The Russell 2000 index (^RUT) continued its retreat yesterday with a part way movement down towards a test of the 20-day EMA. The index stopped some distance from tagging the 20-day EMA and a more thorough testing of that level would not be surprising to see in today's session.

The corrective action in the Shanghai market yesterday caused a minor sell-off in the US markets but the underlying bullish dynamics continue to provide support and there just are not enough emboldened bears to test critical levels on the downside. Some rather extreme values are being registered in the global currency markets at present and asset managers are having to monitor their allocation models quite closely. A coordinated re-allocation based on many fund managers re-thinking the share of their portfolios that they want to be devoted to dollar denominated assets still represents a meaningful risk to the US equity markets

I will be taking part in another live webinar in which he will discuss some of the trading strategies from his new book Long/Short Market Dynamics. This free, online event takes place on Thursday, April 26, at 1:00 Eastern Time (10:00 Pacific Time). Further details can be found by clicking here.



We do not often examine the Dow Jones Transport Index (^DJT) but yesterday's rather striking doji candlestick could be an early indicator signalling a possible intermediate term double top



The gold index (^GOX) has sold off exactly after appearing to be on the threshold of a breakout.

There have been some rather profitable setups discussed in the commentary over the last few days. We shall examine NVLS, BRCM, EBAY and DBRN all of which have performed in line with expectations.



TRADE OPPORTUNITIES/SETUPS FOR FRIDAY APRIL 20, 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.

In Wednesday mornings commentary we mentioned Novellus (NVLS) - a range expansion session downwards on increased volume following the inside day from Monday's trading. In yesterday's trading the stock dropped almost six percent.



EBAY followed the inflection point pattern cited in yesterday's column with a 3.8% drop on substantial volume.



Dress Barn (DBRN) has continued even further downwards following our alert earlier this week which was signalled by the inside day highlighted and subsequent range and volume expansion.



Broadcom (BRCM) pushed above all three moving averages on a range and volume expansion session following Tuesday's inside day. There was a continuation move upwards in yesterday's trading.



The chart for Harley Davidson (HOG) shows some strong positive divergences that helped to propel the stock up on heavy volume yesterday. The stock came to rest right at the resistance of the 50- and 200-day EMA's but we suspect that there may be sufficient momentum for an eventual movement back towards testing the gap down that occurred in late February.



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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