Daily Form October 20, 2009

Inter-market Technical Analysis Using Algorithmic Pattern Detection

TUESDAY OCTOBER 20, 2009       06:17 ET

In Monday’s column I remarked that the pattern on the Rogers Commodity Index (RCT) had the capacity for a breakout from an interesting basing pattern, and the ongoing march of energy and other industrial/agricultural commodities is providing confirming evidence of this pattern.
DBC, an associated sector fund, as well as COW have performed well since being recommended here and other commodity funds such as DBB, DBA and MOO are worthy of consideration.
As the US dollar continues its slump and the enthusiasm for other currencies is not wholehearted, there is clear evidence that the appeal of commodities as a proxy for purchasing power is increasing.
Eventually, my growing intuition is that a new basis for international settlements will emerge and complete the circle with a new global reserve unit of account being established which will rest upon a basket of commodities along with an assortment of paper currencies.

GBP/USD has rallied back towards the $1.65 level, and, as illustrated on the 4 hour chart, the Bollinger bands are constricting along with a drifting of the RSI values in the neighborhood of the 70 level. The pattern would suggest an initial pullback which, provided it is not severe and attracts higher volumes, could be constructive for sterling in the intermediate term.

The DAX index in Germany could not quite reach back to the intraday high seen in last Friday’s trading and registered an interesting green trend day, which was still an inside pattern with reference to Friday’s formation.

The exchange traded fund, SLV, which tracks the price of silver is revealing some divergences. As suggested elsewhere, the momentum for the miners of the more senior of the precious metals provides some additional plausibility to the notion that the two metals could be headed for a period of consolidation.


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

POT  Potash Corp. of Saskatchewan Inc  

Potash (POT) broke away on substantial volume and looks to be targeting highs around $120 seen in June.

GDX  Market Vectors Gold Miners ETF  

The gold mining sector fund GDX is revealing fading momentum.

IGW  iShares Semiconductor ETF  

Last week I suggested that the semiconductor sector was showing some signs of fatigue and pointed to the performance of XSD, and today the focus is on similar waning momentum for another fund for semiconductors, IGW.