Daily Form November 21, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY NOVEMBER 21, 2008       04:30 ET

The S&P 500 (^SPX), along with other indices, took out vital support levels yesterday and closed at an eleven year low. I shall focus on this index in a weekend analysis.

One chart that I want to look at today is for the Russell 2000 (^RUT) which has dropped more than fifty percent in the last 80 days.

The fibonacci retracements from strategic lows experienced during the 1990’s and the high from last October pivot at the 600 level which is exactly the 50% retracement level and where other areas of chart support/resistance map quite cogently on to the fibonacci grid.

The target that I believe is now feasible in the intermediate term for this index is approximately 340.

Yields on the thirty year Treasury bond (^TYX) have fallen to their lowest levels and as the very long term monthly chart reveals the drop below 4% fits surprisingly well into a massive long term wedge pattern with the most recent baseline being decisively penetrated yesterday.

The action yesterday for the long bond captures the fear in the market place for which Mr Paulson and his change of view on the purposes of the TARP must surely take a large part of the responsibility.


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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JPM  JPMorgan Chase and Co.  

JP Morgan (JPM) is increasingly being seen as another troubled bank and yet again Mr Paulson’s reluctance (or incapacity) to address the removal of toxic assets from bank’s balance sheets has caused a sea change in this chart over the last several sessions.

C  Citigroup Inc.  

The announcement, before the market opened yesterday, that Saudi Prince Alwaleed Bin Talal had increased his stake in Citigroup (C) with a $300 million investment had all of the hallmarks of desperation.

Failure at Citigroup, precipitated by deposit withdrawals on a global basis, would even make Lehman’s demise seem tame by comparison.