Daily Form May 21, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY MAY 21, 2010       06:55 ET




The recent near panic conditions across all asset classes showed no signs of abating yesterday with evidence of acceleration.
Even though my area is technical analysis, and I have a certain skepticism for much of the "reasoning" that is put forward to explain what is currently troubling markets, there are certain things that seem obvious to me. Here are my ten observations on the current turmoil facing markets


  • 1. The Eurozone architectural framework is deeply flawed and to suppose that a monetary union can survive without proper fiscal and political integration was something the architects were clearly wrong about
  • 2. The current austerity measures being insisted upon, primarily by Germany - which is required to pay the most in the EZ bailout - will only act to reinforce deflationary tendencies in the global economy
  • 3. Markets are often irrational. How else can one explain the extraordinary love affair that many asset managers have had for the Australian dollar, currencies from emerging markets and EM funds in general.
  • 4. A massive FX carry trade unwind is taking place that has very little do with "market fundamentals". It has more to do with quant funds that have been synthesizing investable funds to play with in the algorithmically based equity markets
  • 5. Politicians should never say that they are going to take on markets - don’t bite the hand that feeds you.
  • 6. Uncertainty surrounding financial regulation is keeping financials under pressure
  • 7. France and Germany are not seeing eye to eye over the future direction of the EU and both countries are doing their best to protect the balance sheets of their own private sector banks which have huge exposure to debt from southern Europe
  • 8. Inter-market correlations/alignments are far more significant as causes behind the mayhem than one month’s job claims number - although yesterday’s US numbers do suggest that the notion that the global economy is on the verge of "growing" itself out of the sovereign debt crisis is highly suspect
  • 9. Valuation of assets based on fundamentals, P/E multiples etc. goes completely out of the window when investors behave viscerally which is why TA is so useful
  • 10. Central banks can only prop up a flawed currency, i.e. the euro, for so long before markets lose total confidence in its integrity. The capacity for damage to global financial confidence from a disintegration of the EMU and the euro, is enormous and still has not been factored into current asset prices.



The S&P 500 faces a key test at 1050 and a close below that level would suggest that a large scale correction is under way with targets eventually down to 870 needing to be tested. Interestingly the 1030 area is an area indicated on the weekly Ichimoku chart as perhaps more fundamental technical support.

The clue to near term direction for US equities is, more so than at most times, to be found in the FX markets and in particular the direction of the euro and the yen.

Signals based upon Ichimoku patterns can be found at the Tradewithform website for premium subscribers and here is the link .



EUR/USD faces a wall of resistance from the cloud formation on the 240 minute chart. Trading this currency has suddenly become a lot more risky as the ECB and other central banks are now intervening in the market to try to "defeat" FX traders.
Still the underlying tone for this currency pair is to sell rallies.



The Nikkei 225 dropped by 2.5% in Asian trading - considerably more than Hong Kong which had already reached down to the February low.
My intuition is that the market could be close to mounting a relief rally but with the ongoing critical rumblings in other geographical regions it seems likely that a re-visit to the 9000 level should be countenanced in the intermediate term.



One of the best leading indicators for the very hard week for those of a bullish persuasion - it has been a spectacularly good week for those bearish on most risk assets - has been the behavior of AUD/JPY.
The chart below suggests that 70.40 on this cross rate will eventually need to be tested. But that may have to wait while there is short covering in the Aussie dollar whose demise this week has been extraordinary.


Daily Form May 19, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY MAY 19, 2010       06:37 ET




I am cautiously monitoring the $AUDJPY rate as it approaches the May 6th intraday low which was registered just below 77. At the time of writing the cross rate is 77.10 and the momentum to the downside is accelerating.

Just the fact that the 80 level has been substantially breached itself makes the outlook for risk assets, in general, distinctly unfavorable. If the yen continues to strengthen against other FX carry trade currency favorites there is an increasing likelihood of market mayhem and disorderly liquidations across a number of asset classes.

Signals based upon Ichimoku patterns can be found at the Tradewithform website for premium subscribers and here is the link .



Given the backdrop in the FX carry trade just discussed as well as the bizarre attitude being expressed by Angela Merkel that she welcomes a fight with the markets and is determined to win, I suspect that we could well be looking at a test of the, 1094.15 level on the S&P 500 cash index in coming sessions at least.

The large intraday "crash" from May 6th no longer looks like an aberration but, strangely suggests a forward looking market that uncannily may have been discounting the possibility that the second most traded global currency could be coming apart at the seams. If it does, and in some ways this would be the preferred solution for not only the Club Med countries but also for Germany, it will once again highlight the folly of our belief in the robustness of the creations of financial technocrats. A monetary union without a fiscal union lacks credibility and it may, in years to come, be seen as remarkable that, with only a 10 year track record, so many placed so much faith in the Eurozone arrangements.

On the other hand, when I remove my Armageddon hat, which has a nasty tendency to appear on occasion (somewhat like Doctor Strangelove’s salute), there is always the possibility that a new fudge will buy more time for the political elite of Europe to spin some new schemes for European unification. If, as in the past, European voters give the wrong answers when asked in a referendum about further integration, they simply hold additional referendums until they get the right answer.

But maybe next time it will be different.



The commentary on the cable rate, $GBPUSD, from yesterday proved to be uncannily accurate. Here is the comment again:

Action in GBP/USD looks rather bearish and the 30 minute chart which was captured at around 10.30 am in European trading on Tuesday shows a violation of a key trendline.
Support may be found at the red line on the chart around $1.4380 but if that fails then a re-visit to recent lows becomes a viable target.

As can be seen, the tip off to being able to realize more than 200 pips on this rate was the break of the trend-line which was indicated in yesterday’s analysis.



The Hang Seng Index has returned to its February low level. Today’s candlestick show an interesting formation that would properly be called a gravestone doji if it was at or near to a multi-period high.
The attempt to rally after a severe downward opening gap met with strong rejection and the index closed more or less where it opened and near to its low for the session.
EWH which has been recommended here, on recent occasions, as an ETF for the short side could also have delivered substantial profits if, at least part of the position had been retained, since suggested.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 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





GS  The Goldman Sachs Group Inc.  

On the weekly chart the Ichimoku cloud suggests $125 as an intermediate term target for Goldman Sachs (GS). Interestingly in these somewhat apocalyptic times the intermediate term sometimes arrives a lot sooner than one thinks.




AUD/USD    

AUD/USD has clearly entered a serious correction after the topping evidence which has been alluded to in this column for some time.
I would not be aggressive on the short side at present but would certainly be looking at any significant rally efforts as an opportunity to re-sell the pair.




EWZ  iShares MSCI Brazil Index  

EWZ, which tracks the MSCI Brazil Index continues to fall after failing to regain a foothold above the base of the cloud (as indicated by the arrow on the chart) and this fund, which was also recommended here some time ago for the short side, seems likely to test the May 6th intraday low in the vicinity of $60.
In all we have already seen a 20% plus correction in this key BRIC index and the notable volume bars shows that there has been a lot of long liquidation taking place as the emerging market mania sucked in a lot of fund managers and retail investors during mid February to mid April.



Daily Form May 18, 2010


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY MAY 18, 2010       05:57 ET




In yesterday’s commentary I discussed the critical level of 80 on the AUD/JPY cross rate and how I would be monitoring it for clues as to market direction if, and when, it was approached.
As the 15 minute chart below reveals, the 80 level was touched twice in yesterday’s trading, and the second time, during the early afternoon session, there was evidence of a positive divergence on the RSI and another proprietary indicator which I use, and this provided a good signal that the 80 level would hold.
Subsequently equities made a rather abrupt V shaped recovery and there was a softer tone to the dollar.

I would suggest that this pattern should be on your watch list throughout the next few sessions.

Signals based upon Ichimoku patterns can be found at the Tradewithform website for premium subscribers and here is the link .



The S&P 500 dropped abruptly soon after the open yesterday and actually pierced below the daily cloud formation and if the cross rate level just discussed above had not held this would have been a good sell signal.
As just discussed the 80 level held on the key FX carry trade pair, and this provided the cue to get long the index. A rather sharp V shaped rally ensued and the Armageddon traders will have to wait for another day to realize their moment of revenge.



Action in GBP/USD looks rather bearish and the 30 minute chart which was captured at around 10.30 am in European trading on Tuesday shows a violation of a key trendline.
Support may be found at the red line on the chart around $1.4380 but if that fails then a re-visit to recent lows becomes a viable target.



As touched on in yesterday’s commentary, EUR/GBP turned out to be a profitable trade on the long side over the last 24 hours, but the cloud formation on the 4 hour chart suggests the 0.8620 may be a good place to fully scale out of this positioning.


Daily Form May 17, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY MAY 17, 2010       06:58 ET




The plight of the euro has taken its toll in Asian trading on Monday, with the largest drop of the major indices being seen in Shanghai where the index dropped by more than 5%.
Indicated with the arrow on the chart is an example of a very reliable sell signal where the Tenkan Sen line crossed below the Kijun Sen within a cloud formation. Signals like this can be found at the Tradewithform website for premium subscribers and here is the link .
There is chart support at the 2400 level and with the index having recently seen a bearish crossover of the 50 day EMA dropping below the 200 day EMA this index may struggle to find a footing before testing this level.



As discussed in Friday’s commentary the S&P 500 futures needed to explore support in the region of 1130.

The action both in US trading on Friday, and in Asian trading Monday, has seen the index test the bottom of the cloud formation just below 1120 and there is some evidence that support has held.
I would not be surprised to see a rally attempt today when trading opens in the US. The 1150 level should provide a strong layer of resistance with even more above that at 1160.

If the bottom of the cloud support should fail (around 1117) then the next obvious target for the bears would be approximately 1090.



The Nikkei 225 dropped by 2.2% in trading on Monday and has now reached an area of potential chart support with another layer of support at the February low of 9860.



While EMU disintegration and Greek default fears linger, the CAC 40 is one of the more vulnerable large indices in Europe.
A fall to the bottom of the cloud on the weekly chart at around 3200 is now feasible.






TRADE OPPORTUNITIES/SETUPS FOR MONDAY MAY 17, 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 was roughed up again in Asian trading and touched $1.2233. It is showing some signs of stabilizing during European trading and is also out-performing sterling, so short term scalping moves in EUR/GBP are worth considering during today's trading.




EUR/CHF    

The EUR/CHF pair has been trading at historic lows for the euro with 1.40 being registered in recent sessions.
The Swiss National Bank appears to have abandoned efforts to "manage" the cross rate, but if there are signs that the euro may be forming a temporary base, there could be intervention which would push this rate up quite abruptly.




USD/CHF    

These were my comments in Friday's column


USD/CHF was a focus currency pair earlier this year in these columns where I discussed my view that in broad terms a strengthening of the US currency was to be expected in 2010.
Reviewing the weekly chart, the pair is about to emerge from the weekly cloud formation which validates further bullish action for the US currency. The 61.8% retracement of the swing high/low which is in the vicinity of 1.14 and has been indicated, is a valid intermediate term target.

I did not expect us to hit 1.14 as soon as we have - the pair actually touched 1.1440 in Asian trading today.
There may be scope for further increases as the euro struggles, but I would be looking to ease up on outright long US dollar exposure this week.




AUD/JPY    

AUD/JPY is still showing a lot of intraday volatility and I will be watching closely at the outcome if there is any testing of the 80 level today, as this would provide valuable clues on the risk on/ risk off dynamics which will impact equities as well as commodities.




June Crude Oil    

The June WTI contract has dropped below $70 over the last 24 hours and should be monitored today for any evidence that a bounce off a triple bottom could play out in trading during the New York session.



Daily Form May 14, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY MAY 14, 2010       04:02 ET




The 240 minute chart for the S&P 500 June e-mini futures contract shows a triangular pattern with a potential violation yesterday, which if confirmed today, could see a test of the 1130 level as indicated by the arrow.



As was the case on May 6th, AUD/JPY was highly correlated in yesterday’s movements with the late decline in US equities. Also visible on the 4 hour chart is the possibility of a correlated retreat with the S&P 500 towards 82.40
This currency pair is worth monitoring on a daily basis and the longer term chart suggests that a topping process appears to be under way.



Here are my comments from yesterday on sterling

$GBPUSD looks vulnerable to a re-test of the $1.45 level seen last week.

In overnight Asian and early European trading we have seen a $1.4540 print and this could well be subject to further downward testing today.
It would not be surprising to see some consolidation in the current area but longer term there still remains potential for further downside into the low $1.40’s



As anticipated yesterday EUR/GBP was ready for a significant move and as anticipated it was up as sterling weakened against the euro. Reviewing the chart below, I would not count on further strength in EUR/GBP in the near term as the cloud formation suggests resistance at 0.8620






TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MAY 14, 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/CHF    

USD/CHF was a focus currency pair earlier this year in these columns where I discussed my view that in broad terms a strengthening of the US currency was to be expected in 2010.
Reviewing the weekly chart, the pair is about to emerge from the weekly cloud formation which validates further bullish action for the US currency. The 61.8% retracement of the swing high/low which is in the vicinity of 1.14 and has been indicated, is a valid intermediate term target.




EAT  Brinker International Inc.  

Brinker (EAT) dropped below the cloud formation on substantial volume and could be vulnerable to a retreat to the level shown on the chart.




HNZ  HJ Heinz Co.  

Heinz (HNZ) registered a gravestone doji candlestick yesterday.



Daily Form May 13, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY MAY 13, 2010       06:54 ET




My focus today will be on EUR/USD and GBP/USD and the best way to monitor those rates of the key European currencies against the dollar is to watch the EUR/GBP rate
As the chart below shows the range constriction over the last 20 hours or so suggests that a major breakout lies ahead.



EUR/USD is coming down towards a retest of the $1.2520 level seen May 6th. The key question is whether this testing will hold setting up a tradable double bottom or whether there will be an eventual failure and move down towards my intermediate term target of $1.18. The technical performance in coming hours will be revealing.



$GBPUSD looks vulnerable to a re-test of the $1.45 level seen last week.
As I mentioned earlier from my Twitter account, sterling appears to be getting ready to be the fly in the ointment which could overshadow all of the happy, clappy pictures emanating from Number 10 Downing Street yesterday.


Daily Form May 12, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY MAY 12, 2010       06:19 ET




The daily Ichimoku chart of the S&P 500 shows that the 1150 level is proving to be a strong attractor while the markets attempt to digest the implications of last week’s dramatic intraday plunge and the EZ rescue package, as well as signs that Asian and emerging markets in general may be less appealing to global asset allocators.
I am not that keen to play in the near term in the US equities arena but my intuition is that in coming sessions the market is going to have to explore the downside further to see just how much technical damage was done on May 6th.
Interestingly, the far right hand side of the chart reveals the large gap in the cloud continuation platform which results from the action last Thursday.



The political landscape is changing in Europe - and not just in the UK. The consequences that flow from the rescue package which was put together for the euro will require, if they are to be successful and the EMU is to survive, a new infrastructure for the EZ area and quite possibly for the EU as a whole.
This will pose immediate problems for the new Con Dem coalition in the UK where the two parties have almost diametrically opposed views regarding further European integration.
$EURUSD looks set to re-test the low just above $1.25 registered on May 6th and on the upside it appears increasingly likely that the Kijun Sen level at $1.28 (indicated by the arrow on the chart) could prove strong resistance - and beyond that the cloud base.



$GBPUSD bounced in the last 24 hours due to a resolution of what was beginning to look like a potential constitutional crisis for the UK.
During the writing of this column sterling has dropped back from $1.50 to almost $1.49 and I would expect the behavior to be erratic over the next few sessions as details of the coalition pact emerge.
The $1.45 level would appear to be in need of a re-test but I would suggest that intraday scalping would be the best strategy for now with a bias towards fading rallies.



Spot gold is at $1247 in European trading and is on a roll. This must be disconcerting to Eurocrats and especially Messrs Trichet and King - central bank governors in Frankfurt in London.
The targets above $1300 which were discussed here last October are now in play but a steady nerve is recommended as there could be big whipsaw movements ahead.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 12, 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





EWH  iShares MSCI Hong Kong Index  

EWH, an exchange traded fund which provides exposure to the Hong Kong market, looks vulnerable to further setbacks as it approaches the cloud formation from below
On a related note, it is also worth pointing out that the Shanghai Composite Index is substantially below its 200 day EMA, but even more significantly the 50 day EMA is on the verge of crossing the 200 day EMA from above - which makes it the converse of the so-called "Golden Crossover".




EWZ  iShares MSCI Brazil Index  

EWZ, which tracks the MSCI Brazil Index has candlestick patterns registered over the last two sessions that are rather intriguing. Monday's action shows a clear hanging man pattern and yesterday's pattern shows an inverted hammer. This suggests a real stand-off between the bulls and the bears and reflects the indecision that is being seen across the board in the capital markets following last Thursday's huge intraday moves.
I suspect that the fund will continue to behave erratically and would be looking at an entry on the short side at the $70 level.




GS  The Goldman Sachs Group Inc.  

The weekly chart for Goldman Sachs (GS) suggests that the $147 level which had previously provided a line of support may now be shaping up as a line of resistance.



Daily Form May 10, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY MAY 10, 2010       05:49 ET




As news of the EU bailout package surfaced in the trading hours in Asia there was a noticeable jump in the euro, and as traders in Europe started covering short positions or instigating new long positions around 7 am European time (as I did) the ascent of $EURUSD proceeded through 200 pips almost without interruption - a very nice way to start the week.

Also those who showed sufficient foresight (and courage) to buy the S&P futures before the weekend on the prospect that the policy makers in Brussels would be scared into a massive show of force to present EMU disintegration, would have been rewarded with a decent 30 point jump or so as of current writing.

On CNBC’s European Closing Bell on Friday afternoon I expressed the opinion that the e-mini contract would explore the boundaries of the cloud formation in the short term and that is exactly what has happened in trading so far today - with a possibility that when the US opens there may be even more positive response to the EU rescue package.

The bi-polar market scenarios, discussed here recently, will continue and it presents nimble traders with potentially very profitable opportunities. Once you have gauged whether it is going to be a RISK ON or RISK OFF session there are several instruments that immediately should be on your list for that day’s trading. Whether you want to carry any of those positions overnight is a harder decision to make.

Listed below are some RISK ON trades worthy of consideration for today’s session.



The euro rescue plan is a complex package and may not be as robust as it appears. Nevertheless the momentum for the EZ currency in the near term is now clearly upwards rather than downwards.
The short term target for today on the upside is $1.3120 and opportunities to buy at $1.29 or thereabouts should be taken.
Longer term I still see potential hazards - political as well as economic - to the EMU and will stand by my longer term view, expressed here Friday, that we could see $1.18 later this year.



$AUDJPY is mirroring the recovery in the S&P futures- which is another of the themes which I touched on in my guest slot on CNBC on Friday. But trying to explain the essence of the FX carry trade in the few minutes allotted to each chart is challenging to put it politely.
Short yen in most currency crosses should be quite profitable for a day or so.



When RISK ON prevails gold will retreat and it has done so in overnight trading. So far the base of the cloud on the chart has held and for longer term investors - sudden drops in the metal are still worth buying in my estimation.






TRADE OPPORTUNITIES/SETUPS FOR MONDAY MAY 10, 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





TBT  Ultra Short Lehman 20 Plus ProShares  

Expect a large opening gap up on TBT but there is a plausible case that this fund which moves in tandem with increased yields on long term US Treasuries could return to the cloud formations rather quickly.




HYG  iShares High Yield Corporate Bond  

The chart for HYG, which provides exposure to the high yield sector, shows that the sector was a major casualty last week and once again there will be plenty diving back into this area of the bond markets and a sizable rally could be seen today - again expect a large opening gap upwards.




YCS  UltraShort Yen ProShares  

YCS is a useful ETF for aggressive traders who want to play the short side of the Japanese yen.
A case could be made for targeting the recent highs in coming sessions.




IPF  SPDR S and P International Financial Sector  

The final suggestion for today would be a long position in IPF which is an exchange traded fund which tracks the international financial sector.
With some European banks up 15% and more after the bailout announcement, this fund is bound to have a massive opening gap, but the top of the cloud could be attainable in coming sessions so it is very much a case of deciding on the risk/reward ratio after looking at available entry points when the ETF opens for trading today.



Daily Form May 7, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY MAY 7, 2010       06:58 ET




The first two charts for today’s commentary need to be considered together.
The one immediately below shows yesterday’s dramatic action in the S&P 500 e-mini contract for June and the one below that shows the cross rate trading between the Australian dollar and the Japanese yen.
It is because of the remarkable similarity in their formation that those, whose understanding of capital markets and determining fundamental valuation is derived primarily from mainstream academic texts in finance and portfolio construction, will find the inter-market dynamics revealed yesterday to be so baffling and incromprehensible.
US equity markets had an attack of bipolar meltdown yesterday in afternoon trading in New York, but a lot of the background to this abandonment of all calm and rationality was already at work in the forex markets from earlier on during the European session where trading was very loose and erratic.

The charts in a nutshell highlight the massive role of the FX carry trade and in particuar the panic driven unwinding by some very large quant funds that were positioned wrongly.

The S&P 500 skirted with limit down moves and as can be seen on the chart the lows of February around 1040 provided the bottom of the bungee jump.
My own suspicion is that, after a day like yesterday, which most resembled October 1987 of any trading day I can recall, there should be a very long pause for reflection on systemic risk. Having said that, there are many individuals who will want to present the case that there are now great values in the market and what a wonderful buying opportunity has been created.

As one of my favorite websites - http://zerohedge.com - showed recently a better text for many market practitioners to be reading is (facetiously of course) Quantitative Ponzinomics for Dummies .



The daily chart for $AUDJPY looks very similar to the one above - and just to spell out what is revealed - there was a major slump in the Australian dollar accompanied by a massive rally in the yen. This is not the kind of behavior that is to be welcomed by hedge funds who have big positions in the FX carry trade and the severity of the move, which coincided with the move in the S&P 500 as shown above, strongly suggests that some large quant funds were having to do some major position adjustment as a result of/ (cause of?) yesterday’s panic.
Just one final comment on this - my own intuition is that talk of "fat finger" errors which precipitated the crisis yesterday should be treated as a smokescreen excuse designed to disguise, to the retail investors especially, the incredible fragility of the financial economy as presently structured.

I shall be discussing both of the two charts above on Friday May 7th on CNBC's European Closing Bell.



The very long term chart for $EURUSD shows that a major trend-line has been broken and to cut to the chase I am now projecting a target of $1.18 - in coming months - based on the lines drawn on the chart.
Needless to say there will be bounces and rallies - which will be dramatic - as there are many prop trading desks that are now massively short the euro, but the underlying dys-functionality of the European Monetary Union- and the risk of its disintegration - should encourage position traders to be ready to sell any significant rallies.



Completely over-shadowed by yesterday’s movements in global capital markets was the election that took place on some rainy islands in the North Atlantic.
On the one hand in the markets we are facing the clash between a tightly coupled financial system - which has very little capacity to withstand crises and on the other hand in the case of the UK election we have an archaic electoral process, an unwritten constitution and no defined procedure for sorting out a messy election result.
Instead of politicians blaming markets for all of the world’s woes they should sort out a lot of the nonsensical nature of our political structures/processes - including the EZ framework- rather than playing populism to try to shift blame on to demonic short sellers etc.
The FTSE 100 looks set to head into the cloud formation on the weekly chart. One of the fascinating features of the chart is that the top of the cloud corresponds to the 38% retracement of the swing high/low since March 2009 and the bottom of the cloud corresponds to the 62% retracement- which I find to be uncanny.
I would suggest that the 50% retracement level - which sits, of course, in the middle of the cloud at 4648 -should be considered as a feasible target in the intermediate term.