Daily Form October 1, 2010

Inter-market Technical Analysis using algorithmic pattern detection

FRIDAY OCTOBER 1, 2010       11:28:00 GMT

Yesterday’s trading was quite a wild affair with plenty of scope for scalping profits from erratic moves in FX.

I shall reiterate my macro targets which were put in play to some extent during Thursday’s North American session, but where the tone this morning is still one of such obvious US dollar bearishness with the view that downwards is a one way bet, that eventually there has to be a serious reversal.

These are what might be called "big picture targets" where one has to exercise some judgment as to whether one to two percent margins of tolerance are the best way to consider them

1. AUDUSD - 0.98 would be a good entry point on the short side
2. AUDJPY - 81.80 would be a very good entry point on the short side
3. GBPUSD - anywhere between 1.59 and 1.60 should present profit opportunities on the short side
4. GOLD - especially following the recovery from yesterday’s spike down to the 1290’s the upside target remains at $1340, however, as and when the US dollar shows any signs of life I would expect a sharp sell-off
5. S&P 500 - if we can close above 1150 then I would next look for 1170 at which point I would suggest that risk/reward characteristics would keep me on the sidelines and waiting for entry points to participate in a corrective mode
6. USDJPY - looks as though 82 is in play again and until 88 is taken out the best strategy is to sell any sharp rallies
7. EURUSD - the currency pair which I am less clear about but where $1.3850 seems feasible, and above that I would be looking at the short side.

The picture below is the current view of the S&P 500 futures, which shows a value just above 1140, but where we need to make it above 1150 to instigate another strong short squeeze to facilitate higher levels.

As suggested yesterday "A potential double top lies in wait for $GBPUSD" and yesterday proved a very profitable opportunity as the 30 minute chart reveals.

However, there appears to be a possibility for another run up towards the $1.60 level so patience will be a virtue in today’s session.

I have not shown the intraday chart for AUD/USD from yesterday but as with sterling above it provided some decent returns on the short side intraday.

The daily chart shown below could well find a place in a text book illustrating how strong trending behavior produces great ADX values - the current 14 day parameter value for the ADX on this chart is just below 60 which is quite extraordinarily high.

Spot gold recorded its highest ever London fixing this morning.


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


USD/JPY appears to be poised to test the previous level, below 83, where the BOJ intervened. For now this is a currency pair that I watch with fascination but where I am not prepared to risk trading capital on "guessing" the next moves.

IAI  iShares Dow Jones US Broker-Dealers  

This comment appeared here a week ago and still looks to be valid.

An exchange traded fund which tracks the investment banks, IAI, has broken a key trend line and out of the cloud formation on heavy volume suggesting that we may be setting up for a triple bottom test in coming sessions.

IYR  iShares Dow Jones US Real Estate  

Here again is my comment from September 27th

IYR looks attractive on the short side as it approaches the recent high.

CL  Colgate-Palmolive Company  

Colgate (CL) registered a striking doji pattern with long legs, but may eventually need to explore lower prices before buying support emerges.