It was a strong upward trend day for the equity indices yesterday as the bullish underpinnings of the market continue to manifest themselves. The chart for the Russell 2000 cash index (^RUT) exemplifies the action yesterday with the index opening on its low for the day and closing on its high for the day.

The index also registered an all time closing high as the closing price was exactly 2 points higher than the previous closing high of 829.44 achieved on February 22.

The S&P 500 also produced a clear trend day and now lies less than five percent from its all time closing high of 1527 from March 2000. This will almost certainly be targeted in coming sessions.



There was a large relief rally within the mortgage sector and better than expected earnings from Citigroup also provided a very constructive environment for the banking index (^BKX) The triangular pattern has been clearly resolved to the upside and further progress is to be expected.



Another bullish chart that illustrates the pattern popularized by William O’Neill is for the oil services sector (^OSX). We drew attention to this pattern in late March since when the index has gained almost five percent.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY APRIL 17, 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 exchange traded funds for some of the foreign currencies are showing breakout behavior. The chart for FXB which represents UK sterling shows the currency about to break through the critical $2 level which was last seen in September 1992.

As this commentary is being written a rather disturbing jump in UK inflation data is pointing toward further tightening by the Bank of England and this has allowed the currency to peek above the $2 parapet.The inflation news has not been good for the FTSE however which is retreating from a six year high that was recorded in Monday's trading.



Lehman Brothers (LEH) was a beneficiary of the view that the sub-prime woes that hit the market in late February may have been overdone. An associated development saw Fremont General (FMT) gain almost 30% as it managed to sell most of its residential real estate portfolio. If the more benign view of the sub prime sector endures there will be further short covering throughout the sector which suggests that LEH could be headed back above $80.



Dress Barn (DBRN) saw a range expansion session downwards on increased volume following the inside day from last Friday. Yesterday's close saw a break down below all three moving averages.



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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