Trading the LATAM Currencies

Using MMR to Generate Trade Ideas

Relative Strength with Point and Figure

Chart Enhancement: TECH<GO>

New Study: Spearman Indicator

Please visit CHART<GO> option 65<GO> for the archived
presentations from Bloomberg Chart Day in Bogota
Colombia and Sao Paulo Brazil!

Market Recap in Excel: Click here

(Click a title to jump to page)
Contributor Corner
NA: East Coast
Paul Ciana, CMT
pciana@bloomberg.net
Josh Rosen, CMT
jrosen23@bloomberg.net
Jonathan Lin, CMT
jlin210@bloomberg.net
Greg Bender, CMT
gbender1@bloomberg.net
Bill Sindel
wsindel@bloomberg.net

NA: West Coast
Geoff Wakeling
gwakeling@bloomberg.net
South America
Andre Lapponi
alapponi@bloomberg.net
Europe
Philip Sexton, MSTA
psexton@bloomberg.net
Middle East
Akshay Chinchalkar
achinchalka1@bloomberg.net
Asia/Pac
Terry Gaut
t.gaut@bloomberg.net
Sheba Jafari
sjafari@bloomberg.net
Bloomberg L.P.
Global Technical Strategy
Issue 132
June 6, 2011
Key Levels Events
LATAM Chart Day
Archives are now
available!

CHART<GO>
option 65<GO>
TAS Professional discusses the
future of the SPY

TASP<GO>
This Week: A look at LATAM
Ticker Support Resistance
DXY 72.696 76.065
CL1 94.63 104.60
UKX 5829 6103
IBOV 61658 64978
NKY 9317 9770
Click here for more
2

Trading the Brazilian Real in the last four weeks, one
could notice through the help of the weekly pivot points,
that the currency didn't expand much beyond its 1
st
sup-
port/resistance levels (blue shadow). Last week, the pivot
breakdown at 1.6253 was the main signal for a bigger cor-
rection. This week, opposed to the previous one, prices
tested the weekly 1
st
support at 1.5791, and went up to test
several resistances (daily pivot levels).






The Peso Colombiano has shown a more disperse be-
havior, as one could notice through the weekly pivot (blue
shadow). The prices have moved away of this range most
of the weeks. This week, prices started already breaking
the weekly 1
st
support at 1808, then they break the 2nd
support, and now, they came back to test it again as a re-
sistance (pull-back) at 1792.







The Chilean Peso has been more predictable according to
the weekly pivot (blue shadow), like the Brazilian Real.
Even though, the prices penetrated the weekly 1st support
level, on May/13th by 1 bar only (60 min.), and on May/17th
and 18th partially, the weekly 1st resistance. This week
prices are testing its weekly 1st support at 464, and are
close to test resistance the weekly pivot at 469







Mexican Peso showed the less dispersion among the cur-
rencies, when looking at weekly pivot (1st support/
resistance). The behavior of the last 2 weeks is very similar
of the other currencies, with the weekly pivot breakdown
last week at 11.68, a test of weekly 1st pivot support at
11.55 in this week, and testing now the resistance of the
weekly pivot 11.65. If prices can break this resistance, it
could suggest a similar movement (depreciation of the
other Latam currencies), as they seems to lag the Mexican
Peso.
Chart of the Week: LATAM FX and Pivots
Bloomberg L.P.
Global Technical Strategy
Andre Lapponi
alapponi1@bloomberg.net
3

Sometimes, the best way to find attractive stock charts does not start with a chart. This week we will take a look at the
Member Ranked Returns (MRR <GO>) function, and how it can help one find attractive stocks within an index.
Although the Brazilian Bovespa index (not shown) has been under pressure since late 2010, tracing out lower highs and
lower lows in price, several constituents within the 68-member index have remained quite buoyant. With IBOV <Index>
MRR 10 <GO> (top left figure), one finds the strongest year-to-date performers among the Bovespa members. Addition-
ally, dragging and dropping each stock name into a chart offers a quick and convenient way to examine these stocks
technical profiles. Such an exercise revealed that, for example, Vivo-Pref and Braskem-Pref A (not shown) have ad-
vanced to five- and four-year highs, respectively, even as the Bovespa has failed to overtake its 2008 peak.
With MRR 4 <GO> (top right figure) and some drag-and-drop maneuvers, one will soon find that Souza Cruz (see below)
not only performed well over the past three months, but has maintained an impressive 16-year uptrend.
Chart of the Week: Member Ranked Returns
Bloomberg L.P.
Global Technical Strategy
Jonathan T. Lin, CMT, CFA
jlin210@bloomberg.net
4

Point and figure is one of the oldest methods of charting. Point and figure charts offer a unique look at the supply and
demand of any security. Columns of Xs depict demand and columns of Os depict supply. Each X or O is drawn based
on a predetermined box size. Columns of Xs and Os alternate based on a reversal amount. The reversal amount is
usually either one or three boxes. These rules create a filter than is by default biased in the direction of the current
trend, At its simplest level, if price is in a column of Xs then at that point in time buyers are beating sellers and the trend
is up (opposite for columns of Os). Notice that the chart moves to the right based on the alternation between up and
down trends and not on the passage of time.
Above is a chart of a Custom Index Expression {CIX <GO>} which is the ratio of Brazils Bovespa Index {IBOV Index} to
the Standard and Poor's 500 Index {SPX Index}. This ratio can also be created under the settings tab in G. Using stan-
dard point & figure rules the relative strength of the Bovespa can be analyzed. A major relative strength low was made
in October 2008. When the overall trend turns bullish an objective 45 degree trend line is drawn from the pivot low
(green line). This line was broken in January 2011 increasing the odds that the horizontal resistance at the 62 level (red
line) was significant. An objective 45 degree bearish trend line, which remains unbroken, was drawn from the right side
of the congestion area.
Objective targets are another benefit of point & figure charts. The blue arrow highlights the congestion area used to cal-
culate a horizontal target of 29.50. The orange arrow highlights the column used to create the vertical target of 38.5.
The formula for each target is (# of rows in congestion area or boxes in column * box size * reversal size) +/- top/bottom
of column or congestion area. Based on the point & figure analysis above the trend of the Bovespa relative to the S&P
500 is down and the next downside target is 38.5.
Chart of the Week: IBOV/SPX Ratio
Bloomberg L.P.
Global Technical Strategy
Greg Bender, CMT
gbender1@bloomberg.net
Bovespa / S&P500 Ratio
5

With over 100 Technical studies at your disposal, the Bloomberg charting package really does satisfy most require-
ments. This is before exploring the possibilities of creating custom studies. As this number continues to rise, Bloomberg
has created a new function to help find and understand what these tools can achieve for you.
The function TECH<GO> will load the new browser for all Technical Studies. Initially, you have a list of study categories,
found on the left hand side. Once a group is selected, the middle section will show those technicals matching the cate-
gory criteria. Then, click on a specific study to view an illustration of this tool, accompanied by a short paragraph to ex-
plain its key features. This can be launched on a historical or intraday chart by clicking on the relevant gray tab.
The browser also allows you to run study searches, be it by keyword or study title. Simply begin typing in the orange field
Find a Study, at the top of the page, and let the system work for you. This option is ideal when searching for studies
with similar characteristics. Alternatively, the New category will show what has been recently added to Bloombergs
ever growing catalogue of Technical Analysis capabilities.

TECH<GO> = Technical Study Browser
Chart Enhancement: TECH<GO>
Bloomberg L.P.
Global Technical Strategy
Phil Sexton, MSTA
psexton3@bloomberg.net
6

The Spearman Indicator, also known as the Spearman rank correlation coefficient, was developed by Charles Spearman, a British psy-
chologist and mathematician just after the turn of the twentieth century. Spearman took a data series, in this case closing prices and com-
pared the original sequence of these values with a sorted sequence of the same values. He then computed correlation between the ranks
of the two groups using the following formula:
Where: number of values in each data group (must be the same for both groups)
difference between the ranks - of corresponding values and
The coefficient will vary between values of -1 and +1. Positive values near +1 indicate a strong positive correlation. For the purpose of an
indicator, we multiply by 100 to create a traditional oscillator showing values between -100 and +100. The Period, or number of data
points back to analyze can be defined by the user and is defaulted to 10.
The second line shown is a moving average of the Spearman indicator, and is generally set to 3 periods. The crossing of the Spearman
indicator and its moving average, like other oscillators, may portend or confirm a change of direction in the market.
While there are many oscillators to choose from when analyzing price charts, the Spearman indicator is generally regarded as a
smoother, less reactive oscillator that can be an excellent tool for analyzing longer term trend strength, particularly when applied weekly
charts.
Spearman Indicator
New Study: Spearman Indicator
Bloomberg L.P.
Global Technical Strategy
Bill Sindel
wsindel@bloomberg.net
7

Contributor Corner: TAS Professional on the SPY
Bloomberg L.P.
Global Technical Strategy
Markets trade in one of two mutually exclusive phases: (a) horizontally where they move slowly through time and accu-
mulate volume at price (VAP) in a relatively narrow range of prices; and (b) vertically where markets move rapidly
through price and accumulate little volume at priceleaving holes (yellow areas) in the chart. These holes, when re-
visited, offer little support or resistance to future price movement and it where we anticipate the market will move rap-
idly again. Knowing where price is likely to move rapidly and when to act on it is a key technical market skill.
TAS PRO VAP Map

,

a free Bloomberg third-party add-on study (left-hand chart), dynamically illuminates the two
phases of market movement with a gradient color coded distribution map that is set to a user-definable number of look-
back bars. These profile maps are overlaid onto price bars to graphically represent areas of market balance (red), im-
balance (blue), and transition (purple).
TAS PRO Dynamic VAP

(right-hand chart) displays a dynamic representation of developing balance and imbalance

areas as a series of three horizontal lines. When price is trading between the lines, the market is balanced and rota-
tional. Above the upper line or below the lower line, we anticipate the market will trade fast through an interim hole.
These two studies alone made for some prescient market calls. The May 23
rd
opening gap left a gaping hole in the
VAP Map profile. And the March 26
th
31
st
rally and subsequent opening gaps did little to develop the profile side-
ways. Then the June 1
st
[day session] gapped open below the Dynamic VAP and rapidly traded down through the
holes on wide-range bars. The messages were clear early on June 1st: (a) Dont be long; (b) get short; (c) stay short;
(d) watch out for the holes below; (e) consider adding to shorts on countertrend rallies.
Trading studies dont have to be complex. They just have to turn market generated data into actionable, rules-based
information that enhances your existing workflow.
Go with the Flow (and watch out for those holes below)
Andrew Kezeli
andrew@tasprofessional.com
TASP <GO>
8

Price = Green if up on the day, red if down.
% Chg (5) = Green if positive over the last five days, red if negative.
50 Day = 50 Day Moving Average of price. Green if its greater than the 200, red if its less than the 200.
200 Day = 200 Day Moving Average of price. Green if its below the 50 day, red if its above the 50 day.
5 Day High = The high over the last five trading days including today. Green if it equals the 20 day high.
5 Day Low = The low over the last five trading days including today. Red if it equals the 20 day low.
RSI 9 = Nine day Relative Strength Index. Green if its below 30, red if its above 70.
ADX Line = Average Directional Movement. Green if ADX is greater than 25 (trending), red if its lower than 20 (range)
2Y High = Two year high. Green if it occurred in last 20 days.
0.382 = 38.2% retracement of two year range. Yellow if price is within 2% of it.
0.5 = 50% retracement of two year range. Yellow if price is within 2% of it.
0.618 = 61.8% retracement of two year range. Yellow if price is within 2% of it.



Below is a recap of the major financial markets with respect to new highs and new lows, moving averages, relative
strength index, average directional movement, and Fibonacci.
Key Support and Resistance Levels
Bloomberg L.P.
Global Technical Strategy
Paul Ciana, CMT
pciana@bloomberg.net
Sym Last Price % Chg (5) 50 Day 200 Day 5d High 5d Low RSI 9 ADX 2Y High 0.382 0.5 0.618 2Y Low
DXY 73.8330 -1.5182 74.8462 77.7369 74.9410 73.6400 29.47 20.69 88.7080 82.5914 80.7020 78.8126 72.6960
EUR 1.4618 2.3736 1.4391 1.3753 1.4658 1.4279 67.46 21.57 1.5144 1.3896 1.3511 1.3125 1.1877
GBP 1.6375 -0.5827 1.6344 1.5979 1.6547 1.6286 51.56 13.07 1.7043 1.5969 1.5637 1.5305 1.4231
JPY 80.2000 0.9353 82.0538 82.5363 81.7700 79.9800 32.52 11.27 98.570 90.044 87.410 84.776 76.250
AUD 1.0746 0.5332 1.0624 1.0060 1.0775 1.0587 59.57 15.06 1.1012 0.9748 0.9358 0.8968 0.7704
BRL 1.5789 1.0137 1.6030 1.6703 1.5948 1.5706 37.21 20.79 2.0384 1.8545 1.7977 1.7409 1.5570

CL1 99.61 -0.91 105.10 91.11 103.39 98.12 44.48 28.28 114.83 93.24 86.58 79.91 58.32
NG1 4.83 7.02 4.34 4.12 4.86 4.53 71.17 20.05 6.11 4.69 4.26 3.82 2.41
GC1 1546.50 0.74 1493.52 1389.70 1551.60 1520.40 66.65 16.15 1577.40 1320.47 1241.10 1161.73 904.80
SI1 36.92 -2.40 39.21 30.18 38.77 35.07 49.19 21.82 49.82 35.54 31.13 26.72 12.44
CRY 348.38 0.62 353.50 324.66 350.89 344.94 55.17 19.00 370.72 317.41 300.95 284.48 231.17

GT2 0.4405 -7.9555 0.6170 0.5702 0.4961 0.4129 35.03 20.79 1.4150 0.9936 0.8634 0.7332 0.3118
GT5 1.6254 -5.4446 1.9684 1.7841 1.7582 1.5407 31.86 31.80 2.9860 2.2330 2.0004 1.7678 1.0148
GT10 3.0314 -1.4609 3.2748 3.1118 3.1047 2.9390 42.07 40.44 4.0095 3.3680 3.1699 2.9717 2.3302
GT30 4.2827 0.9287 4.3857 4.2950 4.2901 4.1299 53.22 34.39 4.8559 4.3233 4.1588 3.9942 3.4616

INDU 12129.77 -2.45 12461 11649 12574.29 12104.03 29.37 23.04 12876 11047 10482 9917 8087
SPX 1297.73 -2.48 1331 1249 1345.20 1296.82 32.17 14.75 1371 1179 1120 1061 869
NKY 9380.35 -1.31 9625 9826 9720.73 9359.78 36.29 12.47 11408 10193 9818 9443 8228
IBOV 64053.55 0.16 65563 67750 64978.78 63277.37 51.08 26.68 73103 63614 60683 57751 48262