Daily Form October 1, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY OCTOBER 1, 2008       05:19 ET

The banks are trading like the dot coms/fiber optic outfits in the late 90’s. After a twenty percent fall in Monday’s session we saw an eighty percent retracement of that plunge yesterday - that is about as stomach churning as it used to get with stocks like JDS Uniphase and Amazon.

Sadly pension funds are the owners of a lot of the banks/financial services and the people who rely on these "securities" for their retirement income could do without the excitement and asset evaporation

If the rescue plan comes through Congress one can be sure that the most suspect bits of Wachovia and Citigroup will be some of the first toxic waste into Mr. Paulson’s troubled asset repository - or to give it an easier to remember name - garbage can.

The housing sector index (^HGX), reflecting most of the homebuilders and construction materials suppliers has not violated the upward trendline. The triangular formation is more acute if one ignores the highlighted "breakout".

Technicals are still suggesting that XHB made an important bottom in July but trying to circumnavigate the extreme bipolar disorder that is currently afflicting this market would suggest that caution is the best policy until the rescue package is clarified. The issue is not only one of whether it will pass but, if it should be passed, will it work?

Amidst some very confusing charts regarding near term direction, although the longer term patterns are still quite gloomy, the S&P Retail index (^RLX) appears to be one where any rallies should be seen as good opportunities to exit the sector.


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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