Daily Form April 15, 2009


Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY APRIL 15, 2009       07:52 ET

The S&P 500 (SPX) is encountering considerable turbulence in a critical zone between the 835 and 875 levels. I shall repeat the reasoning behind why these two levels are significant from a technical perspective.

1. The 1000 level has been selected as a pivotal upside level for a fibonacci grid for several reasons. Between three trading sessions following October 10th the index performed a 20% intraday reversal and clearly ran into resistance at the 1000 level. Two rally attempts in early November both topped out at the 1000 level.

2. Based on superimposing a fibonacci grid with 1000 on the top and 666 on the bottom the 875 level is a 62% retracement level and the 835 level is the 50% retracement level.

3. It would take a close above 1000 to persuade me that forthcoming positive price action has the capacity to make the transition from a rally within a bear market regime into something that would at least cause many institutional investors to jump on board in fear of missing a new bull market. Ironically this could actually trigger another major correction which I would not find surprising.

If we can get above 875 the next obvious threshold would be 935 which would bring the index back to its early January high.

On the downside a decisive break below 810 (the 50 day EMA) would also break an ascending trendline from the early March low.

The Nasdaq Composite (IXIC) is already challenging the 62% retracement level from a suitably adjusted fibonacci grid for this index, and by an interesting coincidence (perhaps not) this also represents the 2009 highest level achieved in January.

1900 would be an equivalent target from a technical perspective to the 1000 level on the S&P 500.

The FTSE index is behaving more erratically than the US indices with two large reversal candlesticks observed in the neighborhood of the 38% retracement level at 3900.

The index is still struggling to break above its 50% retracement level at 4060 and would seem to face a very substantial hurdle at the 4200 level (62% retracement).

EEM, the exchange traded fund which tracks the MSCI Emerging Markets Index is moving into a price zone where there is clear evidence of overhead chart resistance as well as the 200 day EMA which is just above yesterday’s close.

The negative divergences on the MFI chart are also a cause for concern that an intermediate term pullback could emerge.


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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GS  The Goldman Sachs Group Inc.  

Goldman Sachs (GS) has been discussed a couple of times here recently and I thought that a view of the 15 minute chart from yesterday would help to illustrate the negative divergences which were also apparent on the daily charts and which had caught my attention.

The reaction to the anticipated earnings release somewhat confused the short term technical picture, suggesting that caution is always wise ahead of major news on a stock, but as the pattern has evolved the stock was approaching a level at which a substantial correction was to be expected.

The stock has come back to a level where buying support should emerge but I will still keep this on my watch list for trading opportunities in coming sessions.

WFC  Wells Fargo and Company  

Reviewing the hourly chart for Wells Fargo (WFC) and the recent pullback pattern it would seem that around $17.50 new buying interest may emerge.

IYZ  iShares Dow Jones US Telecom  

IYZ tracks the Dow Jones US Telecom index and the pattern suggests that a bullish flag pattern is evident.