Wednesday, 6 April 2011

Eurostoxx Bearish Setup

Coming into the European open, I am monitoring a potential bearish setup in the Eurostoxx. This market is trading in a clear wedge pattern with momentum waning. Yesterdays lows at 2858 once again managed to hold at the upward trendline. I am looking to short below this level targeting 2750 and possibly lower.  These patterns imply a sharp break lower and thus if there is no follow through, look to tighten up stops quickly.

Eurostoxx 15mins:

Eurostoxx 60mins:

Asian Morning Thoughts

Morning All,

US markets tried to breakout last night but failed at their previous highs and gave up almost all gains. The Nasdaq 100 once again underperformed. We continue to build a short term range right at previous resistance levels with deteriorating breadth and weakening momentum. It appears to me that this trend is tiring and I am looking for a deeper pullback in the next 2/3 days. I cannot rule out a breakout and I will be prepared to join should price continue to correct in time rather than price over the ensuing days.

I wanted to update on the underlying breadth figures. The number of advancing issues continues to deteriorate despite price making new highs. Last night the NYSE advancing issues hit a high of 1948 but closed at 1658. Once again we have seen another lower close:

21/3/11: 2473 NYSE advancing issues
30/3/11: 2212 NYSE advancing issues
5/4/11: 1658 NYSE advancing issues

The divergences in these readings with price is often a lead indicator. Indeed, I saw the same divergences on the lows that helped me identify a possible turning point:  

Eminis 60mins: 
There was a small reversal out of the resistance zone. Use breaks of the upward trendline or the moving averages for potential short opportunities.

Dow Cash 60mins:
The Dow is still trading at the top end of it's range and a potential Double Top trade is still very much in play

Thus to Asia. There is no strong overnight lead for early trade. The SPI is indicated at 4922 just below yesterdays highs. The key short term range is 4902/4900 to 4930. As stressed yesterday, I do not have a clear swing trade up here as we are coming right into the February highs. For my day trading, I think today could be another range day. I am looking for breaks of 4930 to target 4945/4950 and I am also looking to buy supports. The ASX200 Cash high is 4944 and this appears to be the "obvious" target.

SPI June 15mins:
Look at this chart. Often the best trades are just the simple ones- look at how price has respected the moving averages continuously. For now, there is no need to fight this until we see a clear reversal or distribution process. 4900 is the key short term support

SPI June 5mins:
This is the short term range

I am still short the Nikkei for all the reasons posted yesterday. We are indicated slightly higher and will be retesting yesterdays breakdown level (see target box). Short term resistance levels are 9670/9700 then 9750. Any more strength above these levels, then I will consider covering.

Nikkei June 5mins:

MSCI Singapore showed an interesting exhaustion candle right at the 61.8 retrace level yesterday. It is still early days but I am looking for a pullback into the Daily moving averages over the next few days to get long once more for a larger swing trade. 3700/3720 are the short term resistance levels

MSCI Singapore Continuous Daily:

In sum, I do think this trend off the low is tiring with momentum and breadth deteriorating. However, as ever, there is no need to short until we see either breaks of support, a clear reversal candle, or a turn in the moving averages. Look for these signals. This market could continue to correct in price rather than time thus we must continue to respect the underlying price action.