Friday, 2 September 2011

Bearish Turn Confirmed

Morning All

Yesterday we saw a strong reversal in the Australian market that saw us give up a 1.4% early gain to close flat. The market traded right into the open gap on the Daily and failed, forming a good bearish reversal candle. Once again I find it very interesting that Australia continues to be a lead indicator for global equities. Europe and the S&P500 went on to register losses despite a strong ISM print. US markets opened on their highs and closed on their lows. Breadth was bearish with 1616 decliners to 222 advancers and a strong bearish reversal candle was left out of resistance. What more do u need? Obviously tonight's non-farms number will be the focus tonight but the price action is telling me we have lower to go.

SPI futures Daily (Australia day session only):
Price reversed right out of the open gap area yesterday and left a bearish reversal candle. Short term traders should now be using yesterdays highs as a stop to get short.

SPI futures 60mins:
We failed yesterday right at the double top area in what looks to be a classic failed breakout. Note the 3 push ending wedge pattern. This will be triggered today and I am looking for a target right back down to 4050/4100.

Shanghai Composite
I have been watching the setup for a while. China has failed to rally despite strong overnight leads for the past 2 weeks. This market has formed a clear triangle pattern and this should be triggered today on the open. Look for weakness down to the previous lows.

The AUD rally off the low also looks to be nearly done to me. This looks like a clear ABC move off the low and price is now forming a Ending wedge pattern right at previous resistance/breakdown level.

This is the Daily count and pattern. Price has moved right into the previous breakdown candle and this should be formidable resistance.

In sum, it appears clear to me that we are on the cusp of a big pullback. Whether this leads to a retest of the lows I do not know yet. However, as a short term trader I short first and ask questions later. Remember that the first day of the month is often a very good precursor for the rest of the months trading. Day 1 was a strong rejection out of good resistance. We could be set for some serious weakness once more.


p.s. Shout out to Ollie on yesterdays comments. Some really good charts and analysis there so pls read. Keep them coming