Daily Form December 3, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY DECEMBER 3, 2008       07:42 ET

Volume on the SPY proxy yesterday moved ahead of that seen in Monday’s sell-off. The 4% recovery for the S&P 500 cash index still produced an inside pattern resulting from the large move seen on Monday.

The next three sessions have the potential for a fairly abrupt move as the struggle between those who believe that Thursday November 20th marked a key bottom take on the sceptics that will use any of the really negative data points that are easily found as an excuse to re-test that low.

The pattern over recent months has been for traders to get ahead of the employment data so a large move could be seen before the release from the Labor Department on Friday.

The Euro/USD rate has been quiet and range bound for several sessions and there is a similar capacity for a rather abrupt move in this cross rate after the decisions from the ECB and B of E as well as the release of Friday’s employment data.

While the direction of the next move is far from clear, what can be said in terms of technical targets is that $1.35 level would be a vital test on the upside, it represents the 38% retracement of the recent range, and yet a re-test of $1.20 could also be seen as a technical requirement in coming sessions.

For now I am definitely on the sidelines as far as trading the European currencies.

The Gold Index (^XAU) is revealing a bullish flag formation.


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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UUP  PowerShares DB US Dollar Index Bullish  

UUP, which represents a bullish viewpoint on the Dollar Index has reached a level of quite strong overhead resistance and a bearish flag pattern appears to be unfolding.

DVA  DaVita Inc.  

I shall draw attention again to DaVita (DVA) which faces clear overhead resistance from key moving averages and sellers might be looking for temporary strength to provide entry opportunities.

SMH  Semiconductor HLDRs Tr ML  

The semiconductor sector fund, SMH, is trading quietly near multi-year lows. There is clearly an absence of buyers and yet the risk/reward prospects are not particularly enticing on the short side either.

Charts like this suggest that a period of low volume trading may lie ahead as we approach the end of the year.

NEM  Newmont Mining Corporation  

Newmont Mining (NEM) has constructive chart characteristics on the long side.