Monday, 2 May 2011

ASX200/SPI- bullish pattern developing

Good Evening,

Today there was a very strong reversal in the Australian market and I think this sets the stage for a good rally to come with a possible retest of the highs at 5000. My morning plan on Twitter was, "SPI, - looking for a morning reversal out of 4845/4855 targeting 4800 once more. Breaks of 4800 open up 4745". The first part of this trade worked out very well indeed as the market continued its recent downtrend. However, the market bottomed at 4765 prior to my ideal target, and proceeded to rally all day to close unch.  As a trader, you have to be flexible and pay heed to the price action- today's rejection of lower prices and close back above 4800 is bullish.

SPI June 5mins:
The SPI is building a great base pattern under 4840. Position traders should be looking for breaks above this level tomorrow to get long, targeting 5000. Stops below today's low.

SPI June 60mins:
A bullish reversal candle out of this mornings lows. There is a potential ABC corrective pattern in place which implies a breakout and retest of 5000 in time.The short term trend is still down so I am looking for a bullish follow through day tomorrow to confirm a low is in place.

ASX200 Cash Daily: 
A very strong hammer candle out of the moving averages and support.

BHP Daily:
The heavyweight of the index put in a strong bullish reversal candle. I am looking for price to take out Fridays highs to confirm a low and potential breakout of a wedge/flag pattern. Looking for a retest of 50.

In sum, I believe the SPI futures and XJO have put in a short term tradeable low. Breaks of 4840 tomorrow should confirm this and is a trigger to get long. Stops should be below today's lows.

Don't Fight The Trend

Good Morning All,

The saying that "Bull Markets climb a wall of worry" seems more apt to me day after day. Over the last few days I have encountered a number of traders, market commentators and blogs who are all growing increasingly nervous here and looking for a top....again. The factors these sources are citing include topping patterns in Copper and China; speculative bubbles in Silver; Dow theory non-confirmations; sell in May and go away; the anniversary of the May flash crash; financials underperforming; the end of QE2; spurious Elliott Wave counts etc etc etc. I don't think many of these issues have validity and last time I checked the S&P500, Nasdaq 100, Dow, Russell, AUD were all at new interim or all time highs. Over the last 2 months this market has shrugged off the European Debt Crisis, the horrors of the Japanese earthquake and an S&P downgrade of US debt- this is stong action! As ever, the charts and the technicals are my primary guide and I wanted to show a number of global markets to illustrate that this market still has some way to go yet.

Emini June Daily:
This is a great basing pattern under the 1340 level and we have successfully broken out. Any retracement back to the 1345/1340 level is HEALTHY and a great buying opportunity. The target for this pattern and market I believe is 1430. This is in line with my 2007 parallel scenario that we are still following very closely:

The AUD continues to surge after breaking out of the multi month consolidation pattern. We have reached my first target of 1.10 which is a 100% projection of the previous range. However, momentum has made a new high and thus we should be looking for buy the first pullback. I don't want to sound like a broken clock but once again- DON'T FADE THIS.

AUDUSD Daily ii
I have been following this pitchfork channel on AUD Daily for a while and it has been working beautifully. The 3 reference points are the 2008 November lows, the Nov 2009 highs, and the 2010 low. The market then went on to hit an interim high at the median line in late 2010 and a major low recently in Feb 2011. If this channel continues to play out, we are looking at a potential target up at 1.13/1.14.

China Composite Daily:
China remains in a consolidation pattern NOT a topping pattern. No doubt I was early in my bullish market call but I don't see any reason to change this until the supports at 2800/2850 breaks. Wait for confirmation as which ever way this breaks, there will be a strong impulse.

Copper Continuos Daily: 
Copper is often seen as a lead market for risk assets and I couldn't agree more. Currently, this market is consolidating in a clear range. Certainly, it has been underpeforming other commodities but this is no reason to turn bearish. The 400 level is key support and keep this on your radar. Note that this consolidation is occurring ABOVE its previous 2008 highs and ABOVE the entire weekly range which is bullish.  Look for breakout trades here


Certainly, there are a number of fundamental macro risks out there and I am not naive enough to think it is all plain sailing. However, the reason why I use technicals and price action is because its puts you on the right side of the market. Timing the market using fundamentals is close to impossible. Hopefully these charts have illustrated my point and put you on the right side of the market in the coming weeks.