Daily Form September 17, 2010

Inter-market Technical Analysis using algorithmic pattern detection

FRIDAY SEPTEMBER 17, 2010       09:55:00 GMT

Trading in forex this week has the additional element of risk that central banks are now adopting a pro-active stance towards intervention. In yesterday’s trading the Swiss National Bank were clearly in evidence selling the Swiss franc and buying dollars and euros partly to offset the impact of the strengthening of the Swiss franc against the yen which resulted from the actions of the BOJ on Wednesday.

As readers will recall there is an unusually strong tracking relationship expressed by CHF/JPY and when the pair gets top heavy from the Swiss perspective corrective action is to be expected as was seen yesterday and should be expected again as the pair continue to re-align after interventions.

From my perspective I intend to be a little less active in FX trading until the extent of the intervention efforts becomes clearer.

Meanwhile risk is definitely on at present with the S&P futures now well established above 1130 and targeting 1140 in European trading on Friday.

QQQQ looks to be headed to the level indicated on the chart but the very strong ascent pattern suggests that there could be a consolidation at best at the $49 level with some quick corrective action a distinct possibility.

Recently I noted that spot gold needed to alleviate concerns that a double top pattern would have been formed if the metal could not break decisively above $1267.
As the chart indicates in trading Friday in Europe following convincing action in Asia earlier the metal is now above $1280 and trading with momentum that suggests that the $1300 level in now being targeted.

The weakest looking sector chart that I encountered in my daily scanning was for the Housing Index (HGX) where the rejection at the top of the cloud demonstrates the usefulness of the Ichimoku formations in determining levels of potential resistance. Also evident on the chart is the potential for a violation of the short term uptrend line which, if confirmed in the near term, would make the homebuilding stocks vulnerable to further weakness.

As noted in Monday’s column the exchange traded fund CYB which enables one to benefit from changes in the closely managed relationship between the Chinese currency and the US dollar is well worth monitoring in coming sessions.


The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions.
None of these setups should be seen as specifically opportune for the current trading session.
For a more comprehensive listing of price formations detected by our pattern recognition algorithms please visit TradeWithForm

XME  SPDR Metals and Mining ETF  

On the long side, XME has a supportive chart pattern which has several of the characteristics of a cup and handle formation, and which could be ready for a break away to the upside.

PCY  PowerShares Emerging Mkts Sovereign Debt  

PCY is an exchange traded fund which tracks the sovereign debt from emerging markets and the recent price and volume action are indicative of what might transform into a downward staircase pattern.