Daily Form February 25, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY FEBRUARY 25, 2009       03:37 ET

Following Monday’s break to a new multi-year low the S&P 500 (SPX) reversed most of the losses from Monday but also registered an inside day pattern.

It will be interesting to observe whether the rally can be further energized by President Obama’s speech to Congress last night but the lack of specificity on ways of resolving the banking problems will continue to weigh on sentiment. Difficult decisions need to be made about how to re-organize institutions that are proving to be massive black holes - AIG might just be the largest financial black hole ever- and no amount of oratory is going to ease the pain that has to be endured.

If the market can maintain some upward momentum there will be sellers looking to get short again at 805 and even more around 820.

The Nasdaq Composite (IXIC) also produced an inside day and as the annotations to the chart below suggest this index would face a real test at the 1500 level.

The exchange traded fund ACWI, is designed to track the MSCI All Countries World Index and once again it becomes clear just how closely the numerous global equity indices track each other. Even to the point that yet another inside day pattern was registered.

The decline in the Japanese yen is continuing, and, following the severe downward gap in FXY in yesterday’s session, the target that I talked about last week of 102 has almost been achieved.

While reducing the position size and taking some profit off the table at this stage would be advisable there still seems to be plenty of scope for even lower levels to be explored.


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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