Daily Form March 23, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY MARCH 23, 2009       06:23 ET

The leaks of the Geithner plan to the WSJ and the NYT over the weekend have already allowed many strong opinions to be expressed on the proposals in the blogosphere and in the financial media.

I shall not attempt to capture the flavor of some of the very critical views expressed about the plan - and will wait until after the actual details have been presented before making any comments.

As I have indicated the 840 level on the S&P 500 should present a formidable hurdle on the upside which is why I have suggested targeting 825/30 on any initial enthusiasm that accompanies the announcement.

Mr. Geithner has the capacity to screw this one up so that should also act a warning not to take it as given that the markets will respond favorably in the longer term to the latest effort at "cleaning up" toxic assets. Indeed it is a fallacy to assume that they can be cleaned up - all that will be happening is that the ultimate liability for them will be the public sector - which is pretty much what most astute traders and money managers have realized is already the case.

The Asian markets appear to have got their celebrations in already for the expected Treasury announcements today. In Monday’s session the Nikkei managed a 3.5% gain and the Hang Seng Index in Hong Kong (HSI) burst above the 13250 level discussed here last week and now seems to be headed towards a 62% retracement of the November low and January high.

The Russell 2000 (RUT) retreated in Friday’s session exactly back to the 20 day exponential moving average support and a plausible upside target on this index from the extrapolated trend lines is up to the 470 level.

In a rather erratic trading environment which may unfold over the next few weeks as the markets digest Geithner’s plans, prepare for news from the G20 gathering in London next week, employment data at the end of next week and the beginnings of Q1 earnings releases, there is clear resistance at the 440 level and a realistic chance of a drop back to at least the 50 day EMA at 380.


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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XLU  Utilities Select Sector SPDR  

XLU, an exchange traded fund which tracks the utilities sector, has pulled ahead in a sharp V shaped rebound but now looks to be hitting a chart resistance level and the 50 day EMA at $26.

FXE  Currency Shares Euro  

The Euro has retraced 62% of the recent movements from its intermediate term highs and lows and the two doji stars on the chart for FXE suggest a clear uncertainty in near term direction.