Daily Form April 29, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY APRIL 29, 2010       06:17 ET




The sovereign credit crisis is producing a variation on the normal flight to safety dynamics that have been witnessed during the structured products crisis. The US currency and Treasuries are certainly seeing a firmer tone as asset managers seek out that normal safe haven, but this time the yen is weakening - still above 94 as I write this - and gold which normally moves inversely to the dollar is poised at the $1170 level which I drew attention to here earlier this week.

The chart for spot gold, with the notable cup/handle formation looks uncannily like the one that preceded the big breakout last October and it would not take much to trigger a substantial breakaway move.

I think it is fair to say that traders in this market are ready to push the buy trigger at any more signs of an unravelling of the EZ.

On that topic I shall amplify something which I commented earlier today on my Twitter account

The irony of the current plight of the EZ is that the evolution of the entire European Union project has been largely in the hands of process driven elitist intellectuals and yet they missed the obvious - which is that it is proving impossible to keep a currency union together where is no centralized fiscal authority to impose taxes on EZ citizens to perform the customary bailout.




The Shanghai exchange fell again today and closed at its lowest level since last October. As noted on the chart the index has dropped more than 10% during April alone.
A move towards a re-test of the low of 2640 seen on September 1st 2009 could well be an intermediate term target.



GBP/USD has almost broken below the cloud formation on the daily chart - readers may recall that I prefer to stand aside when assets are within cloud patterns - and I suspect that there could be a validation of this downward directional bias - as soon as during Asian trading on Friday. Targets of around $1.48 are still on my radar during the next week or so.

The last edition of the X Factor election debates takes place tonight in the UK and Gordon Brown is vulnerable not only for his comments to a voter yesterday - which is a relatively minor offence - but which is all over the UK newspapers today - but for the much more serious accusation that should and probably will be made, that he has systematically mismanaged the UK’s economy for many years.

It never ceases to surprise me how memes can get planted in the public psyche and then be perpetuated without really being subject to critical scrutiny. The notion that Brown is best positioned to handle the economic difficulties moving forward, because of his mastery of economics (?), is quite astounding given the fact that he has presided over the public finances demise for the past 13 years.

Please do not take this as political partisanship since I only have one view of the current selection of candidates - which is that none of them are telling the truth about the austerity measures to come and none of them have clear ideas on how to tackle the structural public deficit which is near to being beyond repair.


Daily Form April 28, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY APRIL 28, 2010       05:59 ET




Readers of my commentary yesterday may have detected a certain amount of exasperation in my comments on the relentless ascent of the S&P 500 and the apparent absence within the fund management community of any concerns about the fact that the second most traded currency in the world - in which trillions of euros of assets are denominated - could be fighting for its very survival.

As suggested here yesterday, traditional tools from TA - such as MACD, RSI and other indicators of dissonance had been pointing to the fact that global equity markets had become unsustainably complacent, and that the expectations for a sharp correction were considered by most to be minimal.

The chart below tells you almost all you need to know about the way that this complacency was shaken severely yesterday. Notice how the VIX reached right to the top of the cloud formation - with a 30% jump - illustrating just how useful Ichimoku formations can be for money management and setting targets/stops.



Here is my comment from yesterday on $EURUSD

Once again the euro is under severe pressure in European trading and we appear headed for yet another test of the $1.3275 level.
According to one estimate from Goldman Sachs the cost for bailing out Greece could reach 150 billion euros which will not sit well with Angela Merkel’s coalition partners in Berlin.
If the currency breaks decisively below the previous support level around $1.3275 then the $1.30 level seems to be the next obvious target.


I did have a very profitable session yesterday but would have had even more satisfaction by benefiting from the wild movements in the sovereign CDS markets as rates on all Club Med countries surged. Portugal is now being lined up for the next attack - and the UK can only be thankful that it declined the opportunity to join the eurozone. As I intimated above - the currency union experiment lacks the architecture and heritage to deal with the problems of Greek government debt which now has junk status, and it is not a stretch of the imagination to contemplate that policy-makers in Berlin must be seriously looking at Germany exiting the EZ and re-establishing the D-mark before it all goes pear shaped.



One of the great fascinations that the markets have for me is the manner in which risk appetite expands so that all kinds of exciting opportunities seem feasible, and then the events of the last 24 hours suddenly sees many fund managers scurrying back to the safety of US Treasuries, the dollar and chucking out the more adventurous securities that seemed such a good idea at the time.
The chart for the Brazilian index shows that this market dropped precipitously and has broken a clear uptrend line since February.
Using Ichimoku as a cue there would seem to be support at the base of the cloud and there could be quite a bounce, but the dynamics seem a lot less bullish than they were before the credit ratings agencies could no longer avoid the obvious conclusion that many sovereign credits need downgrading - with several in risk of moving below investment grade. This is not a small issue since in so doing Greek government "securities" (if that is not an oxymoron) can no longer be held by most mainstream fund managers and pose real problems for the ECB which has accepted them as collateral in repo agreements.
The ECB looks to be between a rock and a hard place over current developments and there is no mechanism - as in the US and UK - to provide them with easy ways to grab EU taxpayer money to bail out basket case economies - of which there are many within the enlarged EU.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .



The CAC-40 in France plunged during the latter part of the trading day in Europe - not only in sympathy with most other European markets but additionally because its banks have the largest exposure to Greece.
I am not aware of any ETF which allows one to short the French market - perhaps readers may know of one and can let me know- but this is a territory where the woes of Club Med are going to be felt more severely than many others.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY APRIL 28, 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





BIK  SPDR S and P BRIC 40  

I thought it would be good to have a look at how many of the suggestions made here recently have performed.
BIK - a play on the BRIC economies - has revealed that the bear flag formation - especially following a heavy volume plunge - still acts as a reasonably reliable precursor of trouble ahead.




EWA  iShares MSCI Australia Index  

Here is a comment from Monday's column


The sector fund for Australian equities, EWA, is on my list this week as a short candidate.

This market is especially vulnerable to further tightening in the Chinese economy - and the PBOC cannot be feeling too clever about their currency diversification strategies which have seen them switch away some of their US dollar holdings to having greater exposure to the euro. Let's hope that they have bought credit protection on their holdings of southern European sovereign debt.




EZA  iShares MSCI South Africa Index  

Also discussed here recently were the growing negative divergences for EZA which tracks South African equities.
The actual targets suggested have been realized and I have highlighted the last three sessions which is a textbook example of an evening star candlestick pattern.
Further downside is to be expected.




IAI  iShares Dow Jones US Broker-Dealers  

IAI was also a feature sector fund last week and again the bear flag formation is in evidence.
On a related matter the Senate/GS hearing provided fascinating television yesterday and showed that the company, which is undoubtedly staffed by some of the brightest people on the planet, just cannot help itself from being predatory.
The argument that Goldman always puts its customers' interest first was made to look laughable by the evidence presented. Having said that I shall repeat something from my recent blog on the company.


For the so called "sophisticated investors" (a misnomer to be sure - but their hubris will promulgate that self delusion), who are the clients of Goldman, the intense focus that has now been brought to bear on the company will only underline and reinforce their conviction that it is best to be with the most ruthless predator in the shark infested eco-system known as Wall Street.





TBT  Ultra Short Lehman 20 Plus ProShares  

Sometimes it's important to know when to step aside and readers may recall that I discussed the chart for yields on the US 10 year Treasury. I said that the Ichimoku charts were send a confusing message and that it was a good time to stay on the sidelines - anticipating that there might be a flight to safety issue.

TBT which moves in line with yields on the long end of the Treasury spectrum shows that the advice to step aside was only partly right - it would have been better to have been short TBT or long the IEF fund - but at least going short Treasuries - which some highly respected analysts were claiming was the no-brainer trade of the year - was avoided.




XLP  Consumer Staples Select Sector SPDR  

XLP dropped far more than XLY yesterday breaking key trend-line support and I have marked where this sector fund which represents consumer staples may be headed.
As part of a book which I am currently writing on inter-market technical analysis I have examined the manner in which many patterns/correlations are breaking down in the new normal. XLP is usually considered to be a more defensive play than XLY - which is for consumer discretionary stocks - but the greater vulnerability of the staples now reflects the growing chasm between those who have had a good recession - the professional classes who have plenty of discretionary income - and those who have lost homes, jobs and are no longer buying branded staples but generics and at a reduced level.



Daily Form April 27, 2010


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY APRIL 27, 2010       06:38 ET




The Shanghai market dropped by more than two percent in trading on Tuesday and is now at a new closing low for the period shown on the chart.
I commented last week that the box pattern had broken and the failure of the index to find support at the previous closing lows suggests that the efforts by the Chinese authorities to temper some of the asset speculation in China are beginning to be taken seriously.



Once again the euro is under severe pressure in European trading and we appear headed for yet another test of the $1.3275 level.
According to one estimate from Goldman Sachs the cost for bailing out Greece could reach 150 billion euros which will not sit well with Angela Merkel’s coalition partners in Berlin.
If the currency breaks decisively below the previous support level around $1.3275 then the $1.30 level seems to be the next obvious target.



SPY saw a modest retracement yesterday and with the backdrop of the Goldman Sachs interrogation today and the ongoing concerns about sovereign debt risk in Europe it remains to be seen whether US equities can remain unflappable with all of these potential harbingers of risk.
I have decided to temporarily suspend any technical analysis of this major US index as the patterns seen on the charts suggest that different dynamics are at work than those that have allowed me to make sense of MACD divergences for several years. All that can be said about the chart below is that the market should, under conditions that have prevailed previoulsly, be pausing for breath, but rather than trying to anticipate any near term directional change, it is more prudent to accept that the path upwards since February is most extraordinary and the trend remains clearly upwards until evidence presents itself to suggest otherwise.


Daily Form April 26, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY APRIL 26, 2010       07:24 ET




In trading this morning in Europe, $EURGBP seemed poised to drop below recent support which would activate my target from last week of approximately 0.85. After it was announced that Angela Merkel would be making a statement about Greece at 13:00 today (European time) the euro found a bid and the euro/sterling cross rate moved back up.
The area targeted is where I would be looking to re-establish a short position on EUR/GBP.



USD/JPY almost closed at the 94 level last Friday and has seen some spikes above this level during trading in Europe this morning.
I maintain my intermediate term targets of 97 followed by 100.



The chart for gold remains constructive but until there is close above $1170, whereupon I would expect a quick move upwards, I would look to add to long positions on each pullback to the dotted line on the chart.



Sterling/dollar is within the cloud formation on the daily chart which will keep me on the sidelines on this cross rate - but as discussed on Friday the real action is on the cross rate between sterling and the euro- although playing both sides against the dollar is a useful tactical scalping strategy.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .






TRADE OPPORTUNITIES/SETUPS FOR MONDAY APRIL 26, 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





EWA  iShares MSCI Australia Index  

The sector fund for Australian equities, EWA, is on my list this week as a short candidate.




XOP  SPDR Oil and Gas Exploration  

XOP, the exchange traded fund for the oil and gas exploration sector, reveals one of my favorite breakout patterns and I would be looking to scale out of the position starting at $49 and then beyond.



Daily Form April 23, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY APRIL 23, 2010       06:17 ET




As expressed here several times in the last few weeks, in the last 24 hours EUR/USD went down and tested $1.3280 - fell below it - and now as I am writing this - the Greek authorities have officially announced that they will be seeking a bailout from the EU/IMF.

From a technical perspective the weekly Ichimoku chart has provided excellent guidance to the plight of the EZ currency and as the arrow indicates the efforts to regain a foothold above $1.3650 failed and I suspect that this level will provide a strong overhead barrier for some time on the currency.

Rather we should be expecting a test of the $1.30 level - from which we could see a decent bounce - but longer term the $1.28 level is now on the horizon.



The chart showing the yield on the US 10 year Treasury is rather conflicted from an Ichimoku perspective. On the one hand the yield has bounced off the top of the cloud which suggests that a near term base in yields is in place, on the other hand there has been a negative crossover of the Kijun Sen level (indicated by the arrow).

For the time being the Treasury market is not suited to position traders and despite the massive supply coming next week, the effects of ZIRP (zero interest rate policy) are still supportive to banks playing the carry trade and there is always the possibility of a major flight to safety if (when?) any of the other Club Med states in the EZ continue to stumble towards the abyss.



The following chart, which is more for illustrative purposes than for having any specific recommendation attached, shows that the Shanghai market fell below the 3000 level in Asian trading on Friday and has fallen out of a clear buy channel as well as below the cloud formation.



The weekly chart for GBP/USD shows that sterling faces a critical test at the cloud level and my own bias is towards the short side - although I prefer to be short EUR/GBP rather than short EUR/USD at present. Goldman Sachs (GS) has advised clients to buy sterling on the notion that some have over-reacted to the possibility of a hung parliament after the upcoming election.

While I have no particular fondness for any of the political solutions being advocated by the UK parties - there is a sense in which gridlock will only prolong the agony before the UK addresses its dire public finances. However as I commented yesterday on Twitter when the rapid rise in rates on credit default swaps for all of the PIIG nations was breaking, the one thing that Gordon Brown may have got right was to keep Britain out of the EZ. It allowed the Bank of England to engage in massive QE operations that are simply not available to those slow track nations that fall under the control of the ECB. There is nothing like being able to print your own currency to forestall a sovereign debt crisis - at least in the near term - and until the bond vigilantes smell blood and a lack of a credible plan to work off a persistent structural deficit. But that may not be evident for another few weeks while the UK electorate is wooed by their obsequious political leaders.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .


Daily Form April 22, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY APRIL 22, 2010       07:02 ET




Re-assessments of the debt/GDP ratios of the troubled EZ economies, published on Thursday from the European Commission, is causing a ramping up of the CDS rates on sovereign debt for all of the PIIGS countries.
Yesterday I suggested that EUR/GBP was destined to test the January low - that has already been tagged and the next target would appear to be the lows around 0.85 from the summer of 2009.



The sector fund for broker/dealers, IAI, appears to be developing a bearish pullack formation and the current mood of increased focus on bank regulations - including the remarkable proposals from the IMF announced yesterday - suggest that this sector could be facing stronger headwinds in the future than the cheerleaders for the sector have presently discounted.



The 240 minute chart for Germany’s DAX is indicative of a lower high/double top pattern and the bottom of the cloud would be a near term target.



One of the FX charts which caught my attention this morning is the long term monthly chart for EUR/CAD which as can be seen is now at historic lows - reflecting as much the troubled euro as well as the strength of one of the world’s key commodity currencies. No specific action is recommended although short term scalping opportunities could be quite lively.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .






TRADE OPPORTUNITIES/SETUPS FOR THURSDAY APRIL 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





EWJ  iShares MSCI-Japan  

The Nikkei 225 dropped by 1.2% in Asian trading and the EWJ sector fund looks technically vulnerable from an Ichimoku perspective




BIK  SPDR S and P BRIC 40  

Heavy volume was associated with the 1.6% drop in BIK, one of the ETF's which track the BRIC economies, and the close dropped below the Kijun Sen level. The hammer pattern suggests that there could be room for near term recovery but the chart looks a little heavy with downside targets in the longer term to the $24 level.



Daily Form April 21, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY APRIL 21, 2010       07:01 ET




SPY has almost recovered the ground lost from last Friday’s sell-off but as the volume chart indicates this has been accomplished without much enthusiasm for the long side - more likely, as has been characteristic of these index proxy instruments, the result of over zealous short sellers on Friday covering their tracks.

As is often the case, there is good news and bad news for the market to digest today - with the proviso that the algorithmic trading "solutions" are oblivious to any bad news.

The good news was the blowout numbers from Apple, the bad news was that the spread between Greek bonds and bunds rose beyond 500 basis points in European trading this morning.

I would suggest that if you want long exposure to US equities at present I would recommend maintaining a long exposure via DIA and approximately 20% short exposure via the ETF which tracks the Russell 2000 on an inverse and twice leveraged basis - TWM.



Whereas most of the casualties from Friday have more or less made a full recovery, spot gold still needs to break above $1150 again.
Looking at the chart pattern below I sense that this may be imminent.



On the FX front, despite several days of gains from shorting the Canadian dollar, much of which I had scaled out of, the Bank of Canada yesterday upgraded its GDP forecast for the year and flagged a rate increase for June. Needless to say the Canadian dollar surged and my remaining short position was stopped out.

I would not however be a player on the long side of FXC at this juncture.

As discussed several times over the last month or so I am definitely intrigued by the long side of USD/JPY and as the chart below suggests the shape of the Ichimoku cloud on the weekly chart is now working in favor of a breakout pattern as soon as the US dollar can sustain closes above 94 against the yen.



The liveliest part of the FX arena at present is cross trading of euro and sterling. Scaling in and out of EUR/USD and GBP/USD is a great way to play this very clear downward trending behavior of the euro against sterling.

EUR/GBP looks headed to a test of the low from January as illustrated on the chart below.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .


Daily Form April 19, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY APRIL 19, 2010       07:14 ET




Asian markets, in addition to poor action last Friday before the Goldman news had broken, suffered further serious losses in trading on Monday.
The Nikkei 225 dropped, with a large opening gap, below the 11,000 level which I discussed in Friday’s column and now faces a critical test of two levels indicated on the chart. The first is around 10,700 (dotted line) but with a reasonable likelihood that the 10,400 level - at the top of the cloud - will need to be tested.



One of the better charts that shows the damage done by the SEC’s charges against Goldman Sachs is the one below for the exchange traded fund, IAI, which tracks the broker/dealers and investment banking sector.



Amongst last week’s suggestions in this column, most of which turned out to have been on the right side of the respective trades, the call on impending Canadian dollar weakness (which was one of the least obvious) has produced lavish profits since first discussed.



One of the calls last week was to short EWH, which acts as a tracker of the Hong Kong market, and this will surely be down even further when North American trading begins this afternoon, even after Friday’s fall, as the Hang Seng Index (HSI) fell back by more than 2% in Asian trading on Monday.

As indicated on the chart for the Hang Seng there is a firm layer of support just above the 21000 level, but if this fails to provide a safety net then a sustained fall would clearly violate the uptrend line in evidence since the early February low.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .






TRADE OPPORTUNITIES/SETUPS FOR MONDAY APRIL 19, 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





EUR/USD    

EUR/USD seems destined to test the $1.3270 area again in coming sessions and the lack of obvious support and the growing awareness of the weakness of the EMU political/financial architecture is pointing to a potential for a failure on the re-test and a retreat into the $1.20's.




AUD/USD    

AUD/USD is another currency pair which may suffer as the RISK ON orientation lately is superseded by a more cautious tone. Also to be factored into the equation is a recognition that much of the speculation in commodities and the FX carry trade is conducted by traders on the main Wall Street prop trading desks, who may be deciding that a lower profile with slightly less egregious bonuses is a smart move in the current climate.




DAX    

The 240 minute chart for Germany's DAX showing Monday's early sell-off has found support at the top of the cloud formation, but it is likely that the base of this cloud will be tested today and if that fails to provide support the daily chart indicates technical support in the 6000 area.




EZA  iShares MSCI South Africa Index  

Also discussed here last week are the growing negative divergences for EZA which tracks South African equities.
If you had acted on this suggestion, I would continue to hold short positions in the coming sessions with a focus on scaling out as the $58 level is approached.




FXC  Currency Shares Canadian Dollar  

My target of 97 on the chart for FXC - made here early last week - still holds as the Canadian dollar is showing considerable weakness in European trading on Monday morning.




HYG  iShares High Yield Corporate Bond  

The chart for HYG, which provides exposure to the high yield sector, and also suggested as a short candidate here last week, reveals the fact that while the safe haven provided by investment grade bonds and Treasuries produced an uptick on most fixed income sector ETF's on Friday, many players decided to take some money out of the more high risk credits.

Furthermore it may well reflect a lightening up of some large and leveraged positions being held by investment banks and hedge funds that have been wallowing in profits from this sector in recent months.




IWM  iShares Tr Russell 2000 Indx  

IWM is the exchange traded proxy for the Russell 2000 and a spread of long DIA and short IWM would be worth considering as the Risk On dynamics fade.



Daily Form April 16, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY APRIL 16, 2010       06:11 ET




While the S&P 500 seems no longer to have a reverse gear, Asian markets fell back in trading on Friday as concerns are mounting about the growing threat of inflation, and signs of speculative excesses in Chindia.

Somewhat overlooked in the last 24 hours was the decision by the Singaporean government to revalue its dollar against the USD as a way of counteracting imported inflation from their growing consumption of US dollar denominated commodities – a trend which I suspect will spread to other emerging Asian currencies as well. I do not see this as so pivotal for the Japanese market which is a more mature, assembly based economy, and because of its debt/GDP dynamics the case for policy based yen weakness, as well as the technical formations, is made below.

The Nikkei 225 has chart support at 11,000 and should be watched next week as it approaches this level, as a failure to hold at this level would violate a clear uptrend line since the February low.



Day trading in spot foreign exchange markets is not for everyone, but there are some great profit opportunities with spread trading around a specific cross rate. EUR/GBP has now broken below key support and it allows traders to scalp two legs of the implied trade EUR/USD and GBP/USD with a lot of flexibility for position adjustment and management while monitoring the underlying relationship between the euro and sterling.
For now there seems to be a bullish bias for sterling against the troubled EZ currency but caution is advised as we move into the latter part of April and closer to the UK election as the pre-election spin may keep the electorate off balance but the sad state of the country’s public finances is unlikely to appear any more appealing to large global asset allocators, including PIMCO, any time soon.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .



USD/JPY is one currency pair which requires a lot of patience for day traders - unlike GBP/USD which can’t sit still.
As I have said on numerous occasions the dollar has almost certainly seen a basing against the yen and a break above 94.50 - the weekly cloud top - would turn me decidedly bearish on the Japanese currency against the dollar.



From a longer term macro perspective I do believe that there is too much risk appetite at present and one of the gauges of that is AUD/CHF which is now very close to where it was before the July 2007 meltdown in the FX carry trade began.
Recent candlestick formations on the weekly chart are, I believe, alerting an imminent inflection point on this cross rate.






TRADE OPPORTUNITIES/SETUPS FOR FRIDAY APRIL 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





USD/CAD    

This may be a strongly counter-intuitive suggestion (I have been early and wrong on big moves previously), but USD/CAD, after hitting parity very recently, seems now to be ready for a tradable correction.
The remarkable downtrend since early 2009 has been almost without interruption and this may well attract contrarian traders who will want to test some large FX position traders who have grown complacently short the US currency against the Canadian dollar.




FXC  Currency Shares Canadian Dollar  

FXC, which represents the inverse pattern to USD/CAD (i.e. it is a long perspective on the Canadian dollar) is revealing more evidence that supports the fact that negative MACD divergences are attracting some short sellers.




SPOT GOLD    

As the price development pattern for spot gold evolves I am still of the view that a sudden breakout could be the catalyst for rapid price escalation.




ATK  Alliant Tech Sys Inc  

Some time ago I mentioned that Alliant Tech Systems (ATK) looked vulnerable after registering a gravestone doji candlestick and confronting a very strong resistance level at the top of the cloud pattern which has been marked on the chart. The stock is now fulfilling the expected weakness but I would be retiring existing positions rather than establishing new ones.




GBP/JPY    

The final pattern for today's column which has caught my attention is a slightly convoluted inverse head and shoulders pattern for GBP/JPY. A break above the dotted line indicated on the chart would, I suggest, lead to a strong upward move - and is in harmony with my overall bearish view on the yen.