Wednesday's positive sentiment following the FOMC meeting continued yesterday and most indices made further upward progress. The S&P500 (^SPC) moved forward to 1445 to register a new multi-year high and the DJIA closed at a new historic high. The under-performer yesterday was the Nasdaq Composite (^IXIC) that actually moved ahead by 0.2% but as the red candlestick closes the index ran into selling after its initial upward opening gap.

The chart formation shows the index entering a wedge formation and a retest of the mid-January breakout levels is to be expected soon.

The Russell 2000 (^RUT) registered another historic high yesterday as it continued to advance beyond the 800 breakout level.





Over the last two sessions the spread between the high yield and low yield on the ten year note covers thirteen basis points. If the two candlesticks are combined there would be a rather striking spinning top formation which suggests that traders are still digesting recent economic developments and remain unclear about the next direction for yields.

Today's employment data may help to clarify matters and it will be interesting to see how Treasury traders react to a report that could show strong job creation. It is unclear whether the markets have moved on from expecting a halt to short-term rate hikes and are now gaining comfort that further increases may be required.



TRADE OPPORTUNITIES/SETUPS FOR FRIDAY FEBRUARY 2, 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.

One of our long recommendations recently was Archer Daniels Midland (ADM) based largely on positive MFI divergences. These have persisted and the stock surged ahead by another ten percent yesterday.



TJX broke down on very heavy volume yesterday and may have further to go towards the 200 day EMA at $27 before it encounters any real buying support.



Smurfit Stone Container (SSCC) also surged from a triangular pattern that was also accompanied by very strong money flow indications. It broke decisively above the 200 day EMA and could be targeting the $13 level that was last seen in May 2006, in the intermediate term.



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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