Daily Form April 27, 2010

Inter-market Technical Analysis using algorithmic pattern detection

TUESDAY APRIL 27, 2010       06:38 ET

The Shanghai market dropped by more than two percent in trading on Tuesday and is now at a new closing low for the period shown on the chart.
I commented last week that the box pattern had broken and the failure of the index to find support at the previous closing lows suggests that the efforts by the Chinese authorities to temper some of the asset speculation in China are beginning to be taken seriously.

Once again the euro is under severe pressure in European trading and we appear headed for yet another test of the $1.3275 level.
According to one estimate from Goldman Sachs the cost for bailing out Greece could reach 150 billion euros which will not sit well with Angela Merkel’s coalition partners in Berlin.
If the currency breaks decisively below the previous support level around $1.3275 then the $1.30 level seems to be the next obvious target.

SPY saw a modest retracement yesterday and with the backdrop of the Goldman Sachs interrogation today and the ongoing concerns about sovereign debt risk in Europe it remains to be seen whether US equities can remain unflappable with all of these potential harbingers of risk.
I have decided to temporarily suspend any technical analysis of this major US index as the patterns seen on the charts suggest that different dynamics are at work than those that have allowed me to make sense of MACD divergences for several years. All that can be said about the chart below is that the market should, under conditions that have prevailed previoulsly, be pausing for breath, but rather than trying to anticipate any near term directional change, it is more prudent to accept that the path upwards since February is most extraordinary and the trend remains clearly upwards until evidence presents itself to suggest otherwise.