Daily Form November 16, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY NOVEMBER 16, 2007       03:12 ET

The question that I would expect to linger beyond today’s session is whether the markets are simply performing a re-test of last Thursday’s low or are gearing up for a new substantial leg down. As always I shall be monitoring the price action on the Russell 2000 index (^RUT) which as far as the pattern following yesterday’s trading is concerned leaves us guessing as to the possible near term direction. The pattern still could be seen as one of slightly higher intraday lows that may suggest that a retest may already have been made but stepping back to review the bigger picture the chart pattern looks troublesome for the bulls.


Yields on treasury notes are continuing to move lower and the floor around 4.4% has been decidedly broken and we should now expect further moves down to the next potential floor at 4%. There is no doubt that many traders are now becoming convinced about the likelihood of a serious slowing of economic vitality in the global economy.

On this theme yesterday’s discussion about the weakness in the industrial materials sector and the vulnerability of the sector fund XLB proved to be timely as the fund dropped down by 2.2% on substantially increased volume.

More evidence to keep us guessing about the retest of recent lows is to be found on the Nikkei 225 index (^N225) which closed Friday’s session just above Tuesday’s low and there is at least the suggestion of slightly higher intraday lows. Having said that the pattern looks as though traders are waiting for further cues from action in the US today and it must be said that the overall formation hardly looks inspiring for the bullish case.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY NOVEMBER 16, 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

XLE    

The energy sector fund, XLE, reveals very noticeable negative divergences in momentum and the 200 day EMA seems like a probable intermediate term target.



FNM  Fannie Mae  

The weekly chart for Fannie Mae (FNM) shows that after yesterday’s ten percent fall there will need to be a test of the October 2005 low.



BEN  Franklin Resources  

We noted yesterday that asset management company Franklin Resources (BEN) faced a strong hurdle at the convergence of all three moving averages. The stock sold off by almost five percent on twice the average daily volume and may need to probe for meaningful support at lower price levels.



BAC  Bank of America Corporation  

Returning to the theme of whether the most recent price action is just the market going through the motions of a re-test of last week’s low or something more serious, the chart for Bank of America (BAC) could be offering a more encouraging reading for the bulls.

Daily Form November 15, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY NOVEMBER 15, 2007       06:12 ET

Equity markets failed to follow through after Tuesday’s strong rally and the S&P 500 (^SPC) fell back below the 200 day EMA. Moreover the volume on the SPY proxy was notably higher than that achieved in Tuesday’s almost 3% rally. This lends supporting evidence to the view that much of what was seen on Tuesday was short covering by hedge funds and trading desks rather than new institutional buying.

One of the more surprising developments yesterday was the bearish comments from the Governor of the Bank of England that global share prices were out of alignment with deteriorating economic and financial conditions. Central bankers usually do not express such honest views about the state of the equity markets and one of the consequences of his downbeat assessment, that was especially targeted at the UK economy, was a slide of the pound sterling especially against the euro. This cross rate could have further to slide and the rate of sterling against the dollar may also be topping out.


The Nasdaq Composite (^IXIC) gave back almost one third of Tuesday’s gains and the index still faces the resistance of the 50 day EMA.

The sector fund for raw materials, XLB, is displaying some negative divergences and the performance of some of the industrial materials stocks as well as the shipping stocks suggests that fund managers are starting to take the possibility of a global economic slowdown more seriously.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY NOVEMBER 15, 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

SGP  Schering-Plough Corp.  

Schering Plough (SGP) appears to be in the midst of forming a bearish descending wedge pattern.



BEN  Franklin Resources  

Asset management company Franklin Resources (BEN) faces quite a strong hurdle as all three moving averages lie just above yesterday’s close.



KG  King Pharmaceuticals  

The chart for King Pharmaceuticals (KG) reveals a bullish flag pattern.



CMED  China Medical Technologies Inc.  

China Medical Technologies (CMED) could struggle to make much further upward progress following the high volume sell off on November 8th.