Tuesday, 19 April 2011

US Market Overview

Overnight the Eminis got hit hard pre the Cash open on the back of the S&P warning. Certainly this invalidates my weekend post calling for a US market low as we made new lows across the board: http://swingtradersedge.blogspot.com/2011/04/important-post-us-markets-bottoming.html. As traders, we take the stop and move on. The setups looked great, we had initial confirmation from the market in the short term but there was no follow through above my 1320 key marker. That's the reality of trading and this should cause no emotional impact. I believe I identify enough good setups to consistently make money and thus we must move on to the next trade.

I don't think this is the beginning of a larger degree sell off. In fact I think that the alternative triangle pattern I talked about is the most likely scenario. Someone who has been calling this for a while and nailed it is Michael at EW Trends: http://ewtrendsandcharts.blogspot.com/. For now it is early days and I am happy to wait for a more meaningful base pattern before getting long once more. Breadth was bearish with Declining issues noticeably increasing on strong volume. Thus, I believe we will see a retest of last nights lows before a more meaningful low ensues.

Emini 60mins:
Price has come into the very low end of my support range. No meaningful short term confirmation yet. 1290 has to hold

One final word. No doubt there will be many Elliotticians who are now calling for a iii of 3 down! From my experience, these are the most fadeable setups and counts out there. Time and time again these fail to play out. Don't be trapped in this bearish mentality after the move has already happened! In fact, I ask any Elliotticians out there- how many times have you forecast a iii of 3 down and it actually played out in real time? Be honest. The whole concept behind strong wave 3 downs is that there are extreme events where the crowd and market is taken by surprise. Thus they are almost unforecastable. I struggled with this many times in my early career and I have learnt to trade more probable setups that actually make money and not a hopeful wish.

Key Levels for the Eminis:
Support: 1290, 1280
Resistance:  1303/1305, 1320


Asian Morning Thoughts

Morning All,

The SPI is indicated at 4821 this morning after last nights sell off. Thus we are coming right into my support levels posted several days ago: http://swingtradersedge.blogspot.com/2011_04_12_archive.html. I have been stressing the importance of patience for postion traders and now I believe it is the time to consider buy setups in Australia once more. The key as ever is confirmation so look for hammers or somekind of bullish turnaround today/the next few days before going long.

SPI 60mins:
4800 is an open gap as well as the 38.2 retrace level

XJO Daily:
Todays sell off will bring price right back into the upward sloping moving averages.

Scenarios I am following today:
i) Gap strategy- wait for the first 15mins to trade and mark the highs and lows of the range. Buy a 5min closing candle above this range and short a 5min closing candle below this range
ii) Look for scalp longs out of 4800 with tight stops. This is a support play with tight risk. If 4800 breaks, look to potentially short and join the momentum lower for an intraday trade only

Bottom line, I think today could be a gap down, test of 4810/4805, and then a potential reversal day higher. The key is waiting for short term confirmation. I must stress the short term trend is down thus keep risk tight on the long side.