Wednesday, 5 October 2011

Double Bottom Take 2

Morning All

I will keep words brief and let the charts do the talking. Last night we saw a vicious squeeze into the close right out of the 1070/1075 previous lows on the Eminis. Looks like a classic false breakdown that brought the bears out and got them covering. This is exactly what occurred in March 2008 before the Intermediate rally began. See here for more details on this rally:,0. Many will call this a 1 day wonder but you need to bear in mind the current market position- we are in a double bottom/false breakdown zone with heightened bearish sentiment. Last nights action tells you how jumpy this market is and it certainly doesnt seem to me that bears are in control if one headline can get the market ripping like this.

S&P500 Parallel Scenario
This chart says it all. We saw a double bottom/false breakdown in 2008 that led to a 60day countertrend rally. This has been and remains my primary view.

S&P500 Daily:
A good double bottom pattern and candle confirmation for swing traders.

Nasdaq 100 Daily:
Another good candle reversal pattern out of the low end of the range. A low risk entry below yesterdays lows.

Eminis 15mins:
Last week I talked about the importance of the 1140 level. This held on a few occasion but when support broke, a retest of the Eminis low was the play. This is what I mean when I say buy supports first, sell it when it drops.

This really is the barometer for the "risk" trade/carry trade. Price put in a interesting reversal candle right out of the low end of the range.

This chart shows the correlation between the Australian equity futures and the AUDJPY. As you can see, they are very tight. With AUDJPY bouncing out of clear support and with the ASX200 at the low end of the range, this could be a great time to put on that contrarian long trade with the correct stops.

I will have more later