The S&P 500 (^SPC) has covered more than fifty points in just the last three sessions. The FOMC announcement, with its removal of the tightening bias, was a treat for the bulls and they propelled the index right through the 50-day EMA and put the previous highs from mid-February back in play. Other indices joined in the celebrations and the Russell 2000 (^RUT), recorded the same percentage gain of 1.7% as the S&P 500.

The reaction in the Treasury market was less extravagant than in the equity markets following the FOMC announcement. The yield on the 10-year note retreated by a modest three basis points and traders have to digest the possible consequences that, unlike the Fed, there may be more concern from institutional investors that there is not sufficient rewards on offer for the potential inflation risks. Also, a factor for Treasury traders is a declining dollar as we discuss below.



The outstanding performer among the broad equity indices was the Nasdaq 100 (^NDX). The index raced ahead by 2.2% and even though we hesitate to point out potential resistance levels when the market seems to be behaving so ebulliently there is a clear threshold to cross at 1820 which is less than one percent above yesterday's close.



We discussed the possibility that the euro would be reaching back towards its all time high that was achieved in late 2004 which lies at $1.3668 per euro (0.7316 €/$). If we venture beyond that level into brand new territory for the currency we should expect to see some pressure on US fixed income assets and also a more bullish scenario for gold.



TRADE OPPORTUNITIES/SETUPS FOR THURSDAY MARCH 22, 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.

The chart for Corning (GLW) shows a bullish breakout and there is now a clear objective which is the old high from last October at $25.



Adobe (ADBE) surged by 6.3% yesterday on almost three times the average daily volume and established a new historic high. With such powerful momentum further upward progress is to be expected.



Coca Cola (KO) looks set to break above the December highs.



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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