Daily Form November 2, 2009

Inter-market Technical Analysis using algorithmic pattern detection

MONDAY NOVEMBER 2, 2009       06:47 ET

As would be expected, the Nikkei 225 had a poor session Monday with a drop of 2.3%. I showed a similar chart to the one below last Thursday and the drop below the 200 day EMA again is giving further credence to the unfolding pattern of successive failures at key fan levels.
There is a provocative article in the London Daily Telegraph today which indicates that the risks of a sovereign default in Japan are of a serious nature and are being reflected in substantial jumps in the CDS market. As reported in the article "Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September... and the gross debt is currently at 218% of GDP".

The KBW Banking index (BKX) appears to be on the precipice and as a Bloomberg article today points out the major banks are hoarding enormous amounts of cash which suggests that they are far from convinced that the systemic risks have disappeared as some of the more cheerful commentators are contending.

The VIX moved up sharply in Friday’s trading and is now above its 200 day EMA for the first time since April.


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

BAC  Bank of America Corporation  

Bank of America (BAC) is performing poorly and one should expect this to re-visit the $12 region in the intermediate term as key trend line violations are evident on the chart.

JPM  JPMorgan Chase and Co.  

JP Morgan (JPM) also did not perform well in Friday's session but unlike the chart for BAC there is no imminent threat of a break below key trend line support. In a financial bounce back scenario this would be the preferred long leg in a pairs play with a weaker bank and buying support should emerge at the $40 level.

XSD  SPDR Semiconductor ETF  

I have mentioned XSD, an exchange traded fund which tracks the semiconductor sector, several times recently and the negative tone of the chart is not showing any signs of improvement.