Thursday, 8 September 2011

The Last Sell Zone

Good Afternoon

Yesterday I said that I thought there would be one more rally before a final push to new lows. We got the rally indeed but certainly the move seems a lot stronger than I had anticipated. Volume was low and my options desk informs me that much of the move into the close was exaggerated due to large short gamma positions coming into expiry. More importantly, if this market is going to sell once more, it has to happen now. Otherwise, I feel a longer term low is in. I am seeing an interesting reversal in Asian markets today out of clear resistance levels. Asia has often led the markets globally so lets see if it proves to be a lead indicator once again.

The main point I stressed yesterday was that this is not the time for longer term swing short positions. There is no need to finesse the market here for longer term traders. This point remains.

SPI Day Session 15mins:
Despite a strong 2% overnight lead, our market opened up 1% and then sold off immediately. This was right out of the 61.8 fib level and the open gap. Once again, the power of these fib levels was shown today. This will probably leave a bearish reversal candle today on the daily.

AUDUSD 15mins:
Rally right into the previous breakdown level and the 61.8. The reversal was enhanced by a weak jobs number.

Copper 15mins:
Same thing. Price has rallied right into the 61.8 and sold off. ABC off the low?

S&P500 15mins:
Coming into tonight, the cash market is right into the 61.8 and the previous breakdown level. Will this market play out like what we are seeing in Asia? Short first and ask questions later.

In sum, we are at a critical juncture for the bears. The market needs to sell here otherwise I believe the intermediate low is in. I am short the Eminis at 1196.50, with stops above 1205. I see this as a low risk trade and will add if I see more confirmation.