Daily Form April 15. 2010

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY APRIL 15, 2010       06:38 ET

The melt-up in US equities continues and the 1280 target which I provided in my 2010 forecast now seems not nearly as far fetched as it did at the time of writing in late December of last year.
I admit to being in awe of the wondrous way that the market manages to focus on almost every bit of news as supportive of further gains and is unwilling or unable to tolerate any efforts at consolidation of the gains since early February.

Analysts were falling over themselves yesterday in their praise of JPM’s earnings, but frankly if an investment bank that can borrow money from the Fed at 0.5% and play all kinds of carry trades using high leverage to earn many multiples of that - with an explicit public guarantee under most of the risk - had not been able to make $3bn in the first quarter it would have been even more surprising than that they did.

So for now it is best simply to go with the flow and not fight the tape as those well worn cliches remind us.

One reasonably cogent remark that a technical analyst should point out is that the S&P 500 faces the 62% retracement level at 1228 in coming sessions. However that also acts as a reminder that there are still 300 or so points to go for a new historic high and the bulls seem to be absolutely in control at the moment and just as I would never jump in front of one on the streets of Pamplona, I have no intention of standing in front of the current rampage.

Acting as a minor irritant to the current feel-good mood music, there is the fact that the world’s second most traded currency has been dropping like a stone in trading early Thursday and now seems destined to test the level indicated on the chart. At the rate of decay this may have been surpassed by the time I finish writing this.
As I said earlier this week, traders should look forward to any rallies in EUR/USD as they provide better entry points on the short side.

My call last week on XSD, if acted upon when alerted, would have provided a 7.5% return on exit yesterday, and as I indicated in yesterday’s column I did exit 50% of the position, and will not be overstaying my welcome on the remaining half of the position.

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