The S&P 500 (^SPC) inched closer to a key level - 1490 - that we shall be watching over the next few sessions. As the market prepares for the FOMC decision we may see some erratic price action in vicinity of that level but if the market does not respond favorably to the FOMC announcement and we move decisively below that level we could see further momentum to the downside.

Looking back to previous FOMC announcements it has been the case that the market sells off prior to the decision and announcement and then a large relief rally ensues when the scrupulously worded statement fails to produce any surprises. It is quite conceivable that this may happen again as the bears have had things their own way for several sessions.



The broker/dealer index (^XBD) appears to be struggling to regain a footing above two pivotal levels.



The natural gas index (^XNG) has pulled back sharply since hitting its recent high in mid June and yesterday closed below the 50-day EMA. There is however some chart support/resistance at the 500 level.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY JUNE 27, 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.

We have expressed the view before that it is usually prudent to regard breakouts in the semiconductor sector with some skepticism. And last week we noted that there was some suspicion that the upward breakout had some signs of being an attempt to energize the Nasdaq into making a new multi year high. The sector has fallen back and there are two stocks that paint contrasting stories for the sector.

AMD could be setting up in a bull flag formation for another move higher.



Lam Research (LRCX) which is in the semiconductor processing equipment sector appears to be struggling after recording its second lower high since early May.



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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