10-year Treasury note but wanted to show the chart for the longer dated security - the 30-year bond. The yield has broken above the November level and is challenging the five percent threshold which has not been seen since last August. Perhaps more than any other indicator it will be instructive to monitor the impact on government yields in the aftermath of the FOMC statement.





The banking sector index (^BKX) is at a key juncture as the chart formation is looking as though the ascending pullback from early January weakness could be in jeopardy.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY JANUARY 30, 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.

Dow Chemical (DOW) registered a strong price surge on January 19 on almost three times the average daily volume. The retracement has brought prices back down towards the pre-breakout level and this might be the cue for further buying to emerge.

However, we would like to see some further evidence from a higher volume session to alleviate some concerns we have about interpreting the chart as the flag like pattern has some unorthodox features and there have been a plethora of false breakouts in recent weeks.



Commerce Bancorp (CBH) will face a real hurdle at the $35 level and while we may be early in drawing attention to the opportunity we would suggest keeping it on the radar screen over the next few sessions.



KLAC also has a hurdle to mount as it approaches the $50 level.



Yet another bearish flag formation is found on the chart for Tessera Technologies (TSRA).



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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