The indices remain highly volatile and this is not the kind of market that lends itself well to position trading but rather favors the use of nimble intraday trading strategies. Despite much thrashing around the chart for the Russell 2000 (^RUT) still reveals a lot of ground that needs to be made up before it can take on the challenge of crossing back above the 200-day EMA.

Achieving this is just one of the real tests for the bullish camp that continues to present the market tumult as a great buying opportunity.

While this index remains below the 200-day EMA I would suggest that the benefit of the doubt be given to an outlook that sees an ongoing series of setbacks that will follow the inevitable short squeeze based rallies.



The best expression of the current market environment is to be found in the chart for the CBOE Volatility Index (^VIX) which despite two positive days for the broad indices is still showing implied volatility forecasts that are greater than at the peak of the previous "critical" episode for the credit markets in early March.



The gold bulls seem to be constantly frustrated in their attempts to get a sustainable rally going. I have commented previously on the clear break of the downward channel that occurred in early July and the brief surge above the important $660 level (or $66 on the chart for the exchange traded fund, GLD), but the momentum seems to be evaporating and the chart is now pointing to a bearish flag formation that appears to be developing.



TRADE OPPORTUNITIES/SETUPS FOR FRIDAY AUGUST 3, 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.

Amilyn (AMLN) which I cited as a long candidate on July 26 still seems to be in a constructive formation despite all of the turmoil of the most recent sessions. But as already noted the reliability of favorable chart formations has to be constantly qualified in the current market environment.



Back in mid-July, I pointed to the fact that Transocean (RIG) appeared to be losing momentum and undergoing some distribution near recent highs. The stock made a strong upward gap move on July 23 stopping me out of my short position. But, in the often frustrating manner in which interpreting this type of pattern can often be essentially right but from a precise timing point of view inopportune, the stock has slumped ever since the upward gap move and would have delivered a nice profit from the original point of entry!



Checkpoint (CKP) still looks favorable on the long side and an entry near to yesterday's close at the $24 level could present a chance to benefit from renewed buying interest following last week's strong upwards gap move on heavy volume.



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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