As we have indicated on the daily chart for the Nasdaq 100 index (^NDX), the two candlesticks from both yesterday and Friday fit entirely within the range of last Thursday's long red candlestick. We would echo the point we made yesterday that the action last Thursday failed to convince us of the successful retesting of the May 15 weakness in the Nasdaq stocks and the two-day inside pattern underlines our view that last Thursday's sell off may have had more significance than has been widely acknowledged.

Trading was subdued again yesterday with the SPY proxy registering almost the same below average volume as that seen on Friday. There may be some increased activity and volatility today with the release of the FOMC minutes and the developments in China with respect to the government's concern about "bubbly" market conditions also has the capacity to make its influence felt.



The same inside pattern with respect to Thursday's long red candlestick is also observable on the daily chart for the Russell 2000 (^RUT).



The 10-year note has almost achieved the target of revisiting its recent highs in the vicinity of 4.9%.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 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.

Automatic Data Processing (ADP) has made solid progress since breaking away from an extended flag like formation that took almost the whole of April to unfold, but the registering yesterday of a shooting start/doji formation and the waning momentum and money flow are worth monitoring for a tradable pullback.



Our overnight scans produced few interesting setups on the long side, but one that could be at the early stages of a recovery out of a basing pattern is Genentech (DNA).



Archstone-Smith Trust (ASN) has received a takeover proposal and although we are not making any kind of recommendation at this stage, we wanted to show how the MFI chart reveals signficant acculmulation activity prior to the announcement. The notable positive divergence with price last week could have alerted to some trading opportunity. While we did not mention it in our commentary the stock did show up in the screening filters based on dissonances that appear at our website.



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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