Yesterday's action in the US equity markets was fairly subdued with relatively low volume being registered on the exchanges. The proxy for the S&P 500, SPY traded just 66 million shares which is two thirds of the 15-day moving average. The index closed with another multi-year high at 1509 and now there are only another eighteen points to add on before we can celebrate an all time closing high.

There are still some concerns about how long the post celebration rally can be sustained.



The Nasdaq Composite (^IXIC) has recorded two narrow body candlestick patterns at the top of a very steep buy channel. Combining the formations from last Friday and yesterday would consolidate into a spinning top pattern which can be a harbinger of a short term change in direction.



The divergences between the performances of the major indices is still a feature of recent action and we continue to pay attention to the relative under-performance of the small cap Russell 2000 index. Apart from the strong catch up session of May 2nd the index seems to be stalling while the S&P 500 and DJIA continue their relentless upward path.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MAY 8, 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 Friday's column we cited the poor technical pattern for XING and selling on the open Friday would have yielded almost an eight percent return for the day. Yesterday the stock bounced back after finding support at the 200-day EMA. For the time being we would stay flat but monitor the quality of any recovery effort as another eventual leg down would not be too surprising



Cymer (CYMI) could run into further selling as it approaches the 200-day EMA at the top of the pullback channel.



Infosys (INFY) could be setting up to retest the low from early April.



Timberland (TBL) surged almost five percent on very heavy volume and the momentum could see an eventual move towards the 200 day EMA (green line)



XMSR has positive divergences in both the MACD and MFI charts.



Contrary to XMSR the chart for Fastenal (FAST) reveals some notable negative divergences.



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.

Disclaimer
The purpose of this article is to offer you the chance to review the trading methodology, risk reduction strategies and portfolio construction techniques described at tradewithform.com. There is no guarantee that the trading strategies advocated will be profitable. Moreover, there is a risk that following these strategies will lead to loss of capital. Past results are no guarantee of future results. Trading stocks and CFD's can yield large rewards, but also has large potential risks. Trading with leverage can be especially risky. You should be fully aware of the risks of trading in the capital markets. You are strongly advised not to trade with capital.