Wednesday, 10 August 2011

What A Day

Yesterday was one of the best trading days of my life. No one likes a gloater but I do think reflection is really important for development and for reaffirming all the positive things we do in this trading game.

Everyone was doom and gloom yesterday. People were talking market crash, runs on banks, P3, forced liquidation etc etc. Now I am not saying that I was not immune to these fears but the simple matter of the fact is that I have been here before and I know these moments present huge opportunities doing the uncomfortable thing. As a trader you have to think differently from the rest and really understand how the market works. The best time to be short is never AFTER a panic move out of the high. You have to to do the analysis, have a plan and put emotion to one side.

If you believe in the power of technicals than all the news and rumours should mean nothing. I titled yesterdays post 1102. The low for the S&P500 cash last night before a 70pt rally was 1101.60! Technicals mean nothing you say? It is all about how you manage yourself. I just sold my long emini position at 1176.50 for a huge overnight gain (I think my biggest ever). Look at how the All Ords reversed out of the 61.8 fib retrace. The papers will give you this reason and that reason for the rally but the simple matter of the fact is that this level was right there for you BEFORE the event happened.

Here is yesterdays post before the huge reversal:

So the snapback has occurred and we have seen a 3% gap up today in Australia. I have just sold the long basket of stocks purchased yesterday. I am sure I am probably early but the trade has played out. The market will do 2 things here I believe- we could retest yesterdays lows once more and this would present a great buying opportunity. If we do not get this test tonight in the S&P500 then I think we will grind higher for at least a week or so and look for targets of 1200/1220 S&P500 and 4300 ASX200. We also have strong hammers in confirming markets such as Copper and AUDUSD. This market is set for a good bounce in coming days/weeks so get positioned if there is any panic retest tonight.

ALL Ords Daily:
The low right on the 61.8. This market has put in a BIG swing low.

S&P500 Daily:
The low right on the 38.2 as forecasted at 1102

Eurostoxx Daily:
The low just beyond the 61.8 retrace. I have used the Jan 2010 high here

There were similar reversals across Asian indicies yesterday. Hong Kong and Australia staged the best recoveries from ideal levels. For now we are holding the morning gap but there has been little additional gains from the morning opening thus I am am short term cautious. However, any overnight panic would present a great buying opportunity as a good short term low is in place.