Global Macro Daily Form March 10, 2011

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY MARCH 10, 2011       12:25:00 GMT

The Shanghai index reversed after posting its first close above 3000 for several weeks and registered a loss of 1.5%. There were several fundamental factors cited for the sell off in Asian trading today but the longer term technical picture is more significant.

For global asset allocators who are maintaining large long exposure to equities, I believe that it is imperative that this index must make its way back and beyond the 3200 level as indicated by the upper most line on the fibonacci grid.

AUD/USD is at a fairly critical level on the daily chart and I have highlighted some rather negative looking candlesticks on the chart.

A test of parity against the US dollar would seem to be on the cards and it would not be too surprising for traders to create the appearance of a key breakdown only to rally back within a few hours.

Since the Ichimoku cloud formation at current levels is quite "thin" this does not suggest that a lot of price action at this level provides reliable support and my intuition is that the powerful constituencies that are still lined up in the aggressive Risk On lobby will try to defend the Aussie from a break down. In particular the Asian banks, especially the PBOC, may want to preserve an upward trendline which, at least on the surface, appears to be in jeopardy.

The FTSE in the UK is in retreat along with most global indices and here again is a comment from earlier in the week

I shall repeat my view from the Daily Form commentary from February 22 nd - which can be found here - that the FTSE 100 index in the UK seems likely to retreat towards the 5800 level.

In particular the highlighted candlestick from January 31st with an intraday low of 5815 would seem to be a feasible target in coming sessions.

The 240 minute chart of the S&P 500 futures indicates that the index is coiling into an increasingly confined range and that this formation should give way shortly to a directional break out.

From a macro perspective the possibility of further woes in the EZ in the coming few days could tip the balance in favor of a break to the downside - although with ongoing POMO support this could also turn out to be a fake out move only to be followed by a resumption of more bullish activity in the medium term.


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

JJC  iPath DJ-AIG Copper Total Return ETN  

JJC is a convenient ETF vehicle for traders who wish to express a view on the direction of copper. The fund is designed to reflect the performance on copper contracts. The index is composed of Copper High Grade futures contract traded on the New York Commodities Exchange.

The chart shows that the 3.4% drop yesterday has brought the price towards the base of the cloud formation on very heavy volume. However the extreme low readings on the MFI and RSI segment suggest a cautious approach. A more advantageous entry point on the short side would present itself in coming sessions once the oversold MFI value has been worked off.

XSD  SPDR Semiconductor ETF  

Here again is the thread which began on March 2nd regarding the semiconductor fund, XSD

Last week- and the link to the commentary can be found here, the suggestion was made that XSD, one of the two main ETF's for the semiconductor sector appeared to be ready to roll over and yesterday's 2.4% drop, along with the weak MFI and RSI readings could eventually trigger a fall to the $55 level at the base of the cloud formation.

OIH  Oil Services HOLDRS  

OIH, along with some other exchange traded funds in the energy related sectors, is revealing negative MFI divergences.