Daily Form October 30, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY OCTOBER 30, 2008       06:13 ET

It is hard to keep track of the ever expanding extent of national government and supra-national bailouts. Apart from the obvious biggies like the TARP and other massive capital injections into the global banking system, here are just some that came to mind readily:

  • The UK government appears to stand ready to shovel credit the way of any small business owner that comes through one of the partly nationalized bank’s front door.

  • The IMF is hastily rescuing numerous economies on the global economic periphery which have dubious credit standings to put it mildly (not that a dodgy credit rating has been an issue in recent times in the developed world either)

  • The Russian government has put together a $6 billion rescue package for its most stressed billionaire oligarchs (some of whom could be down to their last few billions)

  • In the US many regional banks and auto companies that surely have reached their sell-by dates look likely to be in receipt of publicly contributed funds.

    The next priority must surely be to bail out the struggling developers of some fabulous extravaganzas in Las Vegas that are clearly of strategic national interest.

    At some point the ongoing bail out of private enterprise will bring about a bale out from government debt securities.

    In the equity markets the cheerleaders are suggesting we look across the valley to the future earnings growth that is likely to re-emerge with all of this stimulative government intervention.

    If one is consistent bond traders should be looking across that same valley and getting increasingly uncomfortable that additional supply, the ubiquity of cheap short term money and a re-kindled commodity sector cannot be good for bond prices.

    The DJIA could see a re-test of the 10,000 level while the bears sit on the sidelines waiting for re-entry opportunities.

    On the Nasdaq 100 (^NDX) the intraday high from October 14th and the 38% retracement of the June/Oct high low suggests that the 1500 area could be another area where the bears will lie in wait.

    Looking at the Nikkei’s performance in Thursday’s trading one could be forgiven for thinking that last week’s plunge to a 26 year low was just a momentary aberration (or more cynically a reminder of the notion that gained traction in the 1990’s that the Japanese were always clumsy sellers).

    As with the DJIA the 10,000 level would seem to be a feasible short term target.


    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

    CHRW  C.H. Robinson Worldwide Inc  

    The suggestion in Tuesday’s column that CHRW could be ready to break out from an upwards wedge pattern which had been evolving could have allowed an attractive return over the last two sessions.

    MMM  3M Company  

    Also worth repeating is the suggestion given on Tuesday morning regarding 3M - (MMM) has managed to recover fairly steadily since October 10th but could face resistance from the 50 day EMA. A buy and reverse strategy at $65 may be worth consideration.

    Yesterday’s intraday high fell just 2 cents short of that target.

    UTH  Utilities HOLDRS  

    One of the sector funds for utilities stocks, UTH, is looking as though it is preparing for an upward move.

    UUP  PowerShares DB US Dollar Index Bullish  

    One further recent suggestion was to keep an eye on the exchange traded fund UUP, which represents a bull view on the US dollar index, for a possible topping action. The call was a little early but there could still be further rewards as it would not be surprising to see this fund retreat to the arrow indicated on the chart below.