Daily Form January 31, 2008

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THURSDAY JANUARY 31, 2008       06:02 ET

Day traders were treated to a very sharp late reversal in yesterday’s FOMC decision dominated session. Mr Bernanke and his committee delivered the 50 basis points reduction to the fed funds rate that the markets were set up to expect (along with 50 bps off the discount rate as well), but after a sharp upward spike immediately following the announcement, broad based selling emerged to take the market down in a big hurry in the last hour of trading. The late sell-off was attributed to news reports that a monoline insurer was about to be downgraded by the ratings agencies but this seems suspect as it should not have been such a surprise to traders as it has been subject to wide speculation for some time. Could it be another instance of how getting what you wish for is a mixed blessing?

As the long upper shadow reveals the S&P 500 (^SPC) turned around almost exactly at the 1380 level which will now become a significant target and hurdle in the near term.

Within nine days short term rates have come down by 125 basis points and there is reason to expect even more in the not too distant future. Clearly the Fed governors are anxious to avoid any suggestion that they have been asleep at the wheel. From a credibility point of view though, one is left with the uneasy feeling that it has been the gyrations of markets as well as the tactics of trading desks that has scared them into their eye catching generosity.


Yields on the ten year Treasury note moved up yesterday and, as suggested last week, I would expect a test of 3.8% in short order. The steepening of the yield curve which accompanied the FOMC decision should be constructive for banks in their attempts to re-build their balance sheets but it also has more sinister reflationary implications. Asset allocators will be watching the yield curve carefully and any noticeable reticence to load up on long term Treasuries, possibly associated with dollar concerns, would pose even more challenges to US policy makers.

The gold and silver index (^XAU) is carving out a constructive looking pattern at it remains poised at potential breakout levels.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JANUARY 31, 2008



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

MON  Monsanto Company  

Monsanto (MON) registered a striking doji/spinning top formation and looks vulnerable following its recent pullback.



CYMI  Cymer Inc.  

Discussed here on Monday, CYMI rewarded in a big way on the short side as a result of yesterday’s plunge.



WFC  Wells Fargo and Company  

Wells Fargo (WFC) has been in the vanguard of the recovery amongst the money center banks but, as the doji star at the 200 day EMA pattern suggests, a consolidation period may be imminent.



CCI  Crown Castle International Corp  

Crown Castle International (CCI) faces several layers of resistance.



MW  Men"s Wearhouse  

Men’s Wearhouse (MW) has been on the watch list this week for signs that the pullback pattern is running into resistance and the pattern certainly fulfils the requirements for the bear flag template.

Daily Form January 30, 2008

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY JANUARY 30, 2008       07:15 ET

The Nasdaq 100 (^NDX) has failed to make commensurate progress this week and the emerging chart pattern is pointing towards an imminent directional breakout which could arise later today when the FOMC decision is announced. Slightly less obvious on this index, but in evidence on many other index charts, globally as well within the US market, is the proximity of notable chart resistance. The 1900 still looks like a compelling target for the bulls but it is the near term bias which remains quite opaque in the current trading environment.


The S&P 400 Midcap index (^MID) has pulled back from the mid January turmoil and now confronts a clear barrier at the 800 level.

This has been an unusually difficult period for reliable diagnosis of chart patterns and when combined with the sharp intraday whipsaws, to be expected later today as well, it is keeping me on the sidelines more than normal. Indicators for the health of the underlying economy continue to be slightly confusing and yet we should expect another generous move by Fed governor Bernanke today, largely predicated on Wall Street problems rather than Main Street issues.

The Hang Seng index (^HSI) drifted steadily downwards in Wednesday’s trading to close near to the intraday low and with a 2.6% loss. The 25,000 level is proving to be an area where over exposed long funds appear to be liquidating positions and the convergence of the 200 and 20 day EMA’s poses a significant technical hurdle.

Yet another index which has rallied back to a clearly identifiable chart barrier is the Bovespa index in Brazil (^BVSP).

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY JANUARY 30, 2008



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

VMC  Legacy Vulcan Corp.  

Legacy Vulcan (VMC) has recovered well and there are positive money flow characteristics but there could be an abrupt short term reversal near to chart resistance at the $78 level.



COP  ConocoPhillips  

Conoco Phillips (COP) faces hurdles near to yesterday’s close.



SHW  Sherwin-Williams Company  

Sherwin Williams (SHW) has a pullback channel that could be pointing to higher prices ahead.

Daily Form January 28, 2008

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY JANUARY 28, 2008       07:32 ET

The Nasdaq 100 (^NDX) reversed sharply on Friday after piercing through, in early trading, the indicated chart resistance. Along with the rest of the market the index succumbed to the tendency which highlights the current market predicament of rallies being seen as providing an opportunity for fund managers to liquidate long positions and better entry possibilities for traders that want to exploit the short side again.

The 1900 level represents a major hurdle on the upside but I sense we may go down today to test the lows again before there is any appetite for looking at overhead barriers.

Among the many things that the market has to contend with this week are the FOMC deliberations, Friday’s employment data, the fate of the so called monoline insurers, further negative earnings...etc.. and of course whether we get any new financial accidents a la SocGen. Despite all of the protestations about the soundness of the fundamentals - "It’s the financial system, stupid."


The banking index (^BKX) just made it to the 90 level on Friday where as expected there was very firm resistance. As the chart reveals the sector has a formidable obstacle to clear, and despite all of the positive rhetoric that is starting to surface about how bargains abound amongst the regional and relatively well capitalized banks, there is still too much financial uncertainty for anyone to claim that a meaningful bottom is in place.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY JANUARY 28, 2008



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

CYMI  Cymer Inc.  

We made money on both sides of the market last week with CYMI which reversed in Friday’s trading as anticipated.



GS  The Goldman Sachs Group Inc.  

The chart for Goldman Sachs (GS) has an evening star candlestick which on a statistical basis has been a reliably bearish pattern.



VLO  Valero Energy Corp.  

Valero (VLO) looks vulnerable at current levels and even more so as it gets closer to $60.



COF  Capital One Financial Corp.  

The chart for Capital One Financial (COF) highlights the hurdle that many companies face in the financial services sector.



CECO  Career Education Corp.  

Career Education Corp (CECO) is developing a well defined bear flag formation.

Daily Form January 25, 2008

TRADE WITH FORM
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Trade successfully without having to be right about the underlying market direction
FRIDAY JANUARY 25, 2008       03:10 ET

Microsoft’s earnings and guidance after the close last night should provide further underpinning for the recent relative out-performance of the large Nasdaq stocks. The Nasdaq 100 (^NDX) does face some chart resistance just above yesterday’s close but it is in the vicinity of the 1900 area on this index that I would expect the counter-trend rally to run out of steam.

In overseas action the Hang Seng (^HSI) is racing ahead again with a more than six percent gain as this is being written and with the Nikkei 225 ahead by more than four percent when it concluded Friday’s trading. The Japanese index is approaching levels where the risk/reward ratio favors new positions on the short side.


The S&P 400 Midcap index (^MID) was surprisingly more lively than the larger cap indices yesterday which was also in sharp contrast with the Russell 2000 (^RUT) which went nowhere during the rally continuation.

Reviewing the likely resistance levels I would suggest that 800 could pose quite a challenge for the midcap index.

As suggested yesterday there is still scope for profit on the short side in the Treasury complex and I would expect to see yields reach back towards 3.8% in the near term.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JANUARY 25, 2008



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

ASYT  Asyst Technologies Inc  

Mentioned here yesterday as a candidate on the long side Asyst Technologies (ASYT) provided an attractive entry opportunity and delivered a healthy ten percent return on the session.



CYMI  Cymer Inc.  

On Tuesday I suggested that CYMI would make it back towards the 50 day EMA and this target is close to completion. At this level I would be looking to reverse to the short side.



MSFT  Microsoft Corporation  

The chart for Microsoft (MSFT) is very intriguing and reveals, on an extended basis, a slightly unorthodox version of William O’ Neill’s cup and handle pattern. In particular the key level for this configuration sits between $30 and $31 and this acted as support during the turmoil earlier this week. The chart looks very positive on the long side in the longer term.

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Daily Form January 24, 2008

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY JANUARY 24, 2008       06:59 ET

The chart below for the KBW banking index (^BKX) reveals the clue to yesterday’s dramatic reversal and more than six hundred point intraday traversal on the DJIA. Exactly as was seen in mid August (which I have marked in yellow on the chart) the combination of substantial short covering in the sector and genuine buying as opportunistic fund managers look to get behind the strong bounce potential, produced the powerful upward dynamics that kicked in during the latter part of yesterday’s trading.

The banks have now rallied back towards the twin hurdles of the 50 day EMA and the downward sloping trendline through the highs extending back to last October. As the index confronts the 90 level it will become more apparent just how much traders believe that the Fed is now not only committed to aiding the financial sector, but also that the banking sector can seize the advantage of lower borrowing costs to help itself out of the mess that it is in.

If the downward trendline can be decisively broken, it may well be that the market will focus less on bad numbers from the likes of Apple and Motorola and breathe a collective sigh of relief that there is light at the end of the tunnel for the banks, homebuilders and insurance companies that have been clobbered for so long. The delicious irony of course is that it was precisely the availability of cheap money from the Fed that caused the accident prone bankers to mis-price risk in the first place, and yet once again we appear to be "solving" the problem with another spell of cheaper money for the banks.


The S&P 500 (^SPC) broke below Tuesday’s low intraday yesterday but then began the almost vertical ascent into the close. There could be sufficient short covering momentum to bring the index back towards the 1380 level in short order. The next big hurdle will be the countdown to next week’s FOMC meeting as traders wait to see whether Chairman Bernanke will pull another rabbit out of the hat. Ironically the more upward progress that is made before the meeting may reduce the FOMC’s anxiety level and lead them to be less generous next week.

Early yesterday the Treasury market witnessed panic buying as European markets were selling off and US futures were plunging. The yield on the ten year note opened yesterday near to 3.25% but as equities rebounded and asset allocators began to switch away from safety the yields moved up sharply. I would not be surprised to see a move back towards the 3.75% level as traders suspect that the recent panic about financial Armageddon may have been just a bit overdone.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JANUARY 24, 2008



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

ODP  Office Depot Inc.  

One needs to be careful on the long side at the moment but the current dynamics suggest that this bounce could have some way to go. Large bets were being placed on Office Depot (ODP) yesterday and the stock moved up more than 13% towards a noticeable chart hurdle. If stock like ODP can get above these downward trendlines then sentiment could shift enough for a prolonged counter-trend rally.



ADI  Analog Devices Inc.  

Analog Devices (ADI) looks to be tradable on the long side back towards the 50 day EMA.



ASYT  Asyst Technologies Inc  

Asyst Technologies (ASYT) faces a clear barrier at the downward trendline which tracks the 20 day EMA (blue line on the chart) but there are positive momentum divergences and a spike up towards $3.50 is a possibility.



URBN  Urban Outfitters Inc.  

Urban Outfitters (URBN) could see a further move up towards $28.

Daily Form January 23, 2008

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY JANUARY 23, 2008       08:03 ET

Around 9am yesterday morning with S&P 500 futures at limit down and precipitous falls throughout Asia and Europe, Chairman Bernanke came through in spades. Traders were presented with a 75 basis point cut in the fed funds rate and most significantly there was none of the usual obfuscation and measured nuances of Fedspeak.

When the central banker of the most powerful economy in the world drops the usual cover of weasel words and other key figures step up the barrage of reassurances that "the underlying fundamentals are sound" etc. we should all be feeling more uneasy about the stability of the global financial system. The malaise goes far beyond the sub-prime problem and raises more profound questions about the integrity of the structured instruments that have been embraced by accident prone bankers without adequate stress testing.

The S&P Midcap index (^MID) bounced off the 200 week EMA but the long tail below the green line on the chart below suggests that we may see quite a bit of donwside testing before the markets decide whether Mr Bernanke should do another 50 basis points next week. These certainly are interesting times!


One of the most positive responses to the Fed move came from the FTSE index in the UK which reversed sharply in afternoon trading and transformed a panic stricken intraday loss that took the index below 5400 back above the opening price to close with an almost three percent gain on the session. The governor of the Bank of England indicated that rate cuts are on the cards for the UK but other comments from his speech last night and recently released minutes from the most recent MPC meeting suggest that rate cuts will be harder to come by and less generous than those on offer from the Fed.

The outlook could of course change quite quickly if key indicators turn down more sharply and it is the housing market that remains the elephant in the room as many consider the UK real estate market to have even more bubble like characteristics than those in the US.

As this is being written the good cheer that surfaced yesterday afternoon in Europe is fading fast with the FTSE down by 1.5% and Germany’s DAX sliding fast with more than a three percent loss. Encouraged by the way that Mr Bernanke appears so anxious to please, traders now seem intent on sending pointed messages to the governors of the ECB and the B oF E.

Sales of Maalox are probably booming in Hong Kong. During Tuesday’s trading the Hang Seng (^HSI) went into free fall and registered an 8.6% loss when it closed several hours before the FOMC announcement. Today the market staged a massive rally of more than ten percent. As global hedge funds game this market it would not be surprising to see another dramatic reversal tomorrow. Without being disrespectful it is fair to question whether or not health warnings and safety belts should be mandatory for all of the pension funds and asset managers that have major exposure to this market on the long side.

The VIX surged to close above 35 which exceeded the closing level from mid-August 2006.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY JANUARY 23, 2008



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

MYL  Mylan Laboratories Inc.  

Mylan Labs (MYL) bounced off two moving averages in yesterday’s session.



HUM  Humana Inc.  

Humana (HUM) may try to consolidate in the near term but recent topping behavior shows that there is plenty of downside potential.



XLNX  Xilinx Inc.  

Following Monday’s surge on high volume, Xilinx (XLNX) produced an inside day which may well be followed by further consolidation, but in the intermediate term the positive momentum should carry this stock higher.



MW  Men"s Wearhouse  

I shall keep Men’s Wearhouse (MW) on the watch list for signs that the pullback pattern is running into resistance.

Daily Form January 22, 2008

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY JANUARY 22, 2008       06:29 ET

Traders around the globe (even many who would normally be asleep in the Far East) will be transfixed today as they watch the likely gyrations of the US equity indices. Since the U.S. markets closed on Friday the rest of the world has suffered two of the most traumatic trading days in recent memory. I shall focus on the remarkable chart patterns of several of the global indices below but initially let’s review the S&P 500 (^SPC) as of Friday’s close and where we may be headed during today’s trading.

Futures indicate a much lower opening and, from a weekly perspective the 1240 level which has been marked on the chart could be a target for early testing in today’s session. There is a lot of price activity within the 1240-80 region on the daily charts and I would be surprised to see us slice through all of that without some attempts to stabilize for at least a couple of sessions. Chairman Bernanke may ride to the rescue and that prospect will keep the bears on their toes. It has been a great time to be bearish and some hedge funds that are playing the global equity derivatives on the short side are reaping vast rewards. When the short covering begins we could see a mammoth rally. But where it will begin and how enduring it will be is now the new enigma.


When I wrote last week that the Nikkei 225 (^N225) was headed towards the 12000 level I did not expect that we would be getting there so soon.

The Hang Seng (^HSI) has plummeted in the last two sessions and is now almost certain to test the August lows. As discussed many times previously the "de-coupling" thesis turned out to be just as bogus as the alleged benign risk transfer capabilities of CDO’s.

Having looked to be the outperformer within the mature European markets, Germany’s DAX has played catchup in the last two sessions and as this is being written, despite some bounce behavior by the FTSE in London, the DAX is down by more than 2%. However as the chart below reveals the 6500 area, which marked the level at which support emerged following the late February sell-off, may provide a place for the bears to catch their breath for a while.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY JANUARY 22, 2008



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

CYMI  Cymer Inc.  

I shall be looking at intraday swing trades in the next few sessions and would treat position trading with the utmost caution. One of the few charts that looks promising on the long side is for Cymer (CYMI) which could make it back to the 50 day EMA in coming sessions.



SNPS  Synopsys Inc  

Synopsys (SNPS) also has some positive divergences in the context of a possible double bottom formation.



YRCW  YRC Worldwide Inc.  

YRCW has a distinctive bear flag formation and seems like a good example of how traders will be looking to sell rallies on technically weak stocks.