This coming week we should see the market’s considered reaction to the weaker than expected GDP numbers that were released on Friday. Evidence of a slowdown will be taken by some traders as enhancing the likelihood that interest rates may have peaked and that Fed policy will be more accommodating. Contrary to this view is the fear that as the dollar declines and as the European and Asian economies continue to show relative strength, the Fed may have little room to relax from its vigilance over inflation.

The euro touched an all time high in Friday's session and we shall be watching this week for whether the currency will falter this week or perhaps accelerate to the upside. The stronger the currency becomes the more pressure there will be on the Fed to at least maintain interest rates where they are.

The approach of the all time high on the S&P 500 at 1527 could also provide some additional reasons for increased volatility in the week ahead.

This week Clive Corcoran will be the featured guest on The Gabe Wisdom Show on Business Talk Radio at 16.00 Pacific and 19.00 Eastern Time on Tuesday May 1. Further details may be found here.



The Russell 2000 proxy IWM reveals the below par performance for the index during the second half of April. The small cap index attained a new historic high on April 16th following the recovery from the early March correction, since when it has been moving in more of a consolidation pattern and actually closed below that mid April level in Friday's trading. In contrast the S&P 500 achieved a new multi-year high on April 16, but has since carried on to move two percent higher than that close.

Friday's formation on the proxy instrument for the small cap index shows an inside candlestick with a doji pattern. The MACD and money flow charts illustrate quite well that there has been a dissipation of momentum during the last two weeks. Divergences between the small and large cap indices is a dissonance worth monitoring over the course of this week.



The pattern, seen on the chart below for IGW which tracks the semiconductor sector reveals a pattern that we have focused on recently i.e. an inside session followed by a range expansion - this time to the downside - with marginal evidence of volume expansion.



TRADE OPPORTUNITIES/SETUPS FOR MONDAY APRIL 30, 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.

Franklin Resources (BEN) experienced a heavy volume downward session on April 19, which we have highlighted on the charts. The pullback since has been on subdued volume and there are suggestions from the momentum and money flow charts that a resumption of the corrective behaviour may arise in coming sessions.



The chart for Schlumberger (SLB) contains several shooting star candlesticks and there is evidence of distribution taking place.



In Friday's commentary we pointed to the bearish set up for OfficeMax (OMX). The stock did gap down on the open but our entry logic enabled an opportunity to participate in much of the four percent plunge.



One final mention is for Palm (PALM) which is in a constricted range near its 50 day EMA and is undergoing some signs of accumulation. The stock could mount a re-challenge of the recent high just above $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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