Daily Form March 31, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY MARCH 31, 2010       06:50 ET




I commented earlier this week on the very steep ascent of the proxy fund for the Dow Jones Industrials, DIA, and thought it would be worthwhile to show the same configuration for the S&P 500 cash index.
The 1175-80 zone appears to be presenting a formidable overhead hurdle and meanwhile the RSI chart segment below is showing that there is a stalling out of the upward momentum/relative strength.
The next few trading days could well be erratic as today marks the end of the first quarter, tomorrow sees the NFP data and Friday is a holiday throughout Europe and for most American markets (also Monday is a holiday in the UK and parts of Europe as well). I shall be looking to be flat ahead of the data tomorrow and would not be looking to carry any positions over the extended weekend.



In European trading sterling was energized earlier this morning - for no apparent reason - or at least none that caught my attention - and this had the effect of causing abrupt movements in EUR/GBP in particular. I am hesitant to embrace the notion of sterling strength at present although I was well positioned on the long side of GBP/JPY - more of which below.
The 30 minute chart for EUR/USD shows that the $1.3470 level - at the top of the Ichimoku cloud is acting as a brake on further progress at present but on the longer time frames a move up to the $1.3540 level seems attainable in coming sessions.



USD/JPY is by far the most interesting chart of the day and the dollar has now moved decisively above 93.20. As I have been commenting for some time the next hurdle is the point indicated by the arrow on the chart and a move above this - which I believe is now on the horizon - would be a game changer for this cross rate.
It would also have wider implications for global asset allocators, and would, in accordance with commentary here previously regarding the tendency for the yen to show co-movement with the US Treasury complex, be an inter-market indicator that yields on the long end of the Treasury spectrum are destined to move higher.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MARCH 31, 2010


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





XLY  Consumer Discretionary SPDR  

XLY, the exchange traded fund for the consumer discretionary sector, may be able to retain its poise in line with the end of quarter portfolio cosmetics, but the sector looks over-extended.




GG  Goldcorp Inc. (USA)  

The daily chart for Goldcorp (GG) shows that the break below the cloud formation coupled with the earlier break of the trendline drawn suggests that this stock could revisit the February low in the intermediate term.




STX  Seagate Technology  

Seagate Technology (STX) has a bearish looking pattern from an Ichimoku and volume perspective.



Daily Form March 29, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY MARCH 29, 2010       05:51 ET




In European trading on Monday both sterling and the euro are seeing a bounce from the depressed levels seen last week. There appears to be relief in the market that Greece’s debt problems have been addressed by the EU fudge and there has been a slightly more positive tone to some recent UK data, perhaps the most "upbeat" of which is the fact that the publics sector net cash requirement (as forecast in last week’s budget) for the current year has been decreased by £10 bn from the previously anticipated £178 bn. From this some commentators are predicting a much less severe path to recovery than previously thought. I need to get a pair of their rose colored spectacles for myself.
The hourly chart for the S&P 500 below shows the setback seen at the end of last week as the index met rejection at the 1180 level. Notice how the base of the cloud has provided support several times over the period shown, and while the short term view is for more of the same i.e. a slow melt up into higher prices, a decisive violation of the support level provided could re-energize the bears. In turn, their subsequent short covering would provide the fuel for the next leg up.



After breaking down into the $1.32’s last week EUR/USD is now trying to re-establish a foothold above the pivotal $1.35 level. As can be seen on the 240 minute chart, the current level is an area of previous support/resistance and the cloud formation ahead should stall much further progress and lead to a near term price congestion zone.



The chart below illustrates the remarkably steep and uniform trend line drawn for the recovery since early February on the proxy for the Dow Jones Industrials, DIA. Also notice the persistently low volume since the tide turned in early February
Markets rarely trade in such a predictable manner and I would suggest that the large presence of algorithmic trading routines is surely part of the reason for this new "normal" in price development. The task for the technical analyst is to sharpen and modify the tools available, as well as presenting new ones, to keep an edge in understanding where the opportunities lie other than simply being a blind follower of the current bias of the automated programs.



In my estimation USD/JPY is setting up for a substantial break out if it can clear the 93 level. The long term weekly chart shows that a break through the resistance indicated and then a piercing of the cloud formation, which is not too "thick", would put targets of 97 and then up towards 100 in the frame during the coming months.






TRADE OPPORTUNITIES/SETUPS FOR MONDAY MARCH 29, 2010


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





AVP  Avon Products Inc.  

Avon Products (AVP) looks capable of heading back to the $36 level seen last in November 2009.




OSG  Overseas Shipholding Group Inc.  

In last Monday's commentary I suggested that Overseas Shipholding (OSG) looked vulnerable and that I would be stalking a short position on any rebound. Uncannily that opportunity was provided at the failure to break above the overhead cloud formation (illustrated by the arrow) and the sell-off produced a nicely profitable trade which has now been exited.




IYG  iShares Dow Jones US Financial Services  

IYG, registered a noteworthy gravestone doji formation last Thursday on twice the average daily volume. This pattern is not seen too often, but, given my comments earlier about the manner in which the micro-structure of markets is changing with the continuing adoption of automated trading strategies, one has to proceed with caution in using some previously reliable set-ups based principally on candlestick analysis.
The fund looks over-extended to my eyes and there could be a correction down to the $54 level in the intermediate term, but at present institutions and fund managers seem to be erring on a belief, abetted by the algorithmic practitioners, that the financials have nowhere to go but upwards.



Daily Form March 24, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY MARCH 24, 2010       05:37 ET




EUR/USD has broken below $1.34 and as the chart below suggests the range which has been "managed" during the last few months has been violated.
Targets in the mid $1.20’s are now firmly on the agenda in the longer term but beware of some erratic behavior as the EU struggles to keep its cool with all kinds of frenzied initiatives designed to look like it knows what it is doing with respect to deteriorations in the sovereign debt picture for Greece, Portugal etc.



Spot gold is at a critical level on the hourly chart. From reviewing the daily chart there is support between $1085 and 1090 but should that fail then there is quite an abyss below.



The DAX is not celebrating upbeat economic news within the EU this morning but seems to be watching the FX market closely. The irony is that any relief on the Greece crisis will be seen as yet another excuse for equities to rally not only in Germany but elsewhere, including the US.



Some time ago I played with the scenario that USD/JPY could at some stage rally (i.e. indicating yen weakness) and that a decisive break above the 92.50/93.00 level would violate a very long standing descending wedge formation. In trading Wednesday morning the Japanese currency is not benefitting from risk aversion brought on by the plumetting euro which is noteworthy in itself.
Trading during the next few hours on this currency pair will be well worth monitoring since, despite an RSI level approaching 80 on the chart below, there could be a mad scramble to exit the yen if levels near to the 93 level are penetrated.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MARCH 24, 2010


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





JCP  J.C. Penney Company Inc.  

Sometimes recommendations made here are for long term position traders such as the one made below from a couple of weeks ago with respect to JC Penney


Yesterday's break above the cloud on strong volume, which validates the recent breakout above the downward trend which took place in mid-February, suggests that J C Penney (JCP) has plenty of upside potential in the intermediate term.




Daily Form March 23, 2010


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY MARCH 23, 2010       06:42 ET




There is a simple theme to today’s newsletter with little commentary.
I have screened index and sector charts for those where the 50 day EMA is either at, approaching, or has just broken below the 200 day EMA. One further condition was that the so called "Golden Cross" in the other direction had to have taken place before the commencement of this year.
There are several that met the conditions and I have included some of the most notable in the charts which follow.
The first is for the Dow Jones Utilities Average.



The second chart following today’s theme is for the Shanghai Exchange, which concluded Tuesday’s session with a 0.7% fall. Note that the 200 day EMA sits at almost exactly 3000.



The Swiss Franc fell, as represented in the exchange traded fund, FXF, has recently seen the 50 day EMA drop below the 200 day EMA. In the FX market yesterday the EUR/CHF cross rate reached an historic lowest level as the Swiss currency continues to strengthen relative to the wilting euro.
The following news story reflects the concerns that this is causing for the Swiss government

The Swiss National Bank will not tolerate "an excessive appreciation" of the Swiss franc versus the euro and will take the necessary measures, SNB President Phillip Hildebrand said Tuesday.




Commodities are fading as is evidenced by the chart for RJI, which is an exchange traded fund which emulates the Rogers Commodity Index.






TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MARCH 23, 2010


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





JXI  iShares S and P Global Utilities  

In line with the first chart above, the sector fund which tracks global utilities, JXI, is on the verge of the crossover.




FXI  iShares FTSE-Xinhua China 25 Index  

The sector fund, FXI, which tracks 25 major Chinese companies is performing in line with the Shanghai index.




FEZ  DJ Euro STOXX 50 ETF  

The final chart for this column is perhaps the most surprising. FEZ tracks the EuroStoxx 50 and as can be seen the crossover happened in yesterday's session.



Daily Form March 22, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY MARCH 22, 2010       06:34 ET




Exactly as anticipated here last week, the high beta stocks were in the vanguard of the retreat during Friday’s session. I would suggest that the Russell 2000 may need to revisit the 660 zone - which is where the 20 day EMA is to be found - in coming sessions.



The chart for AUD/USD is unfolding in a manner which suggests that two key levels of support - annotated on the chart - need to be tested. If neither of these holds then the evidence would strongly suggest that an intermediate term top appears to be in place.



Here are my comments from Friday’s commentary:

On the hourly chart, Germany’s DAX is looking like it is running out of steam as it attempts to move above the current top of the range which is virtually at the January high.
In particular, I would also point to the manner in which the Bollinger bands have tightened, as well as the RSI is showing divergences, and this suggests a breakaway move is imminent. We could well see a substantial move in this index in European trading this afternoon when the US markets open for business.

As can be seen on the 60 minute chart recorded during European trading on Monday, the base of the cloud has been penetrated and going to the next major time frame - the 240 minute chart - the next line of support occurs in the region of 5800.



The ETF focus for today is on the oil services sector fund, OIH, which has suffered two days of selling on reasonably substantial volume. As can be seen the base of the pink cloud provided an intraday support area in Friday’s trading and this may assist rebound efforts in the near term, but the dynamics are suggesting that this fund is range trading but with a more pronounced downward bias emerging.






TRADE OPPORTUNITIES/SETUPS FOR MONDAY MARCH 22, 2010


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





DSX  Diana Shipping Inc.  

Amongst the numerous daily patterns which are now available to premium subscribers here , several of the shipping companies registered negative technical patterns from an Ichimoku perspective. The chart for Diana Shipping (DSX) is one which has dropped below the cloud and Kijun Sen value in Friday's session, and also violated a short term trend line through the low from early February. Further deterioration towards $13.75 is my expectation.




OSG  Overseas Shipholding Group Inc.  

Overseas Shipholding (OSG) resembles the pattern seen for DSX with a more obvious violation of the uptrend since the early February low. I would be looking at the short side on a rebound to the $44 level.




SEA  Claymore-Delta Global Shipping  

The exchange traded fund, SEA, allows one to take a sector approach to global shipping companies, and I would be targeting the area indicated on the chart - to be achieved during the next few sessions.



Daily Form March 19, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY MARCH 19, 2010       06:10 ET




I have been warning recently that the Russell 2000 index appeared to be closing in on an important intermediate term target of approximately 685. The cash index closed yesterday with a gravestone doji star following Wednesday’s intraday high of 683.98.
The IWM proxy chart below indicates that the momentum which has propelled this index during the last four weeks appears to be topping out. In addition several other sector charts are suggesting that equities are overstretched at this point. While I am not anticipating a major correction, the risk/reward calculus, I believe, is no longer in favor of the long side for most equity sectors in the near term.



In line with my commentary yesterday regarding the extraordinary situation with regard to the Greece rescue plans the FX market is taking the path which often arises when it is completely confounded which is to sell the euro and ask questions later.
From a longer term perspective the monthly chart shows how precarious the positioning of EUR/USD is becoming as the exchange rate is now encountering an upward sloping cloud formation where a break below the $1.34 level would remove any obvious layer of support and put the EZ currency at risk of eventually exploring levels in the $1.20’s.
The market will likely remain erratic as the newsflow about an EU rescue or an IMF rescue continues to muddy the waters but it would be a significant and bearish development if EUR/USD closes below $1.34 in North American trading in coming sessions.



On the hourly chart, Germany’s DAX is looking like it is running out of steam as it attempts to move above the current top of the range which is virtually at the January high.
In particular, I would also point to the manner in which the Bollinger bands have tightened, as well as the RSI is showing divergences, and this suggests a breakaway move is imminent. We could well see a substantial move in this index in European trading this afternoon when the US markets open for business.



Amongst the sectors which are showing the most signs of momentum exhaustion, the semiconductors, as expressed in the chart below for XSD are presenting not only a topping of the most recent MACD peak but also a negative divergence with the peak from the end of 2009 and beginning of 2010.


Daily Form March 18, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY MARCH 18, 2010       06:21 ET




The KBW Banking Index (BKX) has decisively broken away from the cloud formation on the weekly chart and targets near to the 60 level are now in play. Traders can get exposure to this index via the exchange traded fund KBE.



Keeping track of the latest twists and turns in the Greece rescue plans is not for the faint hearted but meanwhile it presents opportunities for FX traders who are not only having fun with the EUR/USD rate, but also in the wake of some surprisingly good news for the UK economy (or at least the markets are perceiving it as good news and a chance to squeeze the abundant sterling bears), the EUR/GBP rate is being heavily traded at present.
Just to summarize EUR/USD first the $1.38 level has proven to be a very tough barrier to cross and the euro is in retreat again in European trading. For the time being, seeing the opportunities as lying within the range of $1.3450 to $1.3750 seems to be the best way to trade this from an intraday perspective.
Looking at the daily Ichimoku charts it can be seen that the 50 day EMA (the redline on the chart) is about to collide with the declining cloud formation at the 1.38 level and I would suggest that it will be technically difficult for the euro to break through this level - even if the markets breathe another sigh of relief on the announcement of yet another definitive rescue plan for Greece!
I admit to having been prematurely too bearish on sterling against the euro and we are now back below the 90 level on this cross rate - but longer term I still believe that not only do the technicals point to renewed pressure on sterling but also the economic fundamentals are being propped up by a government which is reluctant to take the required austerity measures for fiscal sanity ahead of the UK election.



The US dollar found support against the Swiss Franc at the top of the daily cloud formation and underlines my comments from last week that the 1.0540 level was a significant level for this pair. However as also discussed the Swiss currency is highly correlated to the euro and this is probably not the right time to be pushing the long side on USD/CHF for short term traders, although I plan to start building a long position on USD/CHF when there are dips back to the 1.0550 area on the belief that the US dollar rally against the Swiss currency is not over.



I shall repeat my comments from Tuesday’s column regarding AUD/USD

The Reserve Bank of Australia is indicating that the future course of interest rates remains upwards and this is helping the AUD/USD in early European trading. A break above the cloud formation and the descending trendline .... which I suspect is imminent, would put targets around 9190, and perhaps beyond, in play.

The additional comments I would make regarding the daily chart above is that a broadening pattern - sometimes referred to as a megaphone formation - is making itself more evident on the chart, and there is a downward tilt to this. It would seem from the pattern that the Aussie dollar is at a fairly critical level at present, and if it cannot penetrate the upper descending line, then a topping formation could be under way and raises questions about the intermediate term prospects for those heavily exposed to FX carry trades.






TRADE OPPORTUNITIES/SETUPS FOR THURSDAY MARCH 18, 2010


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





ULBI  Ultralife Batteries Inc.  

UltraLife Batteries (ULBI) is quite intriguingly poised within a constricted range (i.e. the Bollinger bands are relatively close together) and the pattern resembles a rather shallow cup and handle formation. My intuition is that, if the stock can close above the $4.50 level, it could move quickly back towards the $5 level, and, as a further suggestion, I would keep 50% in the trade on the chance that the $5.50 level may be tested.




ERES  eResearch Technology Inc  

I shall also be monitoring eResearch Tech (ERES) today to see whether the upward trendline is broken, which would suggest a break down to $6.00. However a close today above $6.85 would be a validation of the more typical consequence of this upward wedge pattern which would be a breakout to higher levels with a near term target of $7.20 - a level which was last seen in December 09.



Daily Form March 16, 2010


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY MARCH 16, 2010       05:00 ET




The chart for QQQQ is providing precious little guidance about whether the surpassing of the January high will act as an impetus to further upward gains or bring about a period of consolidation.
The volume over the last two sessions is unusually anemic, and yesterday’s hanging man/doji star formation is indicative of indecision and lack of conviction on where to go next.
Perhaps the FOMC statement to be released later today will act as a catalyst and provide a little more useful information about near term direction.



On the 240 minute chart for spot gold a repeated pattern is revealing difficulties each time the metal achieves a pullback from selling bouts and encounters the 50 period EMA.
The arrow on the chart indicates where some further selling is to be expected.



The Reserve Bank of Australia is indicating that the future course of interest rates remains upwards and this is helping the AUD/USD in early European trading. A break above the cloud formation and the descending trendline on the hourly chart below, which I suspect is imminent, would put targets around 9190, and perhaps beyond, in play.






TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MARCH 16, 2010


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





ATK  Alliant Tech Sys Inc  

Alliant Tech Systems (ATK) looks vulnerable after registering a gravestone doji candlestick in yesterday's trading.




EK  Eastman Kodak Company  

Eastman Kodak (EK) pushed away from a congestion zone on substantial volume in yesterday's trading and could be about to exit the constricted volatility range which is evident on the daily chart.



Daily Form March 15, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY MARCH 15, 2010       06:00 ET




Friday’s action in US equities produced several candlestick patterns which can be characterized as hanging man formations. Given that they occurred at or very near to multi-period highs there is a suggestion that the market may be struggling to find new excuses to push higher in the immediate term.
The chart below for the Russell 2000 exemplifies the pattern just alluded to, and underlines my comment from last week that high beta may not be the best place to be while the market deliberates on how much further it wants to push into higher ground at present.
Just as a point of interest and to illustrate the benefits of the Ichimoku pattern analysis which I have become more reliant upon, there are two arrows marked on the chart which gave excellent buy signals for this index in February and suggested that the bulls had taken control of the agenda even when the world was worried about Greek defaults and Chinese tightening.
The leftmost arrow shows a crossing of what is called the Tenkan Sen above the Kijun Sen when price was within a cloud formation. This bullish indicator was validated within three days as the right most arrow shows the index piercing decisively through the cloud and setting the tone for the most recent recovery in equities.
As previously suggested one has to go out to the monthly charts for guidance on where there could be cloud resistance and it is in the neighborhood of 685 which also represents the uppermost Bollinger bands on the daily charts.



It is hard to be bullish on the daily chart below for the Shanghai Exchange as several up trend lines have been broken and the most recent formation looks like a broken bear flag which could see a retreat to the 2900 level.



Friday’s FX action saw a lot more attention to testing levels on cross rates without a primary focus on the US currency as one of the pairings. Of course all rates will ultimately have ripple affects which will impact the dollar but the point I am making is that, if and when say, traders are not especially determined to test a key GBP/USD rate then there will be a tendency to focus on such rates as EUR/GBP and GBP/JPY. This will often produce rather abrupt changes in the rate when quoted against the dollar but if the focus of the trade is with the other pair in the cross rate then the direction of the currency against the dollar becomes somewhat secondary to the profitability of the trade.
Sterling benefited in this manner against the US currency on Friday as there was a lot of short covering by traders who had shorted sterling against the euro and were busily buying sterling even as the GBP/USD charts were moving into resistance areas. Monday morning trading in Europe has seen the UK currency back testing the $1.50 level and it is hard not to be bearish on the currency based on the 240 minute chart below, especially as the RSI value has some ground to cover before it drops below the 30 level - a good place to cover short positions.



EUR/GBP behaved quite erratically on Friday but as can be seen from the chart below, and in the context of the discussion above, the pair have moved back towards levels where the chart formation suggests that a break above .9150 on the cross rate will put the .9350 level back into contention.