I put out a special post in the ASX200 yesterday and I urge you to read this. Yesterday was a great trading day across a number of markets and a number of double bottom setups I highlighted here were triggered and profitable. I believe we are now forming a strong base in US markets and we should be focusing on buy setups with tight risk.
I wanted to begin by talking about the recent breadth figures. I do believe looking at some breadth figures is a very important exercise and offers clues as to the underlying trend. I stated a few days ago that despite price making lower lows, the number of NYSE decliners was not following through showing important divergences. For instance:
22/2/11: 2729 NYSE decliners (close)
10/3/11: 2524 NYSE decliners
16/3/11: 2379 NYSE decliners
Thus despite price breaking down and making lower lows, this sell off is not being confirmed under the hood. This is not indicative of a kick off move lower as some Elliotticians and other technicians are citing at this juncture. In comparison, look at the breadth figures that occurred PRIOR to the flash crash in April 2010:
16/4/10: 2481 NYSE decliners (close)
27/4/10: 2602 NYSE decliners
4/5/10: 2667 NYSE decliners
6/5/10: 3018 NYSE decliners- flash crash, peak reading.
Note how breadth was getting more bearish coming into the Flash crash. These are clean facts showing the build up to the event. This is just not occurring now.
The Emini double bottom trade played out well yesterday. The target is still 1280/1285 for now.
Emini June 5mins:
The S&P 500 Cash is building a short term base. Key support is 1260 to 1265. This could be an inverse Head and Shoulder pattern in the making. Note how the low end of today's gap held:
S&P 500 Cash 5mins:
S&P 500 Daily has held right at the low end of its trend channel.
S&P 500 Daily:
The Dow hit a low at a potential C=1.61A move. We need follow through to confirm but once again we have a tradeable pattern.
Dow 60mins:
The Nasdaq 100 has hit and held the 38.2 Fib fan off the July lows. I still believe this is a Failed Head and Shoulders pattern in the making if we can cross back above 2300
Nasdaq 100 Daily:
In sum, I believe a base is forming here in US markets. This echos similar setups I have been showing here in the Eurostoxx, ASX200, Copper etc. Obviously we need follow through but these are all great risk/reward patterns. No doubt there is a lot of scary news out there and volatility. However, as ever I feel you need to be prepared to buy when everyone is panicking using the correct risk/reward setups
Thanks
Austin
