Daily Form April 21, 2010

Inter-market Technical Analysis using algorithmic pattern detection

WEDNESDAY APRIL 21, 2010       07:01 ET

SPY has almost recovered the ground lost from last Friday’s sell-off but as the volume chart indicates this has been accomplished without much enthusiasm for the long side - more likely, as has been characteristic of these index proxy instruments, the result of over zealous short sellers on Friday covering their tracks.

As is often the case, there is good news and bad news for the market to digest today - with the proviso that the algorithmic trading "solutions" are oblivious to any bad news.

The good news was the blowout numbers from Apple, the bad news was that the spread between Greek bonds and bunds rose beyond 500 basis points in European trading this morning.

I would suggest that if you want long exposure to US equities at present I would recommend maintaining a long exposure via DIA and approximately 20% short exposure via the ETF which tracks the Russell 2000 on an inverse and twice leveraged basis - TWM.

Whereas most of the casualties from Friday have more or less made a full recovery, spot gold still needs to break above $1150 again.
Looking at the chart pattern below I sense that this may be imminent.

On the FX front, despite several days of gains from shorting the Canadian dollar, much of which I had scaled out of, the Bank of Canada yesterday upgraded its GDP forecast for the year and flagged a rate increase for June. Needless to say the Canadian dollar surged and my remaining short position was stopped out.

I would not however be a player on the long side of FXC at this juncture.

As discussed several times over the last month or so I am definitely intrigued by the long side of USD/JPY and as the chart below suggests the shape of the Ichimoku cloud on the weekly chart is now working in favor of a breakout pattern as soon as the US dollar can sustain closes above 94 against the yen.

The liveliest part of the FX arena at present is cross trading of euro and sterling. Scaling in and out of EUR/USD and GBP/USD is a great way to play this very clear downward trending behavior of the euro against sterling.

EUR/GBP looks headed to a test of the low from January as illustrated on the chart below.

Readers are advised that TradeWithForm is now offering a premium subscription service which will provide daily alerts to a variety of technical patterns including many based on Ichimoku analysis. You can find out more about the TWF algorithmic pattern analysis by visiting the following link .