Daily Form March 16, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY MARCH 16, 2009       06:00 ET

Improved sentiment for equities was apparent in trading in Asia on Monday and, as this is being written, the European markets are continuing to move higher. The Euro has pushed above the $1.30 level which has somewhat surprised me but for now it appears that the renewed risk appetite for stocks and more speculative instruments appears to be working against the US dollar.

My sense is that sentiment is still rather fragile and it would not take too much to cause a sharp drop again but the bear market rally could have further to go. My target for the rest of the month would be 825 now on the S&P 500 as it represents a rather pivotal intersection point of the trend lines drawn on the chart below. Longer term it still seems that there could be further downside to explore - but that’s for another day.

Sentiment is being helped along by a slightly more positive assessments from central bankers and the spin doctors will continue to keep the markets guessing with window dressing for the G20 meeting in London on April 2nd.

To provide some flavor to the improving mood music here is Mr. Bernanke, interviewed on 60 Minutes on Sunday on how long the recession might last.

"It depends a lot on the financial system. The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We’ve seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we’re not gonna see recovery. But we do have a plan. We’re working on it. And I do think that we will get it stabilized, and we’ll see the recession coming to an end probably this year. We’ll see recovery beginning next year. And it will pick up steam over time."

The Hang Seng (HSI) took off in trading during its afternoon session on Monday and closed out the session with a 3.6% gain.

Price action in Monday’s session moved above a trendline through the highs this year (not drawn), also above two moving averages and the next obvious target is 13250 which would represent a 50% retracement of the swing highs/lows over the last several months.

The Swiss Franc was effectively devalued last week and this is amply demonstrated by the highlighted gap down on the ETF for the currency, FXF. The move could be seen as potentially dangerous within currency markets as it indicates that when push comes to shove even some of the most fiscally conservative governments are prepared to resort to relatively extreme moves to give their economies a boost.

Switzerland is actually under a lot of pressure within the global financial community at the moment for other reasons as discussed in my personal blog

After its neighbor Liechtenstein has decided to revamp its banking laws and no longer provide watertight secrecy to its clients there is mounting pressure on Switzerland to move along the same lines or risk being "blacklisted" at the forthcoming G20 meeting in London.

This really puts the Swiss in an uncomfortable position and they are wriggling in discomfort at providing what is required. As the following report suggests they are making a token gesture towards the requirements for greater transparency on tax evaders but still holding on to their secrecy doctrine.

Question is just how serious are the Germans, French, President Obama, and the new convert Mr. Brown to really shut down tax havens.

To sound a rather sceptical note - I will believe it when I see it.


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

SMH  Semiconductor HLDRs Tr ML  

One of the most liquid ETF’s which tracks the semiconductor sector, SMH, could be bracing for a push up to the top of the trading range.

Worth monitoring is the possibility that a second successive lower high would be registered if the recent rally fizzles.

KONG  Kongzhong Corp.  

Kongzhong (KONG) will be on my Watch List today for any signs that a momentum top pattern which could be emerging will be validated by deteriorating price action.

GMKT  Gmarket Inc.  

Gmarket (GMKT) has an evolving bull flag pattern but could retrace further towards the moving average support. Weighing the risk/reward probabilities carefully could suggest an entry level during today’s session after the overall market has provided further clues as to its near term directional bias.