Daily Form January 28, 2010

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY JANUARY 28, 2010       07:01 ET

Asian markets managed to get a bounce overnight which has been attributed to the fact that President Obama didn’t continue his bank bashing theme in his state of the union address. Also Europe got off to a good start with Germany’s DAX seeing a 1% plus opening gap but as the hourly chart reveals the feel good factor has not lasted very long and as this is being written the index is fading back towards yesterday’s levels.

One thing which caught my eye from the Davos conference was an explicit warning from Bob Diamond who runs Barclays that large indebted governments (i.e. most of the so-called rich countries!) would be unwise to restrict proprietary trading and limit the size of the larger banks as that could seriously jeopardize those government’s chances of selling all of their bonds. So far from moral hazard we now have another catch 22 on the horizon which further underlines my contention that US politicians, including Mr. Obama, have one posture of righteous indignation with the financial elite designed to play well with Homer Simpson et al., but their eyes are also firmly fixed on the trajectory of the capital markets. Rocking the boat too much could lead to a nasty capsizing in which a lot of people would get wet and many might drown.

In European trading Thursday the euro is flirting with the $1.40 level and during Asian trading fell as low as $1.3935. Just to remind readers of the chart from last week - the target for the next week or so is $1.38 -the point indicated by the arrow on the chart below.

Here again is my comment form Tuesday’s commentary.

The tide appears to be turning in favor of dollar bulls or perhaps more accurately it would be better to say that it is turning against the huge number of dollar bears.
Watch the USD/CHF cross rate for a possible break above 1.0540 which would be a strong buy signal for the US currency against the Swiss Franc.

We have come tantalizingly close to the break through but I would wait for a clear and decisive move and there is no hurry to get on board as the longer term wave pattern suggests that there could be scope for a sustained and substantial move from current levels.


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

DHI  D.R. Horton Inc.  

D R Horton (DHI) has found support at the top of the pink cloud and could be set for a revisit to the $12 level.

TSO  Tesoro Corporation  

Tesoro (TSO) registered a notable hammer candlestick at the bottom of the cloud formation and may be set for a bounce from current levels.

KBH  KB Home  

The chart for homemaker KBH looks constructive on the long side with a bullish pullback pattern and evidence that the cloud formation proved supportive with yesterday's move up on above average volume.

WSM  Williams-Sonoma Inc  

Williams Sonoma (WSM) looks vulnerable from an Ichimoku perspective and a bear flag appears to be evolving.