Daily FormNovember 1, 2010

Inter-market Technical Analysis using algorithmic pattern detection

MONDAY NOVEMBER 1, 2010       12:34:00 GMT

The daily chart for the S&P 500 cash index, with an abundance of spinning top/hanging man formations, reveals the lack of conviction and indecisiveness that has been very much in evidence over the last week especially.

The anticipation is that with the US mid-term election and the expected announcement regarding QE2, this will be the necessary catalyst to force traders into deciding on the intermediate term direction.

It is difficult to gauge to what extent the market has discounted the QE move already, and there is the likelihood that buying on the anticipation and selling on the news could be a big factor.

On the more positive side (i.e. if you prefer to be on the long side for US equities) I would repeat the point from Friday’s column that there could be a rush to short cover by many traders who have been trying to pick the top, and a break above the 1193 area could see an abrupt move back to the April high. If that was to unfold this week, the next move after that would be far more revealing as to what to expect between now and Thanksgiving.

The 240 minute chart for the e-mini futures shows that some selling hit the S&P 500 index during European trading on Monday morning, and also the chart helps to illustrate how the upward trendline and the cloud formation are both pointing to the 1173 area as key support.

Sterling has been rallying recently following better than expected economic news (at least in some areas of the UK economy).

In recent months the $1.60 level has been a major hurdle for the pound but there is a potential test of the 1.6110 level which was touched on October 15th. Should there be a clear failure to attain this level then on an intraday basis, there could be a 100 pip gain to be had on the short side on a drop below the $1.60 level.

CHF/JPY looks likely to test chart support around 80.65


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

AMGN  Amgen Inc.  

Amgen (AMGN) has a positive looking pullback (flag) formation and could be headed higher.

CEG  Constellation Energy Group  

Here is a comment from a column in early October

Constellation Energy Group (CEG) dropped below its 200 EMA and violated an uptrend line on heavy volume in yesterday's trading.

After completing a pullback in mid October the stock has now delivered a decent return on the short side and could potentially fall back towards the previous low from late August that is visible on the chart.

AXP  American Express Company  

American Express (AXP) has a weak technical pattern and I would be looking at entry opportunities on the short side near to the level indicated by the arrow on the chart below.