The pattern that has been seen for some time where the market indices continue to display divergences was highlighted again yesterday with the Russell 2000 (^RUT) recording yet another all time high at 747 with a 0.4% gain and the other indices suffering minor losses.

The Nasdaq 100 continues to meander within the range that we have commented on before which lies between 1640 and 1700 and yesterday's close at 1670 puts it right in the middle of that range. Leadership from the big name tech stocks would certainly provide a vital impetus to propel the whole market higher but the divergence between the relative underperformance of the large caps in this index and the smaller caps of the Russell 2000 does not appear as ominous to us as some commnetators are suggesting.

The S&P 500 lost a little ground following Wednesday's push back to the 1305 level. As we have noted there is a minor trendline through the very recent lows that seems to be pointing toward continuing support under the market.

The ETF for the semiconductor sector, SMH, often has an inscrutable chart formation that defies any easy explanation and now is no exception. There have been two long legged Doji candlesticks within the last few sessions and we see few clues from the momentum and money flow charts. Yesterdayââ,¬â"¢s lower tail reached down to new 2006 lows but the sector still seems to be looking for support at the 200 day EMA. We are monitoring some of the sectorââ,¬â"¢s constituents for signs of a turnaround.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MARCH 24, 2006

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 yesterday's commentary we featured a chart for King Pharmaceuticals and suggested that the highly unusual pattern was pointing to imminent weakness. As the chart reveals the stock sold off sharply on heavy volume and delivered a nine percent return to our online portfolio. Although we exited the position with a nice return the stock could continue to fall back down again to the late February lows.

Colgate Palmolive has an interesting bearish channel formation and as money flow is fading we sense that weakness lies ahead.

In the semiconductor sector, Taiwan Semiconductor appears to offer an attractive reward/risk opportunity on the long side.

THQI is approaching a level where it could be attractive on the long side.

Centex (CTX) is revealing some positive divergences and may want to test the intersection of the 50 and 200 day EMA's which are about four dollars above yesterday's close.

Another of our current holdings, Bausch and Lomb (BOL) could be close to making its move.

Disclaimer
The purpose of this article is to offer you the chance to review the trading methodology, risk reduction strategies and portfolio construction techniques described at tradewithform.com.  There is no guarantee that the trading strategies advocated will be profitable. Moreover, there is a risk that following these strategies will lead to loss of capital. Past results are no guarante of future results.  Trading stocks and CFD's can yield large rewards, but also has large potential risks. Trading with leverage can be especially risky. You should be fully aware of the risks of trading in the capital markets. You are strongly advised not to trade with capital you cannot afford to lose. This article is neither a solicitation nor an offer to buy or sell securities.

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.