Daily Form January 6, 2011

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY JANUARY 6, 2011       11:41:00 GMT

The Russell 2000 again found resistance at the 800 level and registered a candlestick which is often characterized as a hanging man formation.
The overall tone for equities remains positive and the ADP number yesterday helped to ameliorate the sentiments from turnaround Tuesday but it remains to be seen after the NFP data just how much good news has already been baked in at current levels.
The 1280 level on the S&P 500 also targeted here last year provides another long term technical hurdle as this has been historically an area of heavy price congestion.

While writing this on Thursday morning (European time) EUR/USD is at a fairly key level and appears to be ready to test the $1.3075 area. As indicated on the 240 minute chart below, if the level indicated by the dotted line fails to provide support then a likely consequence would be to re-visit the $1.2970 print from early December.

One rather striking development following the ADP report yesterday was the sell off in the yen and as can be seen from the daily chart the USD has risen above the Ichimoku cloud again after its previous setback.
Longer term I am still targeting a test of the 86 area as the dollar’s attraction vis a vis the Japanese currency seems to be slowly gathering converts on both a fundamental and technical basis.

YCS is an ETF designed to profit from weakness in the Japanese yen and for longer term position players this would seem to be a trade that has relatively attractive upside with not so much risk on the downside.


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

EDV  Vanguard Extended Dur Trs Idx ETF  

EDV represents extended duration US Treasury strips and the suggestion made here in early December that rebounds should be considered as providing better opportunities on the short side is being validated.

TUR  iShares MSCI Turkey Investable Market Index Fund  

Here is a comment from the December 20th Daily Form column

TUR, which tracks Turkish equities, has reached a level where a bounce should be expected.

EWP  iShares MSCI Spain Index  

I shall also repeat another comment made from the December 20th newsletter

EWP, an exchange traded fund for Spanish equities, remains relatively unattractive with respect to other opportunities in equities in different geographical regions.