Daily Form August 19, 2009

Detecting Profitable Patterns For Active Traders

Successful trading without having to be right about the underlying market direction

WEDNESDAY AUGUST 19, 2009       04:39 ET

Once again the lead chart for today has to be the Shanghai Index (SSEC) which appears to be having another attack of vertigo after Tuesday’s pause. The index dropped sharply into the close in Asian trading today and closed with another 4% plus decline.
In Monday’s column I noted that the 200 day EMA might provide some support but looking at this chart the old phrase about not wanting to catch a falling knife comes to mind.
Needless to say this chart will not be positive for sentiment elsewhere today and is already having a sharp negative impact on European equities and supporting the safe haven play on the US dollar.

After yesterday’s inside day on the S&P 500 and with the deteriorating mood about emerging markets, de-coupling and so on which are already surfacing in commentary from the usual suspects, the 950 level looks more feasible as the intermediate term target which was discussed here earlier in the week.

Following the technical sell signal on the daily Ichimoku chart for the GBP/USD currency pair discussed here yesterday a similar sell signal has been registered on the chart for the EUR/USD pair.
Again these are not short term indicators and the intraday movements will continue to be worth trading in either direction but the longer term outlook seems to be favouring the US dollar against the key European cross rates.

The intraday chart for Germany’s DAX shows the negative reactions to the Shanghai markets late plunge and the index is flirting with the 5150 level which marks possible support.


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 a more comprehensive listing of price formations detected by our pattern recognition algorithms please visit TradeWithForm

ACWI  iShares MSCI ACWI Index  

The investment vehicle which tracks the iShares MSCI ACWI Index is revealing a rather classical momentum divergence and the indicators are suggesting that a correction is now evolving which could bring the index back towards a re-testing of the support level illustrated on the chart.

UUP  PowerShares DB US Dollar Index Bullish  

The bullish view of the US dollar index, as facilitated by the sector fund UUP still seems to me to be validating the basing pattern diagnosis which I provided here some time ago.