Daily Form May 15, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY MAY 15, 2009       07:01 ET

US equity indices and sector funds are revealing a market with a split personality. There is undoubtedly some sector weakness developing but there are still pockets of strength and the broad market as reflected in indices like the S&P 500 still could surprise with an attempt to move beyond the 200 day EMA level.

Also, today, while reviewing the charts for many individual stocks, and to a lesser extent ETF’s, there are many which are displaying the requisite technical requirements of bullish flag formations.

One of the weakest charts from a technical viewpoint is the Dow Jones Transportation Index (DJT) which is probably one of the more reliable indicators of the market’s view on the likely timing and robustness of an economic recovery.

Quant funds continue to second guess where the liquidity pockets are and this market will continue to surprise with its twists and turns, however I do believe that in the intermediate term the chances of a 7 again as the first digit on the S&P 500 are increasing.

The Nikkei 225 concluded Friday’s session with an almost 2% gain.

As indicated on the chart this index has so far been able to remain above the 9000 level despite some pretty dreadful econcomic news and there are some suggestions that the Bank of Japan may be "helping" the market along.

A failure, over the next few sessions to re-test the recent intraday high around 9500 - marked by the hanging man/doji candlestick - would strongly suggest that an intermediate top is in place.

The euro continues to thrash around in the middle of the fibonacci retracement grid in the neighborhood of the $1.35 level. This is a market which seems not to be in a hurry to seek out a new firm direction and while it continues to meander the suspicion must be that there are still large funds that are unsure of where to position themselves on the risk aversion-> risk appetite spectrum.


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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GDX  Market Vectors Gold Miners ETF  

GDX, which provides exposure to the gold mining stocks via an exchange traded fund has approached a potential breakout level. There are also a series of nested cup and handle formations which are bullish.

My only concern is that the volume charts are not revealing an anticipation of a breakout so I would wait for some evidence of highly motivated buyers to emerge.

If the price action does bring in a lot of buyers it could turn into a rather upbeat scenario for gold miners and the precious metal itself.

PRU  Prudential Financial Inc  

Prudential (PRU) also seems to be comfortably positioned with a pullback pattern that has kept it above the 200 day EMA.

DISH  EchoStar Communications  

Echostar Communications (DISH) also has indications that it could run to the upside.

DIS  Walt Disney Company The  

Disney (DIS) has a bullish flag pattern.