Inter-market Technical Analysis using algorithmic pattern detection
WEDNESDAY SEPTEMBER 8, 2010 11:07:00 GMT
The daily chart for the S&P500 September futures chart, captured during European trading on Wednesday morning, reveals a small rebound following what was perceived to be a successful auction of Portuguese government securities and which caused a substantial rally in the euro.
As anticipated here yesterday the futures sold off and reached below 1090 - although the cash index managed to close at 1091.84. During trading in Asia and Europe this morning the futures have bounced off the 1086 level which is close to the 50 day EMA and the top of the green cloud.
The very clear overhead resistance at approximately 1130 is visible on the chart and interestingly the projection of the trendline from the July low (which was violated in mid August) shows an eventual intersection with the 1130 level. This technical pattern underscores the fact that this index is behaving very much in a technical sideways pattern. The challenge for the bulls will be to pierce the upward trend projection or wait the requisite time for the barrier to merge with the 1130 level. In the meantime a break below the base of the cloud at 1065 would suggest that the 1040 level will need to be re-tested.
EUR/USD displays a clear overhead barrier at $1.2920 and support around $1.26. The drop from the ascending wedge pattern indicates a vulnerability to further setbacks and I would be looking for selling the pair as the euro approaches $1.2740.
Apart from the much commented strength of the Japanese yen, the Swiss franc is also displaying its status as the "new deutschemark of Europe". Capital flight from the peripheral eastern European nations, in particular Hungary, as well as the ongoing move of private capital from banks in Greece and the other Club Med countries is finding its way into Swiss banks and the Swiss Franc.
CAD/CHF has broken a key trend line and the suggestion is that the Canadian dollar will struggle to regain a foothold above the point of intersection of the two trend lines on the 240 minute chart below. I will be looking for entry opportunities on the short side in today’s trading and would be surprised to see a move above the top of the pink cloud at 0.9710 in today’s session. But I would emphasize that this is a setup only for today’s session and would not be looking at holding the position overnight.