Daily Form September 30, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY SEPTEMBER 30, 2008       06:50 ET

One of the most extraordinary charts from a historic day of trading is the one for the Nasdaq Composite (^IXIC) which almost dropped 200 points and registered its third largest decline ever with a 9.1% drop.

The reason why I find it especially alarming is that the markets have been precoccupied with sorting out the debris from toxic assets and de-leveraging but seemed to have been overlooking lots of evidence that consumers are withering.

The focus today will be on letting the charts themselves reveal the dramatic and precarious state of the capital markets.


The KBW banking index (^BKX) fell back a breathtaking 20% plus and violated a critical trend-line from the July low. If the smart money is right this is the time to be buying within the sector - the key is to know which banks will be left standing when it is all said and done.

The CBOE Volatility Index surged to levels not seen since September 2001.

I found the following commentary useful from a site dedicated to the volatility index

The VIX set a new record today, with a closing price of 46.72. This record surpassed the previous record of 45.74 from October 8, 1998, which came during the Long-Term Capital Management fiasco.

Today also saw an intra-day high of 48.40 that is now the fifth highest intra-day VIX reading, behind a 49.53 reading also from October 8, 1998.

For the record, October 8th was toward the end of the panic associated with LCTM. It was the 18th day in a 1 1/2 month period that the VIX traded over 40. Following the record readings, the VIX hit 40 on each of the next four days, then did not trade in the 40s again until after the 9/11 World Trade Center attacks.

The Russell 2000 (^RUT) did not (yet) break decisively below the previous lows this year.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY SEPTEMBER 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

LQD  iShares iBoxx Invest Grade Corp Bond  

I shall repeat my comments from yesterday - "Threats of financial contagion are crippling the investment grade corporate bond sector. LQD would be worth monitoring today."



GLD  streetTRACKS Gold Trust  

Last week’s suggestion that the sector fund GLD was a buy has proved timely. Apart from nearly all of the inverse and leveraged exchange traded funds it was one of the very few to end with a green candlestick yesterday.



IYE  iShares Dow Jones US Energy  

Yesterday’s comment about IYE was not well timed and highlights the dangers of using certain indicators when we are in uncharted waters.

Daily Form September 29, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY SEPTEMBER 29, 2008       07:07 ET

Another day, another bailout.

Signs are growing that the European Central Bank and the Bank of England and their respective Treasuries are crafting their own toxic waste management programs.

It would appear that many bankers and politicians, on both side of the Atlantic, will be able to spend more time with their families.

The S&P 500 (^SPC) is poised for a break away from the triangular formation. In such extraordinary times all suggestions are that this could be the capitulation event that many technicians have been expecting. There are others, with more of a focus on Armageddon than I, who are supplying some eye popping downside targets from here.

Meanwhile I would not be surprised by a major move in either direction in such a febrile environment and intend to sit this session out and watch from the sidelines.


Traders in Hong Kong seemed unimpressed with the progress towards a finalization of the US Treasury rescue plan.

The Mumbai Exchange (^BSESN) has closed at a new 52 week low. The weekly chart shows how the index has fallen sharply to the pivotal 200 week EMA level and also to the point at which bubble-mania took hold two years ago.

A few weeks ago I commented in a television interview that the 5300 level seemed to be a possible target for the German market if the markets did not like the measures being taken to rescue the banking sector. As this is being written the Xetra DAX is down by more than 3% and looking precarious. Mood is not being helped by a more than sixty percent decline in Hypo Real Estate one of Germany’ largest holders of commercial real estate.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY SEPTEMBER 29, 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

IYE  iShares Dow Jones US Energy  

The IYE sector fund has a combination of a bullish pullback pattern and a basing pattern.



LQD  iShares iBoxx Invest Grade Corp Bond  

Threats of financial contagion are crippling the investment grade corporate bond sector. LQD would be worth monitoring today.



RTH  Retail HOLDRS  

Last week I touched on the pending weakness in the retail sector and will be watching the sector fund RTH for signs that the pullback should fail at overhead resistance.

Daily Form September 18, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY SEPTEMBER 19, 2008       06:47 ET

Recently here I suggested that we all had to hope that Secretary Paulson had another rabbit in his hat. When the European markets closed yesterday failing to rally after an injection of $180bn and Morgan Stanley and Goldman Sachs looked like they were about to be thrown on to the bonfire of vanities the authorities knew that they had to perform like true magicians. So we got two elements in a carefully planned set of leaks/announcements. Firstly the UK’s FSA came out with an outright ban on short selling of financials and then we got the news that an RTC type solution to the systemic financial crisis was being sketched out with Congressional leaders. Perfect timing and worthy of a true magician.

The nasty hedge fund fat-cats were set up as the distraction while the real illusion is performed which is that the effective nationalization of the illiquid assets of the banking system will restore confidence to the system. And it probably will - eventually - and until the accident prone bankers screw up again with more innovative financial techniques!

What is really crafty about the idea is that since it is still vague and has so many nuances and complexities to be ironed out it will allow for a stealth like alignment of the twin needs of separating out good bank/bad bank stuff with the other vital dichotomy private gain and public loss.

The timing of this was critical and is well reflected in the chart below for the VIX which shows that maximum fear as the 42 level was breached was the signal to the "authorities" that they really had no choice but to fire the biggest gun left in their arsenal.

One of the awkward questions that is going to have to be answered is what kinds of instruments will the RTC type entity be actually buying from the distressed banks? Presumably it will include all of the toxic structured instruments that do not trade, cannot be marked to the market and that none of the astrophysicists who concocted them can value either. What price should be paid for these exotic items? How long does the public sector keep them on its books?

If this issue doesn’t finally reveal the completely bogus way that the mathematics of risk management are being practised then nothing will.

Having got all of that off my chest one is reminded of the saying that the more things change the more they stay the same.




The FSA in the UK have moved the goalposts in a major manner and it is having the expected effect for the FTSE as a massive short covering is taking place in all of the battered financials. This will not be a champagne occasion for some in Mayfair tonight.

The Asian markets had a bonanza session with the Hang Seng index (^HSI) seeing an almost ten percent rally. But reviewing the chart it still apparent how much damage has been done to sentiment in this very speculative market.

The most dynamic move in the US equity indices yesterday was seen in my favorite barometer index the Russell 2000 (^RUT) which surged by seven percent and regained a close above the 720 level. Perhaps we will get the test of the 760 level that I was discussing here just two weeks ago and which following the recent events was something I did not believe we would see for quite a while.

What continues to make markets so fascinating - truth is stranger than fiction - is that I would not be surprised to see us above 760 in coming sessions or below 660.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY SEPTEMBER 19, 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

Daily Form September 17, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY SEPTEMBER 17, 2008       06:01 ET

The tumultuous developments of the last few days are being memorialized in some quite extraordinary charts. Normal indicators should be held in abeyance at the moment as these are extraordinary times so I shall simply comment on some of the implications of the charts I have included.

The enormous green candlestick on the chart for the yield of the 30 year Treasury indicates most clearly the fear that was registered in trading in New York on Tuesday as the inter-bank market froze up completely and all evidence suggested that AIG was about to file for bankruptcy protection. The yield actually touched 3.89% which may be some kind of capitulation moment that technicians have been waiting for.

The fact that this capitulation did not really arise in the equity market underlines the fact that the current crisis originated with all of the issues in the financial system and may still not have been fully discounted by equity traders. One final point is that the Hang Seng index (^HSI) dropped another 3.5% in Wednesday trading and seems to have taken little comfort from the AIG news.

Oh and by the way the Fed left rates unchanged - nearly forgot that.


The mid-July low broke down on the S&P 500 as was being suggested by the downward wedge pattern. The index touched 1169 but rallied into the close and regained a footing above the 1200 level.

It is getting too treacherous to ask whether this really was the bottom (probably not) but moves back towards the descending line of the wedge are certain to find the 1270 area very turbulent.

The VIX topped out yesterday just below the mid March high and reflected the fears and rumours about AIG that haunted the markets all day.

The nationalization of the insurance conglomerate which was announced late Tuesday, after the markets closed, may have marked another short term top in this index, but trading desks will surely remain jittery while the implications of ongoing concerns about counterparty risk remain at the top of the agenda.

The FTSE broke below the pivotal 5000 level in yesterday’s trading but managed to claw its way back to close above that level. As this is being written it appears that two of the large high street banks - HBOS and Lloyds are finalizing arrangements to merge/amalgamate. Details are not yet available but the questions about the ongoing funding of HBOS in the wholesale money markets simply would just not go away, and the UK Treasury must be relieved that a private sector solution seems to be under way avoiding the need for another Northern Rock rescue.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY SEPTEMBER 17, 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

GS  The Goldman Sachs Group Inc.  

If the world is not about to cave in then bargain hunters may be attracted by the fact that Goldman Sachs (GS) has not been this cheap since late 2005 and is now about fifty percent below its all time highs registered last fall.



LQD  iShares iBoxx Invest Grade Corp Bond  

One final eye catching chart from yesterday, which shows the opposite side of the coin to that seen in the long Treasury chart, is the plunge in the price of investment grade corporate bonds as reflected in the exchange traded fund LQD. Volume was six times the daily average and shows how the ETF marketplace is becoming an increasingly significant part of the asset class mix.

Daily Form September 16, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY SEPTEMBER 16, 2008       06:28 ET

Many Asian markets that had a public holiday on Monday caught up with the weekend’s developments in Tuesday’s session. The Hang Seng Index (^HSI) dropped more than five percent but ended the session at the same level it opened.

In general I believe that this is a very scary market and I am watching on the sidelines and advising clients to do the same. The value destruction on the long side is quite horrendous and lots of evidence suggests that we may be approaching a major bout of climactic selling. On the short side one also has to be very careful as there could, on any perceived good news at almost any moment, be a massive squeeze play where carefully planned stop losses become a little academic for many traders.


The chart for the Russell 2000 (RUT) reveals two key violations of trend-lines during the last two weeks.

The first break which brought the index below the 720 level was the real alert that the tide was turning and yesterday’s more drastic violation of the trend line shows that this index seems destined to retest the 660 level.

I would suggest that if the 660 level fails to attract real buying interest in the small caps, which is certainly the presumption, then a new bear leg down on the major US indices could have at least ten percent further to run.

The financials seem destined to revisit the July lows in coming sessions. A lot of the "smart money" had been speculating that the bottom was in place for the sector so a break below the low seen on July 15th in the XLF fund could see a less than orderly liquidation.

Despite the plight of banks and financial services the rout yesterday did not inflict real damage to the homebuilders. With XHB I am still of the view that the bottom is in place but would not be surprised to see a retracement towards the 50 day EMA.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY SEPTEMBER 16, 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

BAC  Bank of America Corporation  

Clearly some investors in Bank of America (BAC) do not appear to be comfortable with the notion that the bank had sufficient time over the weekend in New York to do proper due diligence on Merrill Lynch’s balance sheet.

A more cynical commentator might even suggest that they could have had several months to review and digest it but still not have really understood it.



SJF  Ultra Short Russell 1000 Value ProShares  

SJF, the Ultra Short fund which is an inverse leveraged play on the Russell 1000, mentioned in last week’s commentary has rewarded well but as with all leveraged plays one should not overstay one’s welcome.



RWR  DJ Wilshire REIT ETF  

One exchange traded fund worth considering in the real estate sector is RWR which tracks a number of REITs. This fund broke below a key uptrend line yesterday and looks set to return to the $60 level at least.

Daily Form September 15, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY SEPTEMBER 15, 2008       06:57 ET

The financial Armageddon bloggers are out in force at the moment and with historic announcements coming from the financial sector at an astounding rate it is getting harder to disentangle the emotion, newsflow and technical indicators.

The broker/dealer sector reveals the pattern most clearly that is shaping up on so many charts of a descending wedge where price has been grinding further and further into a narrowing apex and now appears to have nowhere further to go before a very decisive move becomes apparent.

From the evidence my best guess it appears that we are headed lower first but we are getting nearer to a major turning point - but things will become a lot clearer after the dust settles in US trading today and tomorrow.

There is now talk of the need for a new financial architecture and one that does not have embedded within it 30:1 leverage. With public monies now underwriting the entire financial system there should be a complete re-haul of the regulatory framework and the business models of major financial intermediaries. Unfortunately we have been close to where we are before and eventually inertia reasserts itself. Perhaps the severity of this crisis, that far overshadows the S&L crisis of the late 80’s and the LTCM bailout of 1998, may force the issue so far up the agenda that politicians and central bankers will have to address it. But while politicians and the popular media seem more concerned about whether pigs wear lipstick or the Book of Genesis is literally correct the idea that markets must be allowed to self-regulate means that they will remain just as prone to financial accidents in the future as they are now.

Even more fundamental than regulation is the need for the practice of risk management to be entirely re-engineered and no longer predicated on the ridiculous notion that the statistics and probability assumptions of the normal distribution can be applied to the understanding of asset prices and financial time series data.


The Nikkei 225 and the Hang Seng are both closed for holidays this Monday morning after the momentous decisions that were made in New York on Sunday September 14 but the European markets are approaching critical levels while this commentary is being written. Germany’s DAX index is flirting with the 6000 level but still remains above it in late morning trading.

As discussed here last week a break below that level on high volume could take us down to the 5300 level.

One well known commentator suggested that the fallout in the financials should not have a material impact on companies like Amgen and other techs.

We shall have to see whether the Nasdaq stocks (^IXIC) can help to alleviate some of the anxiety that overhangs the world of leveraged finance. The cynic might say that the problem with holding out hopes that companies like Amgen, Intel and Microsoft will provide some stability in a highly unstable environment is that they don’t have the exciting price dynamics that hedge fund managers have come to enjoy with commodities, the financials and currencies.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY SEPTEMBER 15, 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

GS  The Goldman Sachs Group Inc.  

The chart for Goldman Sachs (GS) reflects the same issues that are evident on other charts discussed. One problem that I have with those calling for a capitulation moment is that the chart below shows that we already had one in March and now we have retreated to almost the same level as then.

So are we about to have a second capitulation moment? That’s not how it is supposed to work and to think that Goldman has been smart enough to sidestep the woes of structured financial instruments that have taken down three of its rivals seems suspect.

We may be closer to a bottom than analysts like Nouriel Roubini think but the unwinding of leverage and the fall out from the collapse of all of those dodgy derivatives still has some pain to inflict on the Wall Street boffins.



FXA  Currency Shares Australian Dollar  

Just how all of this weekend’s news will impact the dollar remains unclear. So far the evidence is not pointing to any real resurgence in the euro but one currency that does seem oversold and likely to bounce is the Australian dollar which could be headed back towards 86 cents in coming sesions. Longer term this currency still looks to be headed towards lower levels against the US dollar.

The exchange traded fund FXA does provide easy access to this currency cross rate.

Daily Form September 11, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY SEPTEMBER 11, 2008       06:13 ET

Reviewing charts today I was struck by the number of inside day patterns on individual stocks as well as sector funds. The market’s digestion of the Lehman news was fairly muted and I have the sense that the market is preparing for a directional breakaway move.

The chart for the Nasdaq Composite (^IXIC) reveals the inside day pattern in the vicinity of the 2008 lows and as I discussed during a TV appearance yesterday the tech stocks have relinquished their claim to any leadership role for the bulls. It remains to be seen whether they will now lead us downwards.


Trading in Asia on Thursday was pretty grim with the Hang Seng Index (^HSI) dropping more than 3% and falling decisively below the 20,000 level. The pattern that I have marked on the chart illustrates a downward wedge pattern breakdown. This is what I am also seeing on many other global index charts and is, I would suggest, clear evidence of the deleveraging process that is taking place as hedge funds are being forced to reduce their risk exposure and facing client redemptions.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY SEPTEMBER 11, 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

OIH  Oil Services HOLDRS  

I am looking at those ETF’s that are showing interesting money flow characteristics as this is definitely a market where the large funds are actively engaged in sector rotation strategies. Although there is nothing very revealing in the price pattern I would suggest keeping an eye on OIH which tracks the oil services sector as it appears to be sold out.



SJF  Ultra Short Russell 1000 Value ProShares  

The Ultra Short funds have been very rewarding recently and the price and volume action in SJF which is an inverse leveraged play on the Russell 1000 Value index suggests that some sizable bearish bets are being made here.

Daily Form September 10, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY SEPTEMBER 10, 2008       07:00 ET

There are some extremely ugly charts across a whole spectrum of asset classes at the moment. I was spoiled for choice in trying to pick the lead item for today’s letter as so many charts are at key levels, and highlight the fact that the risk and fear in the market is entering a new critical phase.

The chart below for the VIX captures the mood of the last few sessions well. We have now broken above the downward channel that I mentioned a week ago and this has caused me to ease up on the opening of new positions and tilted my balance towards the short side again.

The VIX appears to be pushing back towards a possible challenge of the mid July levels and both moving averages are moving up as the 50 day crosses the 200 day EMA

The plight of the tech stocks, the bearish performance of almost all of the geographical sector funds, and weakness in anything commodity related all suggest that we are heading for a new leg down. However the financials are not rolling over, notwithstanding the partial collapse of Leman’s stock in yesterday’s session. The news about the talks with Korean banks seemed a bit insubstantial when first announced, and it is rather surprising that the market reacted so dramatically when it became known that negotiations had come unstuck. The fact that the company has brought forward its forward looking statement to this morning (New York time) suggests that we may get another catharsis moment for the financials in today’s trading. I would suggest watching the VIX closely today and cross checking with action in the financials, especially the sector fund XLF for evidence as to whether traders are looking to cover short positions again and send another message ! that the worst case scenarios have already been previously discounted. A failure to rally across the banking sector and another dive for Lehman specifically would be a distinct negative.


The S&P 500 (^SPX) more than erased Monday’s gains with a 3.4% decline bringing the cash index back towards a probable re-test of the July 15th level.

I have shown before the weekly MACD chart which clearly reveals the negative divergences that preceded last October’s new price high but the evidence on the right hand side of the MACD chart is suggesting that we are not making a new momentum low despite recent bearish price action.

The chart for the Russell 2000 (^RUT) is changing its complexion. The failure to reach back towards 760 and three closes below the 720 level in the last week is suggesting that the previous enthusiasm from fund managers for small caps is waning.

The box drawn on the chart shows that despite yesterday’s large red candlestick, and 3.5% fall, all of the trading yesterday still lies within the boundaries of last Friday’s low and Monday’s high. Today will be a revealing session, I believe, and needless to say further weakness at this key juncture would shift me towards the imminent rollover view for US equities

The PHLX Housing Sector index (^HGX) discussed here yesterday met rejection at the 200 day EMA but it would have been more surprising if it had just sailed through this fairly obvious price barrier.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY SEPTEMBER 10, 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

XME  SPDR Metals and Mining ETF  

The last time I was interviewed on CNBC’s European Closing Bell about two weeks ago I discussed the metals and mining sector and suggested that XME was on the verge, after completing the third step in a downward staircase pattern, of a steep fall in the light of a very bearish pattern.

After several sessions of weakness we saw another eight percent decline yesterday.



EWZ  iShares MSCI Brazil Index  

Mentioned here yesterday, taking a short position following the bearish reversal in Monday’s trading for EWZ, which tracks the Brazilian market, could have provided an eight percent return yesterday.

Daily Form September 8, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY SEPTEMBER 8, 2008       07:21 ET

I am starting to lose count of how many times in the last year, according to the pundits, the US taxpayer has come to the rescue of the world’s financial system and saved us (?) from a global meltdown.

Under the new conservatorship arrangements (surely a euphemism for nationalization) those commercial organizations active in the mortgage markets have been given what they already thought they had which is an official ratification of the socialization of the liabilities arising from aggressive and mindless risk taking.

There is an old saying that one should be careful of obtaining what one wishes for and the underwriting of trillions of dollars worth of MBS’s may prove just such a conundrum. Greater transparency in financial markets is often held up as a virtue although one suspects that this is primarily by academics rather than those that actually work on a trading desk. With Treasury officials now required to value and understand the products of several years of ingenious securitizations it may prove harder to escape the emperor has no clothes syndrome.

Global indices are showing some big reactions already and the US market will be closely monitored today for the market’s assessment of whether the Secretary of the Treasury has now put in motion the solution to the global credit crisis.

Key upside levels on the S&P 500 (^SPX) are still 1320 which is the 50% replacement level and 1350 which is not only the 62% retracement but also coincides with the 200 day EMA. After today’s euphoria subsides it might also be worth considering downside targets too but that can wait for another day.


In European trading on Monday the major indices are surging ahead with most registering gains of three percent plus. London’s FTSE has gained 200 points so far, as this is being written, but this needs to be seen in the context of losing almost seven percent last week.

The 5500 level looks set to be challenged but, as the chart suggests, we must be careful that, after registering a failed break down from the triangular formation last week, there is not a similar break out to the upside this week which could eventually trap the bulls.

In trading Monday the Nikkei 225 pulled out of its recent downtrend just before hitting mid March lows but I would suggest that the 13000 level would be an attractive area for establishing new short positions.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY SEPTEMBER 8, 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

EFU  Ultra Short MSCI EAFE Index ProShares  

EFU, the inverse leveraged fund for the MSCI EAFE Index may have registered an exhaustion island top in Friday’s session.



IDU  iShares Dow Jones US Utilities  

As anticipated in commentary last week the behavior of the utilities has the footprint associated with large hedge fund sector strategies. The bear flag set up proved to be a very reliable signal for impending weakness but it remains to be seen whether players will find the Fannie/Freddie news to be a reason to retire short positions.



IGE  iShares S andP GSSI Natural Resources Index Fund  

IGE the exchange traded fund which tracks the S&P Natural Resources Index has positive divergences.



XLY  Consumer Discretionary SPDR  

After Friday’s employment data there are increasing concerns about the fundamentals for the consumer discretionary sector and the chart for the sector fund XLY reflects some of this in a technically dissonant chart pattern.



NX  Quanex Corp.  

Quanex (NX) looks promising on the long side.