Daily Form February 28, 2011


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY FEBRUARY 28, 2011       12:02:00 GMT




Due to other commitments, commentaries this week may be sporadic and shorter than normal.

The daily chart for the exchange traded fund, EWI, which tracks the MSCI Italy Index, is displaying a clear example of a bearish flag pullback and would seem to be vulnerable to further selling.

I would also like to mention that I shall be a keynote speaker at the Traders Expo to be held in London on April 8/9 and if you click here you can register at no charge as my guest!



EWQ, which tracks the MSCI France index is also displaying negative divergences and as illustrated on the chart there was a notable non-confirmation from the MFI segment of the rising price pattern during last October which culminated in a sizable sell-off.

The current pattern shows more of a price plateau with distribution characteristics, but I would suspect that the overhead resistance shown during February may prove to be a barrier to further progress in the medium term.



AUD/CHF has been one of my favorite shorts over the last two weeks and the weekly chart pattern reveals an interesting formation which is that the range covered by the last two candlesticks i.e. for the last two weeks, exceeded the range of the prior two weeks taken together. This would represent a two week outside formation.

The flight to safety into the Swiss franc has been one of the more notable FX developments during the troubled times in North Africa and the Middle East, and the current level for the Aussie is fairly critically poised at the apex of a triangle with a risk more likely to the downside than the upside in my estimation.



One further cross rate which has been attractive to trade recently has been EUR/CHF.

The current outlook from the 240 minute chart below suggests that in the near term the long side would seem to be, on balance, more appealing but the level indicated by the arrow at 1.29 - also where the projected cloud formation is located and should act as resistance - is the recommended zone to be looking at short entry opportunities again.


Daily Form February 23, 2011


Inter-market Technical Analysis using algorithmic pattern detection


WEDNESDAY FEBRUARY 23, 2011       12:12:00 GMT




The S&P 500 futures are managing to cling to the base of the cloud formation on the 240 minute chart as this is being written during trading at lunch time in Europe.

The macro conditions in the market seem somewhat more favorable at present and as a corollary the US dollar is coming under considerable pressure, but beneath the surface there are still signs that the risk appetite is waning.

I would only get interested in the short side on the S&P 500 if there is a decisive break below 1308 and if it is accompanied by a topping out pattern in EUR/USD -- both of which are plausible in today’s session -- but as commented here many times the mega-generosity of Chairman Bernanke is a wonder to behold.

I would also like to mention that I shall be a keynote speaker at the Traders Expo to be held in London on April 8/9 and if you click here you can register at no charge as my guest!



AUD/CHF headed down towards the 0.93 level, as discussed here yesterday, and I shall be looking for any upward surges as opportunities to get short again as I expect this level to be tested in coming sessions.



ACWI, the exchange traded proxy for the MSCI World Index, clearly reveals negative divergences and while I would not be surprised to see a concerted effort to mount rallies the tide may be turning for this key global index.



Here are comments from ten days ago and they seem even more apt today

Underscoring the general theme of today’s letter that the emerging markets are experiencing attrition across the board, and distribution characteristics are clearly evident, is the weak chart for PXR, which is a rather lightly traded sector fund called Power Shares Emerging Markets Infrastructure.



Daily Macro Form February 22, 2011


Inter-market Technical Analysis using algorithmic pattern detection


TUESDAY FEBRUARY 22, 2011       12:10:00 GMT




The gravity of the unrest in Libya is starting to dampen the animal spirits and the fact that Brent crude touched $108 in early European trading acts as a nasty reminder that just one of the risks that asset allocators need to focus on is that large jumps in crude prices will only add more fuel to smouldering inflationary cinders (please excuse the pun).

The 240 minute chart for the S&P 500 futures shows that the index has dropped down to the top of the cloud formation, and this appears to be providing some support during the European session. However traders are largely on hold and are waiting to see how the US markets will react after the public holiday yesterday.



The Shanghai index registered a rather nasty red trend day candlestick in Asian trading Tuesday with a loss of 2.6%.

As discussed here recently, the index is struggling with a lack of momentum which is inhibiting it from making decisive progress through the cloud formation

The 50 and 200 day EMA’s still remain at an intersection point with a bias toward the faster EMA crossing the longer from above.



I have suggested in this column, not so long ago, that for position traders the EUR/CHF pair would be likely to exhibit a downward bias and that rallies were good opportunities to add to short positions.

In the near term the 1.27 region should provide some support but if that eventually fails, as I am inclined to believe it will once traders have fully discounted the hawkish rhetoric coming from some ECB officials, a break below 1.27 would expose the lows around 1.24 again as a probable target for testing.



The key AUD crosses - AUD/JPY and AUD/CHF - are both signaling a rather pronounced risk off macro environment for trading today.

In particular I am focusing on AUD/CHF which appears, in the intermediate term, ready to test the 0.93 level.






TRADE OPPORTUNITIES/SETUPS FOR TUESDAY FEBRUARY 22, 2011


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





FTSE    

The FTSE index has seen two days of selling and is currently below its 50 day EMA and on the verge of dropping below the uptrend line through the lows from last July.

An eventual retest of the 5800 level at the bottom of the cloud seems to be a reasonably probable scenario.




BKF  iShares MSCI BRIC Index  

BKF, one of the main sector funds which track the BRIC economies, and which did not trade yesterday due to the public holiday in the US, looks set for further corrective behavior.

The notable negative price/MFI divergences, which have been annotated on the chart, provide additional concern that the allocation back into EM/BRIC may not be proceeding according to schedule for some asset managers that were trumpeting the imminent likelihood of this rotation play.



Daily Form February 21, 2011


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY FEBRUARY 21, 2011       13:23:00 GMT




In view of the fact that today is a holiday in the US the commentary today will be brief, but I would like to draw attention to a recent piece which I have written which some readers may find interesting.

The tectonic plates of crisis within the Eurozone government debt market are rumbling again as the yields on Portuguese 5 year debt now seem to have established a foothold above 7% and the 10 year yield is currently at a record high above 7.5%.

As the three dimensional graphic below shows yields on the 10 year benchmark bonds for Germany, Spain, Portugal and Italy have all been on the rise during the last several weeks. In fact, notwithstanding the small drop in yields resulting from the Hamburg election result (see article reference below), German yields have moved up by more than 75 basis points since mid October of last year.

Particularly alarming is the rate now shown on the Portuguese 10 year which has a yield at the time of writing (Feb 21st) well above 7.5% and this is considered by most analysts to be above the critical level, and as such the Portuguese government will almost certainly have to turn to the EFSF for a bail out.

There is an extended article available at the following location which is entitled Macro Eurozone risk - we’re all in this together, aren’t we? which addresses some fundamental structural flaws in the EMU and its ability to withstand future sovereign debt crises.


Daily Form February 18, 2011


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY FEBRUARY 18, 2011       12:19:00 GMT




Yesterday I showed the remarkable ascent of the S&P 500 since early September 2010 but its performance has been eclipsed by that of the Russell 2000 index of micro-cap stocks.

The long term weekly chart shows that the index closed yesterday just slightly more than 20 points below its all time highest close of 855.77 - achieved on July 13, 2007. At the current rate of progress of the high beta stocks this could be challenged as soon as next week.

IWM which is the exchange traded proxy for this index is making headway on sub par volume and, as is typical of several charts, the high volume days in the recent past have tended to be the ones where the index closed down. The MFI divergence is not disturbingly negative and, as I have indicated here recently, from the point of view of short term tactical trading, negative divergences can persist for extended periods.

The ride up to the old top seems to be just a matter of time and then we shall have to see whether it can just keep on going or pause for refreshments.



The second chart for today is somewhat unusual but also highly illuminating and comes from the Hayman Capital Management Letter to Investors for February 2011.
Kyle Bass who runs the fund recently made some very interesting comments in a CNBC interview about what he sees as the coming sovereign debt debacle and cited several reasons why he believes that a sovereign domino effect would be the ultimate systemic crisis.

The chart has many aspects but clearly visible is the 11% compounded annual growth rate of total debt outstanding since 2002. The total now stands at $200 trillion. The right hand scale shows the global debt/GDP ratio which is projected for 2010 at almost 320%.

One of the more interesting comments that is made in the very worthwhile report is that Bass is of the view that a better measure for assessing the seriousness of the issue is the debt/government revenue ratios. GDP statistics contain a multitude of economic data which may or may not be relevant to the likelihood that a sovereign is creditworthy. If the ratio, on a single sovereign basis, is to express the total debt as a percentage of the total government revenue the ratio provides a better guide to the likelihood that the debt can be serviced properly. Needless to say, the ratios for US, UK and Japan are quite extraordinarily high, raising the specter of what Bass calls the Keynesian end point - which is where there is insufficient government revenue to even service the debt load!

To quote just one statistic from the letter:


...a move back to 5% short rates will increase annual US interest expense by almost $700 billion annually against current US government revenues of $2.228 trillion(CBO FY 2011 forecast).





EUR/USD has been selling off in European trading on Friday, partly in response to the announcement of further PBOC tightening - which was not entirely unexpected.

Technically the break of the dotted trend-line on the 60 minute chart below suggests that the drop down to $1.3450 in recent sessions needs to be re-tested.



Based on both technical evidence and also on the fundamentals which are driving sterling higher i.e. the open dissent on the MPC regarding the need for interest rate hikes to address inflation, selling EUR/GBP would be a recommended longer term play - with an initial target on the daily chart as indicated at 0.8280 with a possible retest of the 0.8150 further out on the horizon.


Daily Form February 17, 2011


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY FEBRUARY 17, 2011       12:05:00 GMT




Some regular readers of the Daily Form commentary have asked me recently why I have not featured any analysis of the S&P 500. As the benchmark index for US equities it may seem remiss to not have covered it for some time.

The only thing that I would say about the index, and it is graphically illustrated in the chart below, is that it has gone up almost without interruption since last September. The rate of ascent and the lack of any meaningful correction seems, to my mode of interpretation, to be quite extraordinary.
Furthermore it really underscores the notion of how valuable it has been - to paraphrase the song title - to get a little (actually a lot) of help from your friends i.e. the Fed.

Undoubtedly the almost daily POMO operations have helped and there seems to be a mood of benign complacency now on the part of asset allocators that the US fundamentals are just right - not too fast a recovery, not too much inflation and a generally positive outlook for US domiciled multi-nationals.

If the trend is your friend why would you want to go against such an obvious uptrend and especially if that would mean violating the other alleged golden rule of investing in the US -- i.e. don’t fight the Fed.

Perhaps it really is as easy as that!



Because there is really little to say about the US equity market other than what has been said above, I have found myself recently focusing more on the BRIC’s and the EM markets.

Some recent analysis that I have provided both here, and at my blog site, has recently been re-published in a good online publication. The editor of the publication has added some re-formatting of the pieces and I think that it enhances the views previously expressed. The two articles can be found here and also the link for the second piece is here .

The Shanghai exchange barely budged in Asian trading on Thursday and registered a tiny hanging man formation near to the top of the pink cloud formation.

I am still expecting an eventual re-test of the top of the range indicated on the fibonacci grid at around 3200 and I believe that it will be of considerable consequence to macro asset allocation decisions in the intermediate term, to see whether or not the resistance at this level can be overcome.




Turning to one of the other key BRIC markets, the Mumbai exchange has continued its recovery and I anticipate that there are three potential resistance levels that will need to be tackled in coming sessions.
The first is indicated by the dotted line B, then above that is the 200 day EMA at around 18,700 and if that can be overcome there is further resistance at the level marked by dotted line A which also coincides with the 50 day EMA at around 19,150.

Of some concern on the daily chart below is the fact that both the 50 day EMA and the 200 day EMA are slanting downwards reflecting the weak performance for several weeks. The MACD basing pattern suggests that further rally efforts are to be expected but, given the barriers to overcome as discussed in the previous paragraph, there will be a need for a series of sustained momentum moves upwards to re-establish a more bullish tone for this index.



One of the benefits of Ichimoku analysis is the fact that it enables one to anticipate possible price developments into the future based upon the cloud formation projections into the future, which result from the methodology of construction.

As can be seen on the 240 minute chart for EUR/USD below, the area highlighted in yellow suggests that the euro will encounter a falling boundary to the projected cloud formation, and I would expect this to provide resistance to price gains. It would take a clear break above the top side of the cloud formation to turn me into a euro bull at this stage, so my preferred stance is to look to sell sharp rallies and be looking for about 50/60 pips of gain on each trade, with a maximum risk of 30 pips.


Daily Form February 14, 2011


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY FEBRUARY 14, 2011       10:59:00 GMT




Regular readers of the Daily Form will recall that I have commented frequently on the erosion in equity prices in the BRIC’s over the last few weeks and I wrote at some length on the topic here and the article was also republished also here

I wrote that many of the short term indicators suggested that India and China especially looked oversold and that a bounce seemed to be most probable in the near term. In Asian trading today we have seen good rallies with both Shanghai and Mumbai up by more than 2.5% each.

I would expect that these rallies will continue and would be looking at playing the long side while the momentum favors a more risk on approach to these two markets.

Indicated by the yellow highlighting on the chart is the fact that for the Chinese index the rally has arrived at a critical point where the registering of the 50 day EMA crossing the 200 day EMA from above may now see a reversal. The configuration shown on the MACD chart favors a continuation of the rally, and quite probably another attempt at the 3200 level.

Long positions in the exchange traded fund, FXI, are worthy of consideration.



The Mumbai Sensex also rallied by more than 2.5% and a rebound momentum should see a continuation upwards to a near term target of 18,800 - and possibly beyond. Several ETF’s can be played for this rebound including INP.



EUR/USD has already rewarded a short sale placed near the European market open this morning with more than 50 pips but I am looking to cover soon as I would expect short term support at the level indicated by the dotted line.
Longer term I will be looking to sell rallies but with an intraday and scalping bias. GBP/USD could be more problematic to trade this week as there are several data points relating to CPI etc which should ensure that sterling will be even "bouncier" than usual.



The Australian dollar versus the US currency - AUD/USD shows a rather notable failure and double top pattern which has been annotated on the chart and after dropping out of the cloud formation on the 240 minute chart the intermediate term target has been identified with the arrow i.e. around 0.9920


Daily Form February 11, 2011


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY FEBRUARY 11, 2011       12:25:00 GMT




The events last evening in Cairo are providing a certain uneasiness in European trading Friday morning. The possibility of a power vacuum in Egypt in coming months raises a lot of questions about the path that Egypt will take, the repercussions in other neighboring states (esp. Saudi Arabia) and the strategic interests of the USA in the region.

Watching the speech by Mubarak last night one could only wonder how out of touch the man is with the popular movement taking place. As someone joked on Twitter he clearly didn’t run his speech by a focus group for feedback before giving it.

The breaking story also caused a last minute re-shuffling of CNBC Europe’s program schedule yesterday afternoon hence my absence from the usual slot.

The charts today are all rather simple and hopefully most speak for themselves. Continuing with a recent theme the focus is on divergences - both positive and negative - between price action and money flow.

The chart below for the financial services sector fund, XLF, suggests that this ETF would not be on my list of long candidates.



CMF, a play on municipal debt for California, is showing positive MFI divergences and playing for a rebound will be on my watch list for the next few sessions.



GBP/USD has broken below the key $1.60 level and I have indicated a near term target for possible testing in the vicinity of $1.5840. The suggestion comes with my normal qualification that this FX pair can be quite volatile and scalping quick profits (and taking quick losses) is the recommended course.



Despite the fact that many ETF’s for newer equity markets are not looking technically appealing the chart below for EZA, a play on the MSCI South African index, does look attractive on the long side.






TRADE OPPORTUNITIES/SETUPS FOR FRIDAY FEBRUARY 11, 2011


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





F  Ford Motor Company  

I would expect Ford to eventually succumb to a further bout of selling in the next few sessions.




NOK  Nokia Corporation (ADR)  

Nokia is getting crunched in European trading this morning and a near term target would be the dotted line drawn on the chart. This is now a troubled company which has lost its way and any significant rallies should be seen as selling opportunities.

For many years the company dominated in the mobile handset field but remained wedded to its own proprietary operating system - Symbian. The decision to partner with Microsoft and use its mobile platform/OS shows how fundamentally flawed the management strategy has been.



Daily Form February 10, 2011


Inter-market Technical Analysis using algorithmic pattern detection


THURSDAY FEBRUARY 10, 2011       12:09:00 GMT




Today’s commentary is primarily concerned with pointing to some rather easily discernible negative divergences which are becoming apparent as equity markets in the advanced economies continue to move upwards.
This is in contrast to the ongoing attrition in many EM sectors which I also will cover below and where the predominant technical characteristic, which I have been alluding to for some time, is that distribution has been taking place on some key indices/geographical sectors since last November.

The KBW Banking Index clearly reveals a negative divergence between the price action and the momentum as expressed on the MACD chart. While I am not trying to point to any kind of obvious topping process - negative divergences can persist for a long time - it is advisable to be aware that the easy money on the rally in US equities has already been made.



The three dimensional chart below, which I shall be discussing on CNBC’s European Closing Bell this afternoon shows the trajectories of yields on four key European government bonds.

At the time of writing the yield on the Portuguese 10 yr government bond has broken out to a new high but, interestingly, because of the upward path of German bund yields as well, the spread between Portuguese and German bonds is not as wide as it was during the Ireland crisis late last year.

Bund yields are also at a 52 week high.



Just while finishing today’s newsletter the Bank of England has decided to keep the UK repo rate at 0.5% and this has caused gyrations in GBP/USD. The chart which was captured before the decision illustrates that if $1.6020 is taken out there is plenty of scope for downside action.
However, I would be cautious trading sterling today as there may well be a counter intuitive move upwards on the notion that the markets had already discounted the fact that the Bank would leave rates unchanged. Indeed a buy stop at $1.6180 with a 100 pip target gain could be worth considering for aggressive FX day traders.



The Mumbai Sensex registered another losing session following its drop below the critical 18,000 level.
The suspicion is that index should soon find some support but it may need to test the 17,000 level which also coincides with the 62% retracement of the high/lows evident on the chart.






TRADE OPPORTUNITIES/SETUPS FOR THURSDAY FEBRUARY 10, 2011


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





ILF  iShares S and P Latin America 40 Index  

Here are my comments from the Daily Form commentary from February 3rd


ILF is an exchange traded fund which tracks major Latin American equities, and the heavy red volume bars which have been highlighted raise the specter that there could be further weakness ahead for Latin American markets.

The MFI chart segment at the bottom of the chart reveals negative divergences which help to underline the technical weakness of this sector fund.




EEM  iShares MSCI Emerging Markets Index  

Here are my comments from the Daily Form column from January 31st


EEM has broken an uptrend line and a feasible target in coming sessions would be a test of the 200 day EMA.

Notable once again is the negative slope in the MFI chart indicating that distribution has been taking place over the last three months.




EWZ  iShares MSCI Brazil Index  

EWZ broke below the 200 day EMA and yet again there is evidence of distribution since November.




PXR  PowerShares Emerging Market Infrastructure Fund  

Underscoring the general theme of today's letter that the emerging markets are experiencing attrition across the board, and distribution characteristics are clearly evident, is the weak chart for PXR, which is a rather lightly traded sector fund called Power Shares Emerging Markets Infrastructure.




XSD  SPDR Semiconductor ETF  

The chart for XSD, an ETF for semiconductor stocks, is revealing some notable negative MFI divergences, despite making new highs.



Daily Form February 7, 2011


Inter-market Technical Analysis using algorithmic pattern detection


MONDAY FEBRUARY 7, 2011       12:21:00 GMT




In Friday’s commentary I discussed the likelihood that yields on long dated UST’s appeared ready to break out, and specifically that the yield on the 10 year note looked ready for a close above 3.6%. After the somewhat ambiguous report from the BLS regarding January employment data the perception, now gaining more followers, is that the US economy is now recovering at a steady, if unspectacular, rate. But what also appears to be gaining traction is the notion that the modest recovery may be impacted by the rising inflation pressures which are already manifesting themselves in many Asian economies.

The 10 year note closed Friday’ session at 3.65% and the 30 year yield, as seen on the daily chart below closed in a potential breakout mode at 4.74%. As can be seen from the chart, the arrow extended across from the April 2010 high at 4.85% now seems to be the next target, but in reviewing the MACD chart one could sense that the momentum upwards will need to pick up if the rally in yields (or sell off in bond prices) is to be sustained in the near term.


Also worth consideration is the following comment which I made at the Seeking Alpha site in connection with a writer who was also commenting that US Treasury yields look to be headed quite a bit higher.


With debt/GDP levels at record levels in many countries, one wonders how secure that recovery is when coupons that will be attached to new issues on new 10 year notes may well be 4-5% in the next few months. Perhaps a lot more if the BRIC inflation malaise gets properly reflected in US CPI data.

I am inclined to be less cheerful about these signs of economic recovery when we are on the verge of a doubling of US government debt service costs, compared to where yields have typically been over the last 2 years.

This is further aggravated by the fact that so much of that debt is held externally, and the fact that corporate bond rates will, in turn be moving higher as will ARM’s (etc) .

The real test for UST’s will be when the Fed is no longer the buyer of last resort.




The usefulness of fibonacci retracement targets in forecasting potential price targets and support/resistance levels is well illustrated in relation to the weekly close for Brazil’s Bovespa Index. On February 4th the index closed at 65,269 which was almost exactly the level indicated in the broadcast slot which I did for Thomson Reuters last week and which is available here and also echoes my target in the daily commentary which was published early on February 3rd and which is available here .




I shall be paying particular attention this week to the US dollar against a broad basket of other currencies and the ETF which best captures this is UUP.
The following comments come from an article which was published here and which discusses, among other things, the co-movement of the US dollar and the appetite for BRIC equities
The following point was made

Evident on the chart is the low seen in early November which was also accompanied by a positive technical divergence in momentum. One could argue that the last move down in early November was the final thrust by FX traders keen to set up better levels for taking long positions on all of the key dollar cross rates as the implications of further QE became the focal point in markets. Adding to the notable bounce in the dollar was also the fact that Chairman Bernanke limited himself to only $600 billion, rather than the $1 trillion or more which some had been projecting.


Essentially the technical pattern suggests that the dollar is trying to form a base near current levels. However, as I point out in the article, from a fundamental point of view, the BRIC markets have been correcting for some time and have reached quite critical levels. From a macro perspective a lot will depend on whether asset allocators can put aside their concerns about troublesome inflation now evident in the BRIC’s and EM markets, and take the setbacks in equity prices in India, Brazil and China as buying opportunities to increase exposure to this sector, or whether they will continue to re-allocate into the US market. If it is the latter this would conform with the view that the US dollar could move considerably higher in months to come, and I am becoming more inclined towards that view.



The Mumbai Sensex registered a tiny inside day pattern in Asian trading on Monday and closed just above the pivotal 18,000 level. The technical pattern favors a near term bounce, but the quality of the rally will be vital to monitor as it directly plays into the alternative scenarios discussed in connection with the medium term direction of the US dollar and UUP (see above).


Daily Form February 4, 2011


Inter-market Technical Analysis using algorithmic pattern detection


FRIDAY FEBRUARY 4, 2011       12:02:00 GMT




The daily chart showing the yield on the US 10 year note shows that traders have brought the current yield exactly up to a potential break out level which could be triggered in today’s trading.

A close above 3.6% today, which could arise if the NFP data is too positive, would suggest that the markets will increasingly become wary about whether QE2 and perhaps QE3 is such a good policy initiative with so much evidence from other markets that the inflation genie has wriggled out of the bottle.

On that very subject I thought that the following news story which was reported by BBC News today seems relevant - especially as follow up to my coverage of the Mumbai Sensex index in this week’s commentaries, as well as two TV slots which I presented yesterday, on this theme of the BRIC economies potentially being the canary in the coal mine with respect to the fallout for equity markets from increasing commodity price inflation.



India’s prime minister has warned that the country’s rapid economic growth is under "serious threat" from inflation.

Manmohan Singh said getting inflation under control was a matter of urgency, raising the prospect of an eighth interest rate rise in under 12 months.

Emerging markets like India, where GDP growth is running at 8.5%, are helping to drive global economic recovery.

But Mr Singh said India’s inflation rate of 8.4% - and food price inflation of 17% - was unsustainable.

"Inflation poses a serious threat to the growth momentum. Whatever be the cause, the fact remains that inflation is something which needs to be tackled with great urgency," he said.

Analysts believe that surging food and oil prices mean that India’s central bank may have to raise interest rates before its next policy meeting, which is scheduled for 17 March.

India’s stock market has fallen this year on fears that high inflation will scare off foreign investors.


It is also worth noting that the Mumbai exchange reversed again in Asian trading Friday erasing all of Thursday’s gains and closed almost exactly at the critical 18,000 level.



EUR/CHF continues to look vulnerable to lower prices. The decision by the ECB to hold rates at 1%, despite some hand wringing gestures from Mr. Trichet about possible inflationary pressures, caused the euro to drop precipitously against the dollar yesterday but, as the bearish flag patterns on the 240 minute chart below suggest, my preference would be to remain short the euro against the Swiss franc.



GBP/USD continued its slide after failing to break above $1.63 and on the four hour chart below there is a case to be made that $1.6020 would be a good target for a rebound - which could potentially see sterling try yet again to mount a substantial rally.

The medium term outlook for the UK currency will become clearer after next Thursday’s MPC meeting of the BOE where the rumors are that the bank might nudge the repo rate up by 25 bps. Should that not happen, which is my suspicion, then sterling will, in similar fashion to what happened to the euro yesterday, drop quickly against the dollar and the other crosses as well.



COPX, an exchange traded fund which tracks Global Copper Miners, has some negative divergences on the MACD chart.

I would not recommend a short position in the metal as this market is subject to its own idiosyncrasies but the copper miners do look rather stretched and fully priced at present.