The equity indices delivered an uneven and divergent performance yesterday. The DJIA managed to move up 0.2% but the Russell 2000 (^RUT) moved down by just less than one percent and the Nasdaq Composite (^IXIC) dropped 0.6%.

The chart for the S&P 500 below reveals a spinning top formation that found resistance at 1510 and below the intraday high from May 9. Included on the chart again, as requested by several readers, is the pivotal fibonacci retracement level of 1513 which marks the 162% from the February/March swing high/low.



The chart for the broker/dealer sector (^XBD) reveals the sideways pattern that is emerging following the recent record high close just above 258. We have drawn the steep ascent channels and note that a further move down would open the possibility that a short term failure to sustain the all time high level could be emerging.



The CBOE Volatility index (^VIX) moved up by eight percent yesterday which seems somewhat incommensurate with the actual points movement in the S&P 500 index which the VIX tracks. On May 10 when the S&P 500 dropped 1.4%, the VIX moved up 5.6% and yesterday when the S&P 500 index moved down just 0.2% the implied volatility measure moved up 8 percent. This is the kind of dissonant behavior that intrigues us and causes us to monitor the macro market conditions even more carefully than we usually do.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MAY 15, 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.

Yesterday's comment on Compania de Minas Buenaventura (BVN) which was revealing some negative money flow and momentum divergences proved timely as the entry logic could have allowed an almost four percent gain on the short side.



Some of the financial stocks exhibited interesting behavior yesterday. Mellon Financial (MEL) produced a red candlestick trend day on three times the average daily volume and we shall have it on our Watch List for today's session.



Lehman Brothers (LEH), which is a stock that we watch carefully, is also revealing a chart pattern that could be pointing towards a developing correction.



Weyerhauser (WY) was a long recommendation in late April in connection with the bull flag formation that was developing. The stock produced the desired upward break on May 4 and it is now looking likely that there may be another opportunity shaping up on the long side.



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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