Daily Form July 2, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY JULY 2, 2008       06:48 ET

It was another roller coaster ride for traders in US equities. An early sell off down almost to the March 17th level on the S&P 500 (^SPC) brought in some buyers. Reviewing the chart, the picture is one of a rather perfect double bottom but that makes me somewhat skeptical about how reliable a foundation for a rally this might be. Rather it would seem that we saw a bout of short covering at a fairly predictable technical level, but this market needs some institutional buying on the long side to mount a sustainable rally.

The Russell 2000 (^RUT) bounced neatly off the 680 level discussed here yesterday.

The Brazilian Bovespa index (^BVSP) is approaching a chart zone where some stability might arise and where a tradable bounce could be worth consideration.


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.
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XLB  SPDR Materials Select Sector  

Discussed here yesterday, IYM, the sector fund for basic materials continued its precipitous slide. Another fund which provides similar exposure is XLB and this chart reveals the deteriorating technical conditions for the sector.

RSX  Market Vectors Russia ETF  

I would not want to be a buyer of the sector fund for Russian equities (RSX) until it comes down further towards the 200 day EMA.

XLNX  Xilinx Inc.  

Xilinx dropped below its 200 day EMA and registered a hammer candlestick under one interpretation or a hanging man pattern on another. There are negative divergences apparent that are shared by many charts at present and I would keep this on a watch list for an entry opportunity on the short side following any bounce effort.

CCI  Crown Castle International Corp  

Crown Castle International has almost identical characteristics to XLNX.

LEH  Lehman Brothers Holdings Inc.  

I am going to repeat the comment that I made last week regarding Lehman Brothers - Is this bank going out of business - the bears seem to be betting that it is but they really don’t know and would be very quick to cover on any snap back rally.