Inter-market Technical Analysis using algorithmic pattern detection
FRIDAY JANUARY 8, 2010 07:07 ET
Many equity charts are proving to be inscrutable at present as the combination of New Year re-positioning plus anticipation of today’s NFP data is creating patterns that are not easily susceptible to interpretation.
Often before the release of such market moving data it is better to look for opportunities in the forex markets.
The USD/JPY is positioned on the 4 hour chart as at the time of writing at 93.2 (targeted here in mid December) which is in accordance with a trend line of resistance and there is slight of evidence of RSI negative divergence. There is a lot of constructive sentiment building towards Japanese equities - in my own forecast for 2010 I made the case for 12,000 on the Nikkei during this year - and yen weakness would certainly be supportive of this case. However the gravestone doji in the middle of the highlighted section and other shooting star patterns suggest that there is a lot of overhead resistance to overcome. This cross rate will be worth monitoring later today when the NFP data is released. A decisive break through the 94 level would set up 97 as an intermediate term target.
The euro continues to wrestle with poor technical conditions, weaker than expected employment data and the ongoing concerns of a two tier Eurozone with Germany and France exhibiting relative strength while deflationary forces are still engulfing the so called PIGS (Portugal, Ireland, Greece and Spain).
If EUR/USD cannot hold above the January 4th intraday lows around $1.4260 then the next support would lie at the $1.4180 level based on the weekly Ichimoku charts. I suspect that we could be in the $1.30’s before the end of January.
Semiconductor stocks are showing signs of fading momentum and XSD is also showing increasing volume as the MACD chart rolls over.
Correlations amongst ETF’s is a fascinating area for asset allocation strategies and one of the stronger correlations between sectors is between EWT - the MSCI Taiwan fund - and the semiconductors.
The chart pattern on this lightly traded ETF could also be pointing to a tradable correction back to the $12.80 level.
TRADE OPPORTUNITIES/SETUPS FOR FRIDAY JANUARY 8, 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
GOOG Google Inc.
Google (GOOG) is not a stock which I pay very close attention to since it seems that there are many traders and investors that just love the company (somewhat like the situation with Apple) and the chart rarely makes much sense. However the pattern over the last three sessions looks as though some asset managers are moving out of the stock in a big way. The 50 day EMA is probably the most likely near term support level.
AMD Advanced Micro Devices Inc.
Advanced Micro Devices (AMD) is a constituent of XSD and, unsurprisingly, is displaying similar characteristics to the sector fund.
My final chart today, taken by a NASA satellite, illustrates how the UK is in the grip of extraordinary weather conditions which have virtually brought the country to a standstill.
My actionable target for this graphic would be to head to the airport to catch the next plane to the Caribbean but unfortunately, apart from the fact that the roads are impassable, I have other commitments which will keep me on this frozen island!