The title of this post is somewhat misleading. My experience in the market has taught me that ultimately the market is going to do whatever it wants to do. Trying to predict the future course of events is often futile. The best we can do as traders is have a setup, wait for price action to confirm the technical picture, and then execute always keeping the risk/reward in our favour. This sounds simplistic but it is some of the best trading advice I can give.
The market is at a juncture here I believe where it could breakout from a base building process and go on to retest its previous highs. I have been showing how breadth figures have not been supporting the move lower thus setting up a classic divergence. Price has hit some great supports and bounced quite positively across several markets. Equally however, if last weeks supports break, a whole new range of possibilities presents themselves and we have to be flexible enough trade the new setups.
I don't know how markets will take the weekend intervention in Libya. On the one hand it could be perceived as a positive by the market as this will possibly lead to an end of Qaddafi and close the door on recent uncertainty. However, heightened tension and bombs dropping from the sky is hardly the ideal backdrop for a sustained rally. The options are numerous here. Thus I just don't know how the market will take this information and I don't pretend to. Price action as ever will be key. We have some great supports in the S&P500, ASX200 and AUD as shown below. If this is a new leg up, these levels will hold. An ideal bullish scenario would be a gap down with no follow through.
Emini June 60mins:
Price hit the 1282/1285 Double Bottom target on Friday and sold off:
http://swingtradersedge.blogspot.com/2011/03/double-bottom-trades-follow-up.html.
1255 to 1260 is key support and I will be looking for any gap down on Monday to hold these levels. The 2 patterns I am following currently are a broader inverse Head and Shoulders pattern, and a breakout trade above 1285/1290 after some consolidation. If no bounce materialises, I will consider shorting breakdowns below 1250 should momentum intensify.
S&P 500 15min cash:
The ASX200 bottomed beautifully on the 61.8 fib fan and just above the retrace level. We saw a strong candle follow through on Friday after hammers were left in prior days. The key support levels coming into Monday are 4540/4560 (4550/4570 SPI futures). I am also following a potential inverse Head and Shoulders pattern here as well as a breakout above Friday's highs if we can consolidate for next 2/3 days. 4770 is a very big support level and I do believe this will hold.
ASX200 Daily:
ASX15mins:
The Hang Seng Daily is testing a key breakdown level. If we can regain and close above 22500, I think this will be a very powerful signal indeed and a possible bear trap.
Hang Seng Daily:
AUDUSD traded right into the 9950 level I cited on Friday. I will be looking for a retest down to 9850/9800 to get long again for a potential support play, and will be shorting the breakdown of this level should no bounce materialise. Breakout trades should be considered above 9960.
AUDUSD 60mins:
I will focus on the setups more intensely in Taiwan, Singapore and the SPI in tomorrows update.
In sum, volatility is here to stay for a while and thus a wide range of possibilities are here for us as traders. These are the times that will make our year. Remaining bogged down in a rigid outlook or count will lead to missed opportunities. I am sure there are many who could make a strong case for the beginning of a new move up or a short term 4th wave A=C trade that will lead to new lows. I will say that if this is the end of the corrective patterns that I have been showing, then price action will hold the support levels cited. Dr Copper triggered my "failed" head and shoulders pattern and I believe this is key lead evidence.
It is all quite depressing thinking about what is happening in the world right now. I cant help but be struck by the irony that "Western" powers have decided to bomb Libya in an attempt to "save civilians". I dont know many military interventions that have managed such a feat. Nonetheless, my job as a trader is to continue to trade and follow the price action, leaving all this news to play out as it does. These are all black swan events and we cant pretend to know the outcomes.
Thanks
Austin
