Daily Form April 29, 2010

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY APRIL 29, 2010       06:17 ET

The sovereign credit crisis is producing a variation on the normal flight to safety dynamics that have been witnessed during the structured products crisis. The US currency and Treasuries are certainly seeing a firmer tone as asset managers seek out that normal safe haven, but this time the yen is weakening - still above 94 as I write this - and gold which normally moves inversely to the dollar is poised at the $1170 level which I drew attention to here earlier this week.

The chart for spot gold, with the notable cup/handle formation looks uncannily like the one that preceded the big breakout last October and it would not take much to trigger a substantial breakaway move.

I think it is fair to say that traders in this market are ready to push the buy trigger at any more signs of an unravelling of the EZ.

On that topic I shall amplify something which I commented earlier today on my Twitter account

The irony of the current plight of the EZ is that the evolution of the entire European Union project has been largely in the hands of process driven elitist intellectuals and yet they missed the obvious - which is that it is proving impossible to keep a currency union together where is no centralized fiscal authority to impose taxes on EZ citizens to perform the customary bailout.

The Shanghai exchange fell again today and closed at its lowest level since last October. As noted on the chart the index has dropped more than 10% during April alone.
A move towards a re-test of the low of 2640 seen on September 1st 2009 could well be an intermediate term target.

GBP/USD has almost broken below the cloud formation on the daily chart - readers may recall that I prefer to stand aside when assets are within cloud patterns - and I suspect that there could be a validation of this downward directional bias - as soon as during Asian trading on Friday. Targets of around $1.48 are still on my radar during the next week or so.

The last edition of the X Factor election debates takes place tonight in the UK and Gordon Brown is vulnerable not only for his comments to a voter yesterday - which is a relatively minor offence - but which is all over the UK newspapers today - but for the much more serious accusation that should and probably will be made, that he has systematically mismanaged the UK’s economy for many years.

It never ceases to surprise me how memes can get planted in the public psyche and then be perpetuated without really being subject to critical scrutiny. The notion that Brown is best positioned to handle the economic difficulties moving forward, because of his mastery of economics (?), is quite astounding given the fact that he has presided over the public finances demise for the past 13 years.

Please do not take this as political partisanship since I only have one view of the current selection of candidates - which is that none of them are telling the truth about the austerity measures to come and none of them have clear ideas on how to tackle the structural public deficit which is near to being beyond repair.