Inter-market Technical Analysis using algorithmic pattern detection
FRIDAY MARCH 12, 2010 07:05 ET
The S&P 500 (SPX) spurted into the close yesterday after a successful auction of 30 year Treasury bonds - which had a remarkably high percentage of direct bidders, indicating strong domestic and institutional support - and closed above 1150 again.
I shall repeat my comment from earlier this week that the path of least resistance remains towards further gains and whenever the bears come out to play they would appear to be easy fodder for the persistently buy side bias of algorithmic trading routines.
Volume continues to be relatively weak but the absence of institutional selling plus the timidity of short sellers provides a sufficiently supportive environment for equities.
Earlier this week I suggested that from the perspective of the monthly charts and Ichimoku formations, the area around 685 could present a significant hurdle for the Russell 2000. We still have some distance to cover but, relatively speaking, I would suggest that the high beta risk/reward calculation is starting to shift back towards a more cautionary approach.
Reviewing the Nasdaq Composite Index monthly chart, it can be seen that the 2400-2450 zone could also present a region where similar caution might be prudent.
One week ago I suggested that USD/CHF could retreat back towards the 1.055 level and in trading this morning in Europe we have more or less tagged that level.
I shall not be opening a new long position at this stage - although my expectation is for further dollar gains against the Swiss currency - because of the high correlation between the Swiss currency and the euro and the fact that, as in the chart covered next, there is an outside possibility that EUR/USD could make more substantial gains than I suspect it will.
On the weekly chart for EUR/USD there are now two possibilities which could see the euro move up towards the $1.4150 level. Firstly, it represents the 50 week EMA level and secondly the Ichimoku configuration has been morphing recently to show that upside resistance - at the top of the cloud - is also found in the region of $1.4150.
My intuition suggests that neither the ECB want to see the euro back at such levels nor do many trading desks, but there has been a lot of short selling of the euro in recent weeks and the market seems to have easily slipped back into a complacent view that the Greek crisis, and plight of other EZ members, has come and gone.
TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MARCH 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
CNP CenterPoint Energy Inc.
CenterPoint Energy managed to clear the cloud formation yesterday but it was extremely subdued volume and the overall chart pattern does not look bullish to me.
CTV Commscope Inc
In somewhat similar vein to CNP, the chart for CTV has made a rather too remarkable recovery from the plunge in late February and, should it spike up towards the $30 level, I would suggest that it could then fall back rather rapidly.
SHFL ShuffleMaster Inc.
ShuffleMaster (SHF) also broke above key Ichimoku levels (in addition to piercing above the cloud) and short term play -even intraday - on the long side seems appealing.
WFR MEMC Electronic Materials
MEMC Electronics (WFR) has moved up through key levels over the last two sessions on substantial volume and a price target close to $15 is feasible.