The S&P 500 cash index (^SPC) registered a narrow range session with a doji candlestick. The intraday high was just shy of Wednesday's high and accordingly an inside day pattern is also evident.

The index has retraced 70% of the move down from the February 20th high to the March 5th low which suggests that the obvious fibonacci retracement barriers have been overcome. The behavior this week shows that there has been a reluctance on the part of bearish index traders to push hard on the anxiety that was seen over the last three weeks but they may be holding back for an assault as we approach the mid February highs again.



The broker/dealer index (^XBD) came to rest at a level that corresponds to three separate chart features. The first is the 50 day EMA which is just above yesterday's close, the second is the level that violated an upward trendline through several lows since late 2006 and the third is a pivotal support/resistance line that we have marked on the chart. If the sub-prime woes have been fully discounted by the market we would expect the 240 level to be successfully overcome in the near future - if the investment banks were to falter again this may have negative consequences for the overall market.



The oil services index (^OSX) has continued to move higher after the bullish chart formation that we discussed in last Thursday’s commentary. One way to derive exposure to the sector is via the exchange traded fund, OIH, but as can be seen from the extended chart the 150 level will prove to be an obstacle and there remains the possibility that another lower high may be recorded.



TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MARCH 23, 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 BJ Services (BJS) shows a bullish reversal pattern over the last three sessions which is also within the context of possible bull flag formation.



The long lower tail and heavy volume on the chart for Flextronics (FLEX) suggests that a retest of the recent lows in a selling climax was met with buying support that may have established a base for a rally to be mounted.



Jabil Circuit (JBL) has a bearish descending wedge formation and the move down below all three moving averages on heavy volume suggests that the stock is headed back towards the recent lows below $24.



The chart for YRCW shows a move above all three moving averages on heavy volume and continued momentum upwards is to be expected.



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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