After falling two percent in Monday's trading the Russell 2000 (^RUT) was the outperformer amongst the broad equity indices in yesterday's trading as it recovered by 2.5%. The volume on the IWM proxy was just above average but the index now faces some chart resistance at the 780 level.

Overall the relief rallies in Asian and European trading, the retreat in the yen and some strong short covering amongst the battered sub-prime lenders provided the context for a moderate recovery for the US markets. Some commentators yesterday took the opportunity to celebrate the resilience in the world economy and questioned just how significant last week's selling was, failing to acknowledge the extent to which the financial and main street economies have become disconnected in recent times. The risks of further financial de-leveraging remain.



The Nasdaq Composite index (^IXIC) arrested its decline at exactly the 200-day EMA and now faces a chart hurdle at 2400.



The yield on the 30-year Treasury bond (^TYX) has entered a congestion zone and all of the yield readings over the last five sessions lie inside the long red candlestick from last Tuesday’s big pullback in yields. It seems unlikely that we could have retreated as far as we have over the last few weeks without having another test of the low yields close to 4.5% from last December.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MARCH 7, 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.

Caution is still advised with regard to interpreting individual chart formations as the overall market turbulence could return at short notice. Notwithstanding this Activision (ATVI) has some positive momentum and money flow divergences.



Avid (AVID) also has some positive technical divergences



The chart for King Pharmaceuticals (KG) is revealing some negative divergences and has encountered persistent resistance just below $19.



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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