Daily Form June 29, 2007

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FRIDAY JUNE 29, 2007       05:53 ET

Our intuition, expressed in yesterday’s commentary, that the volatile reversal action in Wednesday’s trading may have anticipated how traders would greet the FOMC announcement appears to have been validated as the market spiked up right after the decision (which was agreeably not surprising) but then came to rest essentially at the same level that it had opened and in line with Wednesday’s close.

The net result was that most charts reveal shooting star/doji formations and the pattern on the S&P 500 (^SPC) illustrates this well. We continue to be somewhat concerned by the possibility that we registered a lower high in mid June and will remain vigilant for a closing break below 1485 or thereabouts.

The commentary will not be published next week and we wish all of our American readers a happy 4th of July holiday.


The chart for the Nasdaq 100 (^NDX) shows a similar kind of shooting star /doji formation to the one we noted above but this time there is the additional implication that the intraday high reached back yesterday towards the mid June high and yet fell short before heading back down towards the opening level.

The appeal of the large technology stocks that have been the recent beneificiary of asset allocators switching away from the banks, utilities and other interest sensitive sectors, has been one of the reasons to remain ebullient about the overall market’s chances of avoiding a slump. We need to monitor whether there is confirming evidence that the big Nasdaq stocks might be topping out.

The yields on Treasury instruments moved up on the FOMC announcement and as the chart reveals the recent retreat in yields turned after reaching the 20 day EMA. Trading in coming sessions may well lack the normal liquidity as Treasury market participants celebrate the mid week July 4th in what could be a very quiet week, but it will still be useful to track the progress of the benchmark yields and the performance of the large stocks within the financial sector.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JUNE 29, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

AVID  Avid Technology Inc  

Ten days ago we pointed to Avid Technologies (AVID) and the ascending wedge pattern with some positive divergences. Despite a retreat below the EMA’s the trend line remained positive and the last two days have produced the break out behavior that was expected. Intraday the surge in the stock yesterday met overhead resistance exactly at the 200 day EMA.



CSCO  Cisco Systems Inc.  

Cisco Systems (CSCO) could be in the process of registering the third successive lower high following the point A on the chart that occurred early in January.



GIS  General Mills Inc.  

Another follow up to a recent recommendation seems timely. In mid June we commented that General Mills (GIS) offered a good opportunity on the short side at the $60 level. The stock has eroded since and now there is evidence of a mini bear flag formation which could presage another leg down for the stock.

Daily Form June 28, 2007

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THURSDAY JUNE 28, 2007       03:30 ET

The action yesterday in the S&P 500 (^SPC) was quite revealing and provides an interesting backdrop to the potentially market moving scenario which might unfold later today when the FOMC releases its statement. We have commented on the importance of the 1490 level on a closing basis for the index as this would register a new low for the corrective behavior that began in early June when bond yields surged.

In yesterday’s session it appears that traders decided to test this level ahead of the announcement which is not expected to contain major surprises. The intraday low that was registered at 1484 brought out the support buyers and the index managed to reverse and close at 1506 for a gain of 0.9%. We now face the prospect that the announcement may have already been "discounted" in trading yesterday although the focus should be on the bond market for the real clues as to where the equity market may be headed.


The broker/dealer index (^XBD) made a lower low yesterday and still appears to be struggling to rise above pivotal chart levels.

The daily variabilty of the CBOE Volatility Index (^VIX) and the large intraday range that is being covered points to the growing nervousness which is becoming a feature of recent equity trading. Looking at the daily chart for the last few sessions we can see the long green and red candlesticks which stand in marked contrast to the far less variable bars from late last year. Also quite noticeable is the fact the ceiling for the latter part of 2006 has become the floor in 2007.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JUNE 28, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

XLF    

We shall focus on two sectors today that show the current market dynamics. The exchange traded fund for the financial services sector, XLF, is showing evidence of distribution and may have momentum and money flow hurdles to contend with as it attempts to mount a rally at the 200 day EMA.



IGW    

The exchange traded fund for the semiconductor sector, IGW, put in a strong performance with respect to price yesterday as it moved up 2.2%. What is also clear from the chart below that volume was very subdued and we now face the real test for the bulls that are hoping to tempt asset allocators to switch the funds that are clearly coming out of the financial services into the technology and specically the semiconductors.

Daily Form June 27, 2007

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WEDNESDAY JUNE 27, 2007       07:41 ET

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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

AMD  Advanced Micro Devices Inc.  

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.



LRCX  Lam Research Corporation  

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

Daily Form June 26, 2007

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TUESDAY JUNE 26, 2007       06:05 ET

After an early positive start to yesterday’s session and an apparent rebound for the benchmark S&P 500 index almost precisely at the 50 day EMA, the latter part of the session saw further deterioration in the financial sector which brought about a late reversal with most indices closing with relatively minor losses.

The Russell 2000 (^RUT), came down slightly harder than the S&P 500 which was the converse of Friday’s action.

The daily chart reveals that the small cap index closed at the intersection of two potential support levels. Sub-prime concerns were a bigger worry yesterday than the level of long term interest rates and as we see below Bear Stearns (BSC) was one of the principal casualties in a weak investment banking sector. The ^XBD index closed below its 50 day EMA after suffering a 1.5% fall yesterday.


Intraday volatility is on the increase and yesterday’s reversal caused the CBOE Volatility Index (^VIX) to move back towards levels last seen with the early March anxieties over the sub-prime sector.

One of the sectors that is acting poorly and has dropped below two different potential trendlines of support is the biotech sector. The exchange traded sector fund IBB seems to be picking up volume as it has sold off below its 200 day EMA. We may be headed back towards the March low.

In general this is a good trading environment for intraday traders but a more difficult trading environment for multi-period position traders. The already volatile conditions are enhanced by a plethora of data to be released this week as well as the FOMC meeting. We would suggest that being mainly on the sidelines, as far as end of day chart analysis is concerned, could be the prudent course.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY JUNE 26, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

BSC  The Bear Stearns Companies Inc.  

Bear Stearns (BSC) closed below the March low and is at a level not seen since last September.



GOOG  Google Inc.  

Google (GOOG) registered a spinning top formation after posting a new high on Friday that invalidated the possible lower top formation. There are negative divergences on the MACD and MFI charts but shorting the stock is not for the faint hearted.



VSH  Vishay Intertechnology  

Vishay Intertechnology (VSH) has succumbed to the weakness that was evident from the dissonance between the higher prices into mid June but the deterioration in momentum and signs of distribution.

Daily Form June 25, 2007





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MONDAY JUNE 25, 2007       05:36 ET



The performance of the banking index (^BKX) in Friday’s trading reveals the market’s growing apprehension about the deteriorating position with respect to long term interest rates. There is evidence that suggests that the recent breakout to higher yields in the Treasury market may be just the beginning of a fundamental change in the operating enviroment for financial services based companies.

The break below an uptrend line through lows that extend back to March and also the 200 day exponential moving average is pointing to a more difficult time ahead for several sectors of the market, specifically housing and consumer related stocks.




Last week we discussed the chart formation for the S&P 500 (^SPC) and commented on the possibility that in mid June a lower high plateau may have formed following the recovery from the early June sell-off. The index retreated to the 50 day EMA in Friday’s trading and with a 1.3% decline on the session it outpaced both the small cap Russell 2000 index and the Nasdaq Composite on the downside.

The bullish resolve of asset managers will be tested this week as we not only have reached a significant level on the charts but also we are approaching the end of the second quarter. For fund managers that are long the market a decisive close below 1490 on the S&P 500 during the course of this week could lead to portfolio adjustments that might prove to be rather unsettling.



The chart for the financial services sector fund XLF further illustrates the concerns that we have expressed above. Once again a lower high formed during the mid June period and a trend line has been clearly violated. Perhaps most clearly seen on this chart rather than the S&P 500 chart is the fact that the sector really has struggled to make any progress since the late February sell off and now appears to be capitulating.


TRADE OPPORTUNITIES/SETUPS FOR MONDAY JUNE 25, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com




BAC  Bank of America Corporation  



Persisting with our preoccupation with the financial services sector we want to focus on the daily and then the weekly chart for Bank Of America (BAC).

The daily chart below reveals how Friday’s break down from an extended wedge formation on twice the average volume also shows a decisive move below all three moving averages. The recent pattern has a fractal quality to it as it is echoed in the weekly chart as well.




BAC Bank of America Corporation (Weekly)    



On the weekly chart BAC has also dropped below a pennant like formation and closed below both its 20 and 50 week EMA’s.

It appears that the underlying bullish dynamics have given way to an intermediate term correction that could see a test of long term support/resistance around $44.




SIRI  Sirius Satellite Radio  



Sirius rallied by more than six percent on Friday from a clearly defined flag formation and the chart suggests that a basing pattern has been successfully formed with further gains likely.




CCL  Carnival Corporation  



Carnival Corporation (CCL) moved up despite Friday’s sell-off, on four times the average daily volume. A continuation back towards the recent high of $51 seems likely, but we would take profits slightly below this level and not extend our stay.

Daily Form June 22, 2007





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FRIDAY JUNE 22, 2007       05:28 ET



In yesterday’s discussion of the chart formation for the S&P 500 (^SPC) we commented on the possibility that a lower high plateau may have formed following the recovery from the early June sell-off. Looking at several charts today, not only for the indices but also individual stocks, this pattern is beginning to intrigue us. On the chart for the Russell 2000 (^RUT) we can simply characterize a template which is widespread at the moment.

The point A marks a recent multi-period high (in the case of the Russell 2000 it was an all time high as for the S&P 500 in yesterday’s discussion) and point B which now appears to be in place following Wednesday’s sell of shows that we failed to reach back to the intraday levels seen in conjunction with A. But as the point C shows there is in place a rising trendline through recent lows. What in effect is happening is that price action is being squeezed into a triangular pattern which will eventually need to be resolved by a breakout. Which way we break will have much to do with interest rate expectations and long term yields. At the moment the evidence is mounting that central banks are contemplating further rises rather than any imminent easing.




The chart for the homebuilders sector XHB shows that prices have reached down to an area of potential chart support in the region of $32. Some technicians may be able to discern a nested head and shoulders pattern lurking within the data, although we would proceed cautiously with that interpretation. However with the steep descending line from the January high down through the May high we would suggest proceeding cautiously with the sector generally.



After moving higher last week on subdued volume, the semiconductor stocks moved up confidently with much more impressive volume yesterday. Could this be the signal for the overall market to push further upwards and remove the lower top phenomenon we have discussed? Well possibly yes, but it could also be seen as a spirited attempt by the bulls to energize the overall market or (from a more predatory perspective) as an attempt to squeeze nervous shorts back to a level where macro index players want to establish more strident short positions.


TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JUNE 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com




GOOG  Google Inc.  



Google (GOOG) illustrates the spectre of a lower high quite well and the MACD and MFI charts are suggesting that we may have seen much of the buying pressure already expended.




MCD  McDonald"s Corporation  



McDonald’s (MCD) less obviously reveals the lower high phenomenon but the pattern could be pointing to a double top with deteriorating momentum and money flow dynamics.




WYNN  Wynn Resorts Limited  



Wynn Resorts (WYNN) has retreated to a level where there is not only chart support but the stock registered a hammer candlestick as it straddled the 200 day EMA. If a bounce fails to materialize the stock has no obvious support down to the low $70’s.

Daily Form June 21, 2007





TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
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THURSDAY JUNE 21, 2007       04:46 ET



The chart formation for the S&P 500 (^SPC) reveals the possibility that a lower high plateau may have formed following the recovery from the early June sell-off. The downthrust yesterday took the benchmark index as well as the smaller cap Russell 2000 (^RUT) index down by 1.4% and was on significantly increased voume from the previous two sessions.




The chart for the Dow Jones Utilities (^DJU) is showing the kind of technical trading patterns that should provide us with useful clues as to how asset allocators are responding to the changing interest rate environment. The recovery last week took us back almost exactly to where we expected - at the convergence of the two short term moving averages - and in yesterday’s action we headed back towards a test of the recent lows.

It will be instructive to monitor whether the upward slope to the lows of the last few sessions is about to be violated in coming sessions.



In yesterday’s commentary we featured, XLP, which represents the consumer staples stocks and commented on its relative weakness and declining momentum. The action yesterday highlights the fact that the sector appears to be on the verge of slipping below the second of two trend lines of potential support.


TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JUNE 21, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com




PKI  PerkinElmer Inc.  



Perkin Elmer (PKI) has a chart which typifies many large institutional favorites. A slightly lower recent high has been registered (at least from our current vantage point) and the price action appears to be at variance with the underlying dynamics which are detriorating.




SSCC  Smurfit-Stone Container Corporation  



Smurift Stone Container (SSCC) has penetrated a long standing line of resistance on the chart and providing that the overall market remains reasonably cooperative we should see further gains.




AMZN  Amazon.com Inc.  



Amazon (AMZN) appears to be over extended and vulnerable to a correction which could see it testing the 50 day EMA.




WFC  Wells Fargo and Company  



Wells Fargo (WFC), as expected, ran into resistance yesterday at the top of its range




LTD  Limited Brands Inc.  



Limited (LTD) managed to record a green candlestick, albeit a spinning top, despite yesterday’s sell off, and appears to have established a beach head above the line of recent resistance.

Daily Form June 20, 2007





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WEDNESDAY JUNE 20, 2007       03:04 ET



After reaching above 5.3% in intraday trading on June 13th, the yield on the ten year note has fallen back by more than twenty basis points. This has contributed to the broad rebound in stocks and raises the possibility that the concerns that were being expressed at the beginning of the month about a possible secular change taking place in bond yields was overblown.

We may need to revisit the 5% level (the 20 day EMA lies at 5.03%) before there is a further indication from actual Treasury sales as to the longer term prospects; much of the recent activity could have been derivatives based trading predicated on the over reaction that was seen earlier in the month.




The S&P 500 (^SPC) produced another narrow range formation that fitted entirely within the confines of last Friday’s session. There could be a positive bias entering the market over the remainder of June as asset managers wish to present their end of quarter portfolios in the best possible light. Balanced against this is the possibility that Treasury traders will find a new excuse to push up yields and that asset allocation models will again be alerting to a need to prune equity holdings.



In reviewing the sectors, XLP, which represents the consumer staples stocks is showing relative weakness. The momentum and money flow characteristics are showing that the sector appears to be out of favor.


TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY JUNE 20, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com




FRE  Freddie Mac  



Freddie Mac (FRE) registered a prominent hammer candlestick in which the intraday low tagged the 200 day EMA and also the June 8th low. Support is to be expected, but if a failure was to occur there is little obvious chart support until $60 is reached.




IACI  IAC InterActiveCorp  



We cited InterActive Corp (IACI) recently and indicated that the pattern looked constructive on the long side. Yesterday’s move up on above average volume has brought the stock to a potential hurdle at the 50 day EMA but the underlying dynamics still look positive.




MRK  Merck and Co. Inc.  



Sometimes our recommendations can produce fairly immediate results (alas not always in the expected direction!) and at other times there is a more prolonged validation of the interpretation. At the end of May we mentioned that Merck (MRK) appeared vulnerable to corrective behavior in the intermediate term. Continued attrition has brought the stock down to a pivotal level but looking at the larger frame pattern there is an apparent descending wedge formation that could call into question the upward gap move that took place in April.

Daily Form June 19, 2007





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Profit Patterns and Risk Management For Active Traders
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TUESDAY JUNE 19, 2007       06:01 ET



Volume was subdued in yesterday’s trading. The S&P proxy, SPY, registered just sixty percent of its average daily volume and not dissimilar figures were seen for IWM and QQQQ. The indices hovered around the unchanged level for much of the session and small narrow range candlesticks were recorded in proximity to the recent highs. The Russell 2000 (^RUT) registered an inside session, which taken in conjunction with Friday’s "island" formation could be pointing to some need to digest the valiant recovery since the weakness shown in the first full week of trading in June.

Treasury yields pulled back a little more yesterday which is perhaps holding the interest rate fears in check for the time being, but persistent strength in the energy complex is a factor that may rattle any complacent notions regarding cost pressures in the world economy.




The Nasdaq Composite (^IXIC) closed the session at almost exactly the same level as Friday’s session and as noted above there is an "island" formation developing at the top of the range and above the upper volatility band. At the very least some time spent consolidating recent gains seems likely.



As in yesterday’s commentary we would draw attention again to the extremely subdued volume that has accompanied the recent upward price performance in the semiconductor sector fund, IGW.


TRADE OPPORTUNITIES/SETUPS FOR TUESDAY JUNE 19, 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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com




AAPL  Apple Computer Inc.  



Apple (AAPL) is facing a retest of the $126 level which brought out some sellers previously.




WOR  Worthington Industries Inc.  



We recently pointed out that Worthington Industries (WOR) has climbed an ascending pullback channel and seemed to be stalling. This pattern was reinforced in yesterday’s trading.




PH  Parker-Hannifin Corp.  



Parker-Hannifin (PH) has similar characteristics to those just noted for WOR.




WFC  Wells Fargo and Company  



Continuing our theme of revisiting some of the charts featured recently, WFC produced a doji star formation on very subdued volume.




AVID  Avid Technology Inc  



Avid Technologies (AVID) has an ascending wedge pattern with some positive divergences. It now faces the hurdle of pushing above the level recorded on the gap down in late April.