Daily Form October 29, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY OCTOBER 29, 2010       10:39:00 GMT




The S&P 500 futures are struggling during European trading on Friday morning following weak performances in Asia and a lackluster session for the major European markets.

The S&P 500 e-mini contract is currently at 1170, which is below yesterday’s intraday low and now seems set to challenge the 1167.50 level seen on Friday. In this region there is quite significant chart support, but if that should fail to arrest an intraday sell-off then I suspect that 1155 would be the obvious next target.

As stated here several times recently the journey from 1175 back to the April high around 1220 has been a very choppy one and is really testing the fortitude of the bulls. On the other hand it also suggests that there are a lot of traders trying to pick an intermediate term top who would provide lots of buying power when they cover their positions should the index break decisively above the 1193 area.

For the time being I prefer to watch the dance from the sidelines.



AUDJPY has almost attained the 78 level, and I did say in Wednesday’s column that I would be expecting a move towards this key level which actually represents the 38% retracement level on the fibonacci grid shown on the daily chart below.

I have exited my short position for the time being, but longer term I would suggest that the chart configuration - which is quite negative - suggests an eventual return to the more critical 75 level.



The Hang Seng Index (HSI) has continued to correct, as suggested earlier this week. The long lower tail shows that some buying support emerged at the 23,000 level but a revisit to the 50 day EMA at 22,400 seems feasible.



The Nikkei 225 took it on the chin again in Asian trading as the yen continues to strengthen.

As visible on the chart, with the exception of the highlighted area, the 9200 level has provided support over the last several weeks so it will be worth monitoring whether this support holds during next week, which for all of the obvious reasons related to developments in the US, is expected to be an eventful week for global capital markets.






TRADE OPPORTUNITIES/SETUPS FOR FRIDAY OCTOBER 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





COW  iPath DJ AIG Livestock ETN  

COW, an exchange traded fund which is designed to reflect the performance of livestock and is composed of futures contracts on lean hogs and live cattle, has reached a level where a long term trend line of support is now in jeopardy.




INP  iPath MSCI India Index  

INP which tracks the MSCI India index is revealing corrective behavior following the clearly visible shooting star pattern registered last week.




EURJPY    

Following a profitable trade recently selling EUR/JPY the current chart configuration suggests that at least a short term, scalpable (if there is such a word) bounce, appears to satisfy the risk/reward trade-off at the 111.50 level.




EPP  iShares MSCI Pacific excl Japan  

More than three times the average daily volume was seen on EPP yesterday.

One other noteworthy feature of the chart is the extreme low reading seen on May 6th which suggests that this fund is one of the cluster of ETF's that are tied into "arbitrage" activities with FX trading, about which I have made several comments over the last few months.




Daily Form October 27, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY OCTOBER 27, 2010       10:43:00 GMT




The hourly chart for the S&P 500 futures shows that the index still has to break above the ascending trend line through recent lows which also coincides with the top of the cloud formation at around 1184.

Although it is hard not to believe that with the numerous supportive factors for US equities (including bountiful amounts of POMO and other "liquidity provsioning") we will not see a test of 1200 in coming sessions, I am maintaining my view that the risk/reward matrix for the next 30 or so points on the S&P 500 are not favorable. Although it is unlikely, before the key events of next week in the US, that there would be any break down below 1165 in the remaining sessions this week, if such an eventuality was to occur it would then put in play again the 1155 intraday low from October 19th.



I commented recently that the Hang Seng Index (HSI) appeared to be struggling to move above the 62% retracement level of 23,800 (based upon multi-year highs and lows observable during the last three years).

The 1.9% drop in Asian trading on Wednesday morning contributes another big red candlestick in what is becoming a bearish looking chart formation.



I shall repeat the comment from yesterday’s commentary

EUR/USD has broken twice below significant uptrend line and may need to re-test the $1.38 level as it has been unable to retain a footing above $1.40.

Having taken profits on the attainment of $1.38, currently I am positioned for a relatively short term bounce back towards the $1.3890 level, where I would again be considering selling the euro.



Rather noticeable upward movements in yields of US Treasuries, gilts and even bunds suggest that the recent episode of ultra low yields may be drawing to a close.

Yesterday’s GDP number in the UK has definitely changed the landscape for further QE from the BofE and the US markets may well have already more than discounted at least $500bn of QE2 from the Fed.

The pattern on the 30 year Treasury yield - if it develops further into the cup/handle formation as depicted - would suggest that this is not the place to be when the exodus out of longer term UST’s gains momentum.

As yields move higher it should also help to increase bids under the US dollar which would not be the most benign environment for US and emerging market equities.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 27, 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  

The chart for TBT, which moves in tandem with increased yields on long term US Treasuries, shows that for the first time in many months there has been a break above the pink cloud formation.




CEW  WisdomTree Dreyfus Emerging Currency  

CEW, which is an ETF marketed under the moniker Wisdom Tree Dreyfus Emerging Currency, seeks to achieve total returns reflective of both money market rated in selected emerging market countries available to foreign investors and changes to the value of these currencies relative to the U.S. dollar.

A short position would be a recommendation for those with a longer term holding period perspective.




AUDJPY    

AUD/JPY looks to be technically vulnerable to a correction down towards the 78 level in the first instance.




RIMM  Research In Motion Ltd. (USA)  

Research in Motion (RIMM) surged yesterday on massive volume but met resistance at the 200 day EMA. The clear break out from the descending trend line through the highs suggests that this stock should be accumulated on any significant pullbacks.




YCS  UltraShort Yen ProShares  

Here again are comments from a Daily Form column from last week


The exchange traded fund, YCS represents a leveraged vehicle which rises on yen weakness. I am not trying to call a bottom in the dollar/yen rate but I would say that for those with a longer term horizon there are some technical suggestions that the US currency looks "sold out" against several currencies, and in particular the yen.





EWH  iShares MSCI Hong Kong Index  

EWH, an exchange traded fund which provides exposure to the Hong Kong market, provides a suitable vehicle on the short side for those persuaded that it is of some consequence that the Hang Seng Index is revealing evidence of failure at the 62% retracement level (see above).



Daily Form October 26, 2010


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY OCTOBER 26, 2010       11:14:00 GMT




The big surprise thus far in European trading on Tuesday morning has been the release of better than expected Q3 GDP statistics from the UK. With expectations set modestly at 0.4% for the quarter (i.e. 1.6% annualized), it was a rather low bar to exceed, and the actual figure of 0.8% has sent sterling rocketing.

However not all is so rosy for the rainy isles as the yield on 10 yr gilts moved up about 20 basis points.

As I commented earlier the number is actually rather awkward for the bulls who have become accustomed to the idea that the B of E will always be there to buy UK Treasury issue and help to "support" financial assets. Unlike the sweet spot in the Goldilocks story, it is not the requirement that the number should neither be too hot nor too cold. For QE addicts - on both sides of the Atlantic at present - the numbers for GDP need to remain distinctly cold.

The hourly chart for the S&P 500 futures have shown some erosion since the UK statistic was released, and perhaps reminded traders that the extent of further asset purchases by the monetary authorities may not be sufficiently generous for the Herculean task of propping up both bonds and equities.

Reviewing the chart it can be seen that the 1165 area on the S&P 500 futures remains quite a critical area of support.



EUR/JPY met the target recommended in yesterday’s commentary during Asian trading on Tuesday morning.



EUR/USD has broken twice below significant uptrend lines and may need to re-test the $1.38 level as it has been unable to retain a footing above $1.40.


Daily Form October 25, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY OCTOBER 25, 2010       11:09:00 GMT




The Shanghai market has been on a rising trajectory for several sessions and continued along this path in Asian trading with 2.6% gain pushing the index to its highest level since April 19th. As highlighted on the daily chart below there would seem to be an imminent likelihood of a golden cross as the 50 day EMA appears to be set to cross above the 200 day EMA from below.

Below are some thoughts arising from the G20 meetings in South Korea which I posted to my Twitter account during the last 24 hours.

1. Even if denied the clear aim of US monetary policy is to weaken USD and as always traders are smart not to "fight the Fed"
2. Whatever the G20 communique may or may not have said the message that FX traders got was to keep selling the dollar
3. Simple equation China makes iPads which creates real jobs - US exports dollars and UST’s which do not require creation of many jobs at all
4. In essence the latest incarnation of "Don’t fight the Fed" especially when coupled with the new 2010 mantra "Don’t fight the PBOC" translates into higher prices for equities and commodities.
5. It is important to decide on what metric or basis to use in assessing the appreciation in equities. Surely not against the US dollar as that is being deliberately depreciated, and against other currencies and a basket of commodities the nominal gains in prices of US equities really aren’t that impressive.



Updating my comments from Friday, EUR/JPY has been clearly confined by the descending trendline through the highs drawn on the 60 minute chart below and indicated is a near term target of approximately 112.50



The Hang Seng Index, inspired and corroborated by the vigor of the Chinese markets, has reached exactly to the 62% retracement level from the high/low visible on the longer term weekly chart.



While nearly all other major global equity markets continue to move forward, benefiting from the abundance of liquidity being provided (or expected) from the Fed’s generosity, the Nikkei 225, as has been the case for an extended period, looks, from a technical perspective to be the weakest index.

It was reported earlier that major Japanese manufacturers are now contemplating a 70 handle on the USDJPY rate of exchange and, with the yuan pegged to the dollar, it is becoming increasingly apparent that the Japanese economy’s dependence on exports is under serious threat.


Daily Form October 22, 2010


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY OCTOBER 22, 2010       11:16:00 GMT




Several commentators (including myself) have recently pointed out that more than ever asset markets are being driven by price developments in the foreign exchange markets. And in trading yesterday across several FX pairs and watching the associated movements in equities, gold, oil and other commodities the broad theme was exemplified par excellence

To grossly oversimplify here are some "Big Picture" themes for "dress down" Friday

1. There is an inherent bias in US monetary policy to weaken the US dollar, despite all protestations to the contrary.
2. The Chinese know this and, as George Soros has recently commented, they have sufficient reserves and enough skin in the game that they can effectively "manage" (manipulate) the FX markets to achieve their longer term goals of diversification so that they are less reliant on dollar denominated assets and at the same time secure their stake in resources/commodities to continue to grow their economy at 10% per annum.
3. The world is awash in dollar liquidity which helps to explain why US equities and bonds have marched relentlessly higher despite, especially in the case of Treasuries, the real inflation adjusted returns and expected future returns seem absurdly "underpriced" and defy explanations from "traditional finance theory".
4. Many major funds are massively short US dollars from the use of all kinds of derivatives which are tied into correlation strategies involving everything from commodity plays to yield curve arbitrage and ETF rotation plays.
5. It would not take too much evidence of a short term US dollar rally to lead to some sudden and large scale shifts in asset allocation
6. Continuing with the theme from earlier this week in this column, many global equity indices are stalling at key fibonacci levels
7. Systematic (i.e. overall market) risk is under-priced
8. Exactly how global policy makers would deal with another bout of systemic risk remains a mystery of staggering proportions.

GBP/USD almost met yesterday’s target of $1.5640 and I have indicated on the chart where I believe the next major target is on the downside...but, as suggested yesterday, it may take the scenic route first.



EUR/JPY has been clearly confined by the descending trendline through the highs drawn on the 60 minute chart below and indicated is a near term target of approximately 112.50



AUD/USD has entered a correction phase after peeking above parity and the near term target from the 240 minute chart below is around 0.9710.



The S&P 500 futures are trading at 1176 in European trading on Friday morning which puts them at roughly the mid point of the expanded range seen yesterday.

The intraday moves are becoming more erratic which is indicative of a lot of short sellers trying to pick an intermediate term top and to a large extent the "traps" are being set in the FX market where, even if the S&P 500 shows remarkable resilience, the astute inter-market traders can reap their rewards from coordinated plays with strategic FX pairs.

1200 is still the upside target but the 1155 value registered earlier this week also represents an Achilles heel which may need to be tested again before the April highs are challenged.

To end for today ... it is vital for those large funds that are aligned with the Chinese currency management goals, and are counting on a weak dollar to sustain further gains in the S&P 500, that the ambushes based on selling the euro, aussie and sterling do not turn into a rout.


Daily Form October 21, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY OCTOBER 21, 2010       10:53:00 GMT




As discussed yesterday many key global indices have attained and are struggling at key fibonacci levels.

ACWI, the exchange traded fund which tracks the MSCI World Index, needs to clear current levels in order to avoid a retreat based on a failure to break above the 62% retracement of the high/low seen on the weekly chart below. A correction, should it come, would suggest a return to the 50% level which is also in the proximity of the weekly cloud formation around $41.50



Residents of the world’s largest onshore tax haven, or as it has been amusingly described by Ambrose Evans Pritchard, a rainy version of the Cayman Islands in the North Atlantic, are getting set for belt tightening as the government is chopping away at entitlement programs and getting rid of 500,000 public sector workers in coming three years or so.

But the borrowing continues with record public deficits - in September alone the UK required more than £15bn to plug the gap between revenues and expenditures.

However, it is heartening to hear the political leaders talking about how "we’re all in this together", but as I commented on Twitter yesterday, there are quite a lot of MP’s that will have to clean up their own tax avoidance (evasion) shenanigans before that slogan becomes too laughable.

Anyway enough of politics and let’s take the higher ground - and in this case it looks almost certainly higher ground for $EURGBP as targets above 0.90 are now alive and well. On the contrary it is lower ground for $GBPUSD with imminent targets in the $1.5640 region. But as FX traders can attest sterling sometimes takes the long way home, and whipsaw behavior is to be expected as the whiz kids in the towers at Canary Wharf engage in their passion for "bouncy castles".



Continuing with the theme of both fibonacci retracements and Great Britain as it is sometimes referred to (especially by George W Bush as I recall), the chart for EWU shows that the MSCI UK index also faces a challenge to remain above the 62% retracement level. It has been turned back already three times so far in 2010.

One of the more novel ways that the UK government may try to dig out from its mountain of debt is by selling off "bits" from the public sector in a 2010 version of Margaret Thatcher’s privatization. Going even further back into modern UK history, and with reminiscences of Edward Heath, three day weeks and power cuts, if the government does decide to "privatize" some bridges and other bits of infrastructure, serious thought should be given to a re-issue of the classic 1973 Genesis album Selling England by the Pound.



IDX, an exchange traded fund which tracks the Indonesian market, has been a spectacular performer in recent months. It has risen by more than 50% since late May and if it keeps moving up at the current rate of increase Indonesia could have a larger market cap than the UK before the current cuts program has run its course.

Given the bountiful liquidity being provided by the US, UK and Chinese central banks there’s probably not much danger of the bubble bursting any time soon...anyway that seems to be the current conventional wisdom amongst many asset managers.


Daily Form October 20, 2010


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY OCTOBER 20, 2010       11:34:00 GMT




On Monday I mentioned that a focus chart for this week would be the Aussie/yen or AUD/JPY.

Below is a daily chart for the pair and added to the graphic is a fibonacci grid predicated on the high value of just over 88 seen on April 30th of this year and the most recent multi-period low of 71.86 seen on May 21st. As can be seen the 62% retracement level corresponds to approximately 81.85 which was touched intraday on October 7th but which met with rejection. Following yesterday’s sharp drop the pair has fallen below the 80 level which marks the 50% retracement level and now a target of 78 is activated at the 38% level which also marks the top of the green cloud on the right hand side of the chart.

Interestingly,if one reviews a longer term weekly chart, which I have shown here recently, the 81.80 zone also represents the 50% retracement from the multi-year swing high/low levels. Moreover the swing high or top shown on the chart below at approximately 88 also marked the 62% retracement on the longer term fibonacci grid.

Putting all of this together the suggestion is that the Australian dollar is revealing a pattern of failures against the yen in its attempts to attain and exceed key fibonacci retracement levels. The suggestion is that the region close to 75 (38% on the weekly grid) seems like a feasible intermediate term target.

This analysis would lend further support to the intuition that there are growing signs that risk aversion is beginning to re-surface which is also being reflected in hesitation about extending and adding to the hot money flight into a variety of emerging market asset classes.



Updating a theme from Monday’s Daily Form, the chart below is the 240 minute chart of AUD/JPY showing that the succession of lower lows discussed in that commentary, were a good tip off to yesterday’s steep drop.



Also noted here recently was the suggestion that the Mumbai index (BSESN) was showing signs of topping behavior. The weekly chart shows that the index has stalled at a rather key level.



The S&P 500 futures spiked down to the 1155 level during yesterday’s session and I would suggest that there would be value in monitoring the 240 minute chart for evidence that the recent uptrend line is being violated, which, given the current Ichimoku configuration, will also be corroborated by a close below the cloud formation.






TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 20, 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





EURUSD    

EUR/USD broke below important support yesterday and it now becomes quite critical for the single currency to take on the challenge of remaining above the $1.40 level. A failure to break back above the top of the cloud formation would suggest that an intermediate term top was registered on October 15th.




N225    

In Asian trading Wednesday, the Nikkei 225 slipped back 1.7% and closed below the 50 day EMA.




PCY  PowerShares Emerging Mkts Sovereign Debt  

PCY, the exchange traded fund which tracks the sovereign debt from emerging markets, shows a clear example of a negative MACD divergence.



Daily Form October 18, 2010


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY OCTOBER 18, 2010       10:54:00 GMT




The exchange traded fund, KBE, which tracks the KBW Banking Index has definitively violated the uptrend line shown, failed as part of an ascending wedge pattern and closed the week below its Ichimoku cloud formation.

Just how severely the banks could be hit again by the re-surfacing of the mortgage backed securities mess remains to be seen. The real damage is being done to major pension funds and other asset managers that are not only heavily exposed to the financials, through holding equity and debt of the large banks, but also directly by their ownership of the same toxic waste that the large banks still own.

Here is an opinion I expressed on the matter which was published this weekend.

In essence, the reason why this issue could become one of systemic risk is that a broken chain of title is far more threatening to a legal/economic framework which is based on unambiguous property claims rather than any red herrings about dematerialized securities.

Needless to say those who do not want to shine a light on this matter and clean up the mess will want to confine the debate to nuances related to electronic registration (MERS), SPV’s and other opaque entities. It’s just a version of divide, mystify and distract

As many are now realizing the truth is that during the porcine inspired rush to create and sell MBS’s, very often the conveyancing of ownership slipped through the cracks and the chain of legally enforceable title transfer has been broken.




Following the official nod from Chairman Bernanke, last Thursday, that the Fed stands ready to buy hundreds of billions of dollars of Treasuries, not surprisingly the incipient bond market sell-off gained momentum on Friday, with plenty of chatter that PIMCO was unloading a lot of inventory. In particular the long end of the Treasury spectrum has seen the worst in terms of yield appreciation with the 30 year bond closing at 4% on Friday.

One reason behind this drop in price is an arbitrage being played by many large funds where the assumption is that the Fed will be focusing its buying on the 5-10 year maturities. Accordingly going long the intermediate part of the yield curve and selling the long end is being seen as an attractive spread trade. However the Fed has previously surprised the market by buying 30 year bonds and the arbitrage may not turn out to be as easy a way to make money as anticipated.



TLO, is an ETF which seeks to provide investment results that correspond generally to the price and yield performance of an index that tracks the long term sector of the United States Treasury market.

In determining how much significance to attach to the drop below the cloud formation there is the matter discussed above in regard to the yield curve arbitrage as well as the tiny doji candlestick pattern which can sometimes be seen when a market is experiencing conflict and indecision.



It has been reported this morning that the Chinese central bank is considering maintaining its managed floating of the yuan but increasing the upper band which would allow for further incremental gains of CNY against the dollar. This is similar to the policy decision taken by the Singapore authorities last week and which I discussed here .

The exchange traded fund CYB remains an attractive long term play as further yuan appreciation should be expected.






TRADE OPPORTUNITIES/SETUPS FOR MONDAY OCTOBER 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





CHFJPY    

CHF/JPY should be monitored for a potential test of the trend line annotated on the 240 minute chart below which also coincides with the base of the Ichimoku cloud formation.




AUDJPY    

AUD/JPY has still not violated the support levels on the 240 minute chart, discussed here last week, but, as highlighted, there have been a succession of marginally lower lows seen over the last few sessions.

The pair remains on my focus list for this week, and as suggested previously, any serious breakdown in this pair would signal a warning to lighten up on exposure to the usual suspects amongst risk assets.




BAC  Bank of America Corporation  

The chart for Bank of America (BAC) captures the fear that has arisen following the moratorium on further foreclosures and all of the associated implications regarding the value of asset backed securities on the bank's balance sheets.

Undoubtedly short sellers are taking large positions on this stock (and other large financials) and there are likely to be some violent whipsaws as traders try to comprehend the severity of the new malaise which should not have been a surprise to those who have been paying attention to the whole MBS debacle.




JPM  JPMorgan Chase and Co.  

The chart for JP Morgan (JPM) is slightly less severe than that seen for BAC but a re-test of the early July low would seem to be highly probable.




YCS  UltraShort Yen ProShares  

The exchange traded fund, YCS represents a leveraged vehicle which rises on yen weakness. I am not trying to call a bottom in the dollar/yen rate but I would say that for those with a longer term horizon there are some technical suggestions that the US currency looks "sold out" against several currencies, and in particular the yen.



Daily Form October 14, 2010


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY OCTOBER 14, 2010       09:57:00 GMT




The S&P 500 cash index closed yesterday’s strong session above 1178 and reached almost 1185 intraday.
Meanwhile the Nasdaq 100 registered a close at 2057.2 which is the highest level since before the bleak events of the second half of 2008.

Clearly equity markets are extremely "enthusiastic" about the prospects for more largesse from Chairman Bernanke, and, to some extent, from strong results/forecasts from Intel and JPM (although JPM’s results were not as good as they appeared on a quick analysis).

Meanwhile in Asian trading the US dollar got slammed and the price of gold has exceeded $1385 (and silver has almost touched $25).

I shall be recording a broadcast slot for Reuters Insider today about currency wars and the slumping dollar.

In essence I shall argue that the likelihood of some dramatic moves in FX are increasing and that other asset classes are now at risk from big FX and commodity dislocations.

While 1200/1220 on S&P 500 still could prevail – for me the zone between where we are now and the April high is one where the risk/reward ratio is becoming less appealing with every move higher.




The following chart for the cross rate between the Chinese currency and the Japanese yen reveals more about the currency war issue than attempting to unravel any of the IMF discussions that took place in Washington last weekend.

FT had an Alphaville article this morning which talks about a dollar meltdown and included the following remark.

Someone’s going to step back and think of the consequences of a really weak dollar at some point, surely…


Yes, the Chinese, with $2.65 trillion in foreign currency holdings (much of it in US Treasuries), already are.



The following chart for USD/CHF has one of the most remarkable downtrend patterns that I can recall seeing on a daily FX chart, and the question has to be asked, and clearly is being asked by major global asset allocators:

If Inflation is now official US policy are those buying gold, commodities and Swiss francs, Armageddon merchants or prudent investors?



The Singapore central bank has re-adjusted its managed currency bands to allow for more appreciation of the Singapore dollar upwards against the dollar - perhaps sending a message to its Chinese counterparts.

As the chart below shows the affect in Asian trading was for another immediate dive for the US dollar.

When trading in FX becomes so simple as to sell the US dollar against all other currencies then it is surely time to pause and assess the risk landscape.

We are presently witnessing the embodiment of extreme market bipolarity - risk paper assets love more QE yet all other indicators including FX, gold etc. are saying be very careful






TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 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





CNYTHB    

The weekly chart below for CNY/THB helps to illustrate why the Thai government is introducing a withholding tax on "hot money" seeking out yields on Thai securities.




CNYSGD    

One other chart which helps to explain the actions of the Singapore government in Asian trading on Thursday also speaks for itself...it is the relationship between the Chinese yuan and the Singapore dollar.

You don't have to look too closely to see that this chart shows that, as George Soros alleged in an interview over the weekend (and which I discussed at my blog site), the Chinese "effectively control the global currency system". And one could add, with $2.65 trillion under management, who can blame them?




PCY  PowerShares Emerging Mkts Sovereign Debt  

PCY, the exchange traded fund which tracks the sovereign debt from emerging markets, and which I have mentioned here recently, manifests the problem of too much liquidity in search of yields.

It looks extremely overdone to my way of thinking but it could get even more so before the bubble bursts.




CYB  WisdomTree Dreyfus Chinese Yuan  

Here again is a comment from the September 27th newsletter


Hopefully readers have followed the suggestion first made here some time ago to participate in the gradual move up in the Chinese yuan, and with the political climate in the US now becoming more directly confrontational on this matter, further moves up seem likely.