The S&P 500 (^SPC) almost touched 1530 intraday in yesterday's trading and if it had remained there or above 1527, it would have registered a new historic highest close. In fact the index, along with the rest of the market experienced a slide into the close and the index came to rest at 1525. The highest intraday level of 1552 was also achieved on March 19, 2000 which still, as of this morning, marks the session with the historically highest closing level.

We shall be watching the index in coming sessions to see whether an attack of vertigo arises, spurred on by some tactical trading from index futures traders.



The Russell 2000 (^RUT) played some catchup in yesterday's trading as it outshone the S&P 500 and the DJIA but as the chart reveals the index still has not been able to break decisively above the February levels.



The oil services sector continued its advance yesterday but the session closed with a notable spinning top on very heavy volume which can sometimes be seen at market inflection points.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MAY 22, 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 late April, we suggested that the $54 level would be an intermediate term target for Peabody Energy (BTU). The stock achieved this level yesterday achieving a return of more than ten percent since the suggestion and the spinning top formation underlined our decision to exit the trade after satisfying our price target.



Nortel (NT) which we commented on recently after its upward gap in early May has managed to move up above all three of the EMA's that we track in yesterday's trading. This is a stock that has been frustrating on the long side for a very long time and although there is no reason to chase it we suspect that $28 could be seen in coming sessions.



Wal-Mart (WMT) fell below its 200 day EMA on heavy volume after an inside day was registered on Friday.



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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