Wednesday, 28 December 2011

Santa Did His Job

Morning All

Well it looks like the pre-Christmas ramp did its job. In my last post on 15th December I said:
 "For what its worth, I could see the market (S&P500) retest 1200/1205 and holding in the coming days". This certainly played out overseas. Call it what you want, but I see it time and time again at this time of year. End of year window dressing, performance chasing, quant algos exploiting low liquidity seasonal tendencies- the list can go on. For me, very simply, there were 2 main buy zones which were shown here on this blog ahead of time:

The first buy setup at 1220 did not work and I was stopped out. Take the stop and move on. The next buy zone at 1200/1195 proved to be the low before a 50 to 60 point move. I continue to stress- it is all about identifying low risk/high reward trades. If you are a swing trader, you need to anticipate these turning points as it is where the money is made. Keep pursuing that low risk idea until the market tells you that you are wrong. 

S&P 500 Emini Continuous 15mins:
This is how the buy setup worked out. You could have traded the 1200s with a tight stop or you could have waited for confirm i.e. bullish reversal out of support and break of the downward trendline. We are now approaching the target for this move so bulls should be looking to get flat/tighten up. 

The ramp job did not play out to the same degree in Asia. Our markets continue to underperform the US and I can't see too much reason for this to change given the character of our trading and the underlying patterns. The Australian futures are capped at 4150/4160 and I would continue to sell against this level. Look for breakouts above.

SPI Continuous 15mins:
Potential base building under 4150 but I am only looking for long trades on a clear break above this zone. 

I thought I would finish with a few Daily charts to put the markets in perspective. I don't see a clear underlying theme but it does look like we are set for more weakness ahead as we come into January. 

ASX200 Daily:
Currently, price is stuck right in the middle of this range. I do think we are likely to see a breakdown given that each bounce is getting weaker and weaker. The market was so well offered at 4350/4400 with several reversal bearish candles. Use breaks of 4000 as confirmation of the next leg lower. 

Shanghai Composite Daily:
This market continues to trade lower. The bounce out of the horizontal support zone in October worked initially but ultimately there was no follow through. Quite simply, focus on this downtrend. There is a potential A=C relationship (or WXY if u want) coming in some way lower yet as well as a potential trend channel. I will only look for big picture buy setups if we can recapture that horizontal line. 
Hang Seng Weekly:
Price is consolidating under the support zone in what looks to be a pennant. This is a continuation pattern and thus I anticipate that the next likely move out of this is to the downside given the downtrend in place.  This is such a good trading pattern to exploit from a risk/reward perspective. Wait for the breakout either way and use the appropriate stop. Price action has been weak of late despite the bounce in overseas markets and this could be a telling lead indicator. 
It is difficult to know what to make of this market currently. Certainly price is now "testing" a number of overhead res points and thus setting up for some good short fade trades. However, price has hit that 200ma 4 times and keeps popping up for more. If this was a weak market, we should have left this long behind but we haven't. It is resilient. Thus ultimately, we could be looking at an ascending triangle of some sort with a breakout to the upside further down the line. For now, I am looking at fading those res points. 
It is good to be back. I am really excited about the upcoming year and the opportunities ahead. As ever, I hope to relate my experiences and trades ideas through this blog.