Great News!

Morning All

It has been a while since I last posted as I have been in the process of accepting a new role. I am now very excited to announce that I have taken a position as the Senior Market Analyst at a leading CFD provider, First Prudential Markets: http://www.fpmarkets.com.au/. Our niche is our Direct Market Access (DMA) product, which means that our clients receive direct price feeds from the underlying market and price depths. There is no market maker intervention and thus all client orders are placed directly on the underlying exchange. I believe First Prudential offers a fantastic platform and product offering, and there is increasing scope for Market commentary, analysis and identifying trading opportunities for our client base. Thus I am really looking forward to expanding my analysis to a broader audience and developing a first rate research product. We specialise in ASX Equities and Equity index CFDs, with a growing presence in FX and commodity markets.

As ever, I thank you for your continued readership and support. If you enjoy my work and are interested in trading CFD products through DMA across ASX equities and international equity indices, please contact myself and the team at First Prudential: http://www.fpmarkets.com.au/about-us/contact-details/. I very much intend to build a first rate advisory service across our markets for our clients- a reason in itself to sign up and get an account! I will be posting here here infrequently for now.

Thanks again. Please seem my contact details below and feel free to give me a call.
Austin




Austin Mitchum
Senior Market Analyst
First Prudential Markets

Email: a.mitchum@fpmarkets.com.au

Office: +61 2 8252 6800 Ext 120

Mobile: +61 0431547026

Buy The Rumour Sell The News?

Morning All

I want to keep this post relatively succinct.

-My central strategic case was/has been to initiate shorts in the SP500 1350/1365 region as a global proxy for world equity markets: http://swingtradersedge.blogspot.com.au/2012/06/initiating-shorts.html AND  http://marketletters.blogspot.com.au/2012/06/initiating-shorts.html. The initial entry has given us a lot of room to ride this move lower.

-The first target and bounce zone for this sell off was 1300/1305 Emini SP500 as posted here: http://marketletters.blogspot.com.au/2012_06_22_archive.html AND http://marketletters.blogspot.com.au/2012_06_26_archive.html.

-Last nights price action and move has fulfilled the minimum requirements for this bounce sequence. It may still have some room to play out. However, the key message is that we have trend changes lower across equity markets. It is important here to focus on the bigger picture. Thus holding partial shorts or putting shorts back on in the 1330/1335 Emini zone is key, stops above 1350.

-This obviously has important implications for Asia and all global equity markets. 

-I have massaged the market over the last few weeks and now I want to sit back and let the bear trend play out. If this is a genuine break, then markets will fall sharply out of the Euro Summit. If policy makers actually surprise everyone and come out with something meaningful- then so be it. A risk to my scenario is a move above 1345/1350 Emini SP500. Certainly I will have to pay heed to the market if that occurs and re-assess.

 -Pls see the setups for the Market tops in 2007 and May 2010 before the big breaks. To me we are in an eerily similar junction.

SP500 Daily Now:


















SP500 Daily May 2010:
(I realize that this may not be a clean "1" down in this example but I use it to explain the market positioning currently). 

SP500 Daily 2007:

-Are we on the cusp of a 3 of 3 down moment? These kind of events are impossible predict and often wrong. However, my central message is that we have had strong move off the tops, complete countertrend bounces with confirmed bearish reversal candles (1360 currently), and now a squeeze out of the first support.

-My sell zone is 1330 to 1335 Emini SP500 with stops above 1345/1350 for shorter term traders.A break of 1300 would lead to a breakdown and confirmed trend lower.

 

ASIA

-Clearly my short term sell patterns did not play out in Asia yesterday. My message here remains the same. We are in a confirmed downtrend and thus selling into rallies is the key trade unless we see a meaningful base/bottom pattern. I don't see those at all yet.

SPI Continous 15mins:
Major res at 4050/4060 today and I will be putting on bigger picture shorts here.

Hang Seng 15mins:
We will gap up right into meaningful resistance this morning. 

A Shares 60mins:
Note that the A Shares/Shanghai Composite did not catch a bid at all yesterday. This market continues to underperform and has remained my bearish play throughout the region. To re-iterate, this is not healthy for the region. Target is still down at 2250 minimum.

CURRENCIES
AUD futures:
I have highlighted the clear boundaries here. Bounced out of the support zone which was central to my bounce scenario across markets. Now up against resistance.A break of that support shelf will open up a protracted move lower. 

Initiating Shorts!

Morning All

This is another one of those important posts. Since S&P500 1290 (June 7 post), my central case has been for a strong countertrend bounce in risk assets led by the S&P500 with an idealised target up to 1350/1365: http://marketletters.blogspot.com.au/2012/06/counter-trend-bounce-in-play.html. Last night we finally hit this target zone and thus this trading scenario has played out well indeed. Asian Equity markets have also been dragged higher as we anticipated. This is the value our analysis offers traders and investors alike.

Now I believe it is time to re-initiate shorts. No doubt this market could still go some way higher in the short term, especially given the FED meeting tonight. However, the central point to make is that we have confirmed major trend changes lower across global markets. It is always difficult to time the "top" in these countertrend bounce sequences and you have to be willing to sit through these squeezes.  The real money will be made holding core shorts now through the summer months into September/October. The simple fact that price has rallied strongly into this FED announcement implies that there is a high level of expectation. Ben better not disappoint.

Some notes:

• The 61.8 Fib at 1365 was hit on the S&P500 cash overnight (1355 SEP futures). There has been no confirmation of a short term high but my preference is to begin scaling here on the short side. 
• Key risk is obviously the FED meeting tonight. I cant rule out a spike up to 1385/1390 if Ben pulls a real rabbit out of the hat. However, it is supposed to feel like this at these key junctures i.e. that this is the beginning of a new trend up. You have to be willing to sell it when everyone wants it.
• AUD has not shown a meaningful reversal or short term climatic pattern at this stage. This does concern me slightly in the short term. However, no doubt it is up against some meaningful overhead resistance. EUR looks like a clear Flag pattern or A=C bounce to me off the recent low.
• ASX200 is indicated around 4160 first thing. The base pattern I showed the other day has clearly been triggered. Note there is a minor res level at 4160/4165 first thing but the main target is 4200/4250 for the big picture shorts. 
• A Shares continues to dwindle and underpeform. I believe this is very meaningful and indicative of a major break coming. 
• HSI has fulfilled my forecast and is now coming into idealised short levels at 19800/20k. 

S&P500 Daily:
Retest of major resistance level. Strategic view remains to re-initiate shorts at 1350/1365, stops above 1400. 

S&P500 60mins:
Res zone in more detail. Note the potential inverse H+S projects up to 1390 as an outlier level. 

DOW Industrial Daily:
Retest of meaningful resistance. 

ASIA

ASX200 60mins:
Breakout of base pattern. Minor res at 4160/65 today but the real zone for aggressive shorts to me is 4200/4250. 

HSI 60mins:

A Shares 60mins:
Has failed to bounce in line with other markets. Looks like a flag pattern below the key triangle trendline which implies a continuation of the trend lower in coming days. 

Thanks
Austin

Update

I continue to post at http://marketletters.blogspot.com.au/ and am only updating this blog from time to time. Pls keep reading and I value your support as ever.

--------------------------------------------------------------------------------------
I wanted to let the dust settle and gauge the early price action this morning before I wrote. Obviously at first glance it appears that the market is "pleased" with the results of the Greek elections with the Emini S&500 gapping up almost 10handles. Currencies have also gapped up but the EURO is slowly giving back all its gains which is bearish. 

I believe this price action remains part of the short term countertrend bounce scenario I have been stressing in my recent posts. These are difficult events to time and markets will usually go higher and for longer than one deems possible. The important thing to stress is that we have confirmed trend changes across Equity markets. Use this bounce opportunity in coming days to re-initate the bigger picture shorts for investors/position traders. Shorter term traders will just have to wait for this "risk on" mentality to play out for now.

• The key market in this countertrend bounce scenario is the S&P500. Price has now clearly broken through my first target of 1330/1335 and this opens up a move to the next major resistance zone at 1350/1365. See the 60mins chart below.My line in the sand remains 1305/1310 cash.
• A possible inverse Head and Shoulders/base pattern has been triggered. This actually targets up to 1380/1390 and thus would take most bears completely off guard. A similar violent squeeze occured in May 2011 before the big sell off. This is not my primary view but it is worth considering. 
• Both AUD and EUR have rallied strongly and are now testing key resistance zones in an established downtrend. These markets bottomed before everything else and once again I believe we will see weakness in these pairs as a prelude to a equity top.
• The Hang Seng is the strongest market currently in the Asian region. A solid base pattern and breakout has formed. An idealised short level would be 20k but I doubt we can rally that high. 
• ASX200 has some catch up to do this week. 4100/4120 has been solid short term resistance. Looking for breakout trades in coming days up to 4200/4250. However, this remains the weakest market in the region and I would prefer to be short this vs other markets as a pair. 
• A Shares/Shanghai composite broke through the key trendline but the sell off thus far has not been impulsive. The bigger picture remains bearish. 

S&P500 60mins:
Key overhead res zones. My tactical view was to look for bounces from 1280/1290 to 1335 then 1350. I believe this has almost played out. Strategic view is position short at 1350/1365, stops above 1400 for the bigger picture short. 

CURRENCIES:

AUD Daily continuous:
Remains an overlapping mess. However, price has now rallied into the downward 55ema and previous support. There is also a potential downward trendline coming in here. 

EUR Daily continuous:
Flag pattern into resistance. A low risk short setup forming here. 

ASIA:

XJO Daily:
Short term overhead resistance at 4120/4125. Once again we are struggling to break above this today. Remains in a downtrend. Only breaks above 4125 would confirm a base pattern and continued move higher. Weakest market in the region. 

HSI Daily:
19,500 to 20k is the key res and short zone. 

A Shares Daily:
E leg of the triangle potentially complete. Only a move back above 2450 would put this scenario in jeopardy. 

KOSPI Daily:
Topping pattern, breakdown through support, now solid bounce back into the downward moving averages and established downtrend. 

Market Update

This post was originally written on Thursday May 24th: http://marketletters.blogspot.com.au/2012/05/market-update.html.


In Tuesdays post, I called for a tradeable low and looking to buy retests of 1300/1290: http://marketletters.blogspot.com.au/2012/05/oversold-bounce-time.html. This played out to a small degree yesterday. We now wait to see if the market can take out some minor overhead resistance levels and pick up some steam. In short:

• The S&P500 tested and HELD the key trendline and 1290/1300 support zone. A bullish hammer was left on the Daily chart and higher lows on the smaller timeframes. I believe this is part of a bigger bounce sequence that could lead to a retest of 1330/1350 in time.
• Note that type of swings usually begin with simple short covering after the market fails to make a new low. This then triggers more buying as we tick higher and higher. 
• Key risk for bounce scenario is a break of 1290 and this would be the trigger to re-initiate shorts once more across risk assets. I would actually be very concerned if this level dropped.
• Central to my oversold bounce call is the USD. Both AUD and EUR remain at key buy zones/short cover zones. However, for now we are just not seeing decent bullish confirmation. If we are to rally, these pairs must move higher and NOW. I show a potential short term breakout pattern in AUD below.
• Asia continues to be a laggard as anticipated. Today, XJO tested Fridays low as did the Hang Seng. Both made higher lows. These could be short term double bottom patterns but obviously we will need a strong offshore lead for these to play out (joys of this timezone).
• Any decent bounce in the upcoming fortnight in S&P500/DAX/EUR should be used to re-iniate big picture shorts in Asia. It is tough to try and pin point a level for now but simply we will need both price and time before initiating shorts. 

S&P500 Daily:
Retest of key trendline that holds. Bullish Daily reversal candle. Need to see breaks of 1325 to open up a bigger bounce. 

Tactical View: Looking for continued bounce up to 1340/1350.

S&P500 Daily ii:
Note I do not use Bollinger Bands in my own trading. My point here is that a buy signal has been triggered now that price has closed back into the bands after a climatic overthrow. I have noted a few examples on this chart in the past year or so. Obviously this could be an "outlier" event but the essential point is that we hit a price extreme, and buyers are now stepping in.

AUD June 15mins:
This is the key short term setup I am watching tonight. If risk is going to catch a bid, AUD needs to break out of this basing pattern. Last nights low once again tagged the lower end of the trendchannel line. We now need to see price recapture and hold 9770/9780 futures.

ASIA

XJO Daily:
Certainly not enough evidence to call a low yet. The trend is down. Price has tagged the first major target zone but the first rally attempt was slapped down yesterday with more bearish follow through today. I don't have a trade here other than to look for good bounces to re-initiate shorts.

Hang Seng 60mins:
Like Australia, little confirmation of a low or turn yet. This trend down has been very powerful and there is no need to fight this. Note we have hit an interesting relationship between the initial waves down. Need to see bullish follow through to confirm.

A Shares 60mins:
In no-mans land for now

Thanks
Austin

Updated Market Outlook

Morning All

Well the last few weeks have been truly savage. It just goes to show how fragile this market really is given that a whole years gains can come undone in a matter of weeks. One by one,topping patterns have formed with the US Equity market the last to crack.

With the SP500 breaking and closing decisively below 1340,we have now entered a new cycle I believe that will continue for weeks and possibly even months. All we can do is play the levels and take it one step at a time, but certainly it appears that caution is the name of the game for the foreseeable future. At some points, the market becomes a self-fulfilling prophecy and it appears the growing chorus of bearishness has decisively changed the character of this market. Of course there will be bounces and vicious squeezes. The simple fact that I am writing this in such a tone implies we might be on the cusp of a bounce now. That is the nature of bear markets. However, the breaks across markets look impulsive and the start of new trends lower across risk assets.

• S&P500 oversold bounce zone at 1280/1290. Volume and breadth have both reached potential short term panic extremes. This bounce zone is best left for short term traders. Look for potential Tuesday/Wednesday turn. The bigger money will be made sitting in this new trend down. Key risk is now a close back above 1340 for bears. 
• NASDAQ100 entering previous 2012 breakout zone. This should be formidable support on the first re-test. 
• EUR entering previous lows at 1.26/1.27 and risk of bounce here. AUD at 98c support level but needs to do more work before a confirmed turn DXY into overhead resistance. 
• Confirmed bearish breakdowns across Asian equities imply further weakness in weeks and months ahead. There is also a risk of an oversold bounce but this should provide a good opportunity to re-establish core shorts. The swiftness of the current sell off shows that this market should not be massaged too much. Holding core shorts and themes is key. 
• Australia is the most bearish market in region. That market is a core short with targets down to 3800. Look to play bounces out of S&P500 or potentially HSI.  
• The DAX failed to bounce out of key support zone of 6350/6400. This implies genuine weakness.

S&P500 Weekly:

A bearish reversal candle through the key support zone and previous breakout level. 

S&P500 Daily:

Strategic View: The bearish close below 1360/1340 support zone has shifted the trend to down. This opens up a deeper move to1200/1220 in coming months. Follow the new trend down.

Tactical View: Oversold bounce likely in coming days. This is for short term traders only. Position traders and investors should be using any bounce to establish core shorts into 1320/1340. Re-establish shorts if 1280 drops.

1280/1290 should be a decent bounce zone. This is the 38.2 Fibonacci retracement off the October 2011 lows, and a key trendline. Key is waiting for confirmation first such as a bullish reversal candle or a base pattern on the lower time frames.The 200 day exponential average was overthrown but these are not always exact hits (note Nov 2011).

NASDAQ 100 Daily:

Adding weight to a potential short term bounce scenario is the NASDAQ100 which has sold off into the previous breakout zone. 2400/2450 will prove a formidable support zone on first test.  

ASIA

Australia Weekly:

Very bearish breakdown candle through the upward trendline and ascending triangle. This opens up a move down to 3800 key pivot level and even a possible retest of the March 2009 lows. One level at a time. 

Australia Daily:

Strategic View: Bearish and following trend lower to first target of 3800/3850. The fact that this market has underperformed all of its global peers since 2009 lows implies genuine weakness indeed. This is the laggard of the region and should be the key short play.

Tactical View: Short term bounce possible out of 4000/4050. However, this is the weakest market in the region so prefer to play other markets for a risk bounce. Focus on re-shorting into the downtrend.

Hang Seng Weekly:

Breakdown through upward flag. Opens up a retest of the key pivot level at 16,000.

Hang Seng Daily:

Strategic View: I was cautious on a break of upward trendline and now bearish on the clear breakdown through support.

Tactical view: Oversold into support zone therefore cover shorts. Waiting for bullish reversal candles to play a short term risk bounce. Look to re-establish shorts at 19,500/20,000. A break above 20,000 would be key risk for bears. 

A Shares Weekly:

Further confirmation of triangle pattern. Looking for breakdown through low end of triangle for potential wave 5.

A Shares Daily:

Strategic View: Bearish and confirmed reversal at top end of range.

Tactical view: Remains a core short and happy to ride trend lower. Obvious bearish repercussions for Australia.

KOPSI Weekly:

Very bearish reversal and breakdown through flag/pennant pattern. This looks to be a sharp C wave down with targets into 1500/1550.

KOSPI Daily:

Strategic View: Bearish on breakdown through neckline and upward trendline.

Tactical view: Cover shorts here. No need to catch a falling knife in this market for now, especially as it is one of the most volatile in the region. Look to re-establish shorts in time .

Nikkei Daily:

Strategic View: Bearish on breakdown through support zone of 9000/9100. Initial targets of 8000 but more meaningful target at 7000.

Tactical View: I was looking for a potential bullish  turning point and this was clearly wrong. Short bounces back into overhead resistance.

CURRENCIES

AUD Daily:

Tactical view: Looking to get long in 97/98c for a solid bounce back into parity. This could potentially be the low end of a C wave as part of a broader triangle. However, note it is very unlikely that AUD will hold up in a risk-off environment in months ahead therefore triangle interpretation in jeopardy. 

Thanks

Austin

Mixed Signals

Morning All

Well I really thought the rally would pick up steam overnight. I went to bed soon after the US cash open and saw lots of sell stops going off only for price to snap right back. Often that is indicative of a false breakdown and good turning point. However, price has once again failed to kick on and we have drifted lower forming a short term range. I see mixed signals across markets.

• S&P500 continues to hold the low end of the support range. The cash market made a lower low overnight but recovered strongly. Price is in a range from 1345 to 1365. Use breakouts above the latter level to get long. Emini S&P500 1340 is now the last stand for bulls.
• Australia has come into my first major target zone and I believe it is time to get out of shorts. Short term traders could be looking for bullish turning points today out of 4250/60, SPI 4250/40.
• Hang Seng has broken my daily trendline but we have seen no lower low thus far. Difficult to make a forecast here as price is still in the low end of the Daily range
• The A Shares reversed yesterday right out of the top end of the range. There is a potential ending wedge pattern that was triggered yesterday. 2500 is key support
• The KOPSI is testing major supports from 1925 to 1950.
• EUR and AUD both continue to grind lower but there are bullish momentum divergences forming and some solid supports here. Sentiment is v.v.bearish. Potential bear traps forming.

In sum, I do think Bulls are successfully defending the low end of the range in the S&P500 and the DAX. We need to see follow through which has to come and NOW. Asia is a mixed bag but I am leaning bullish in some markets in the short term such as Australia and the Nikkei just for tactical short term buys.

S&P500 Daily:
Another reversal candle out of support

S&P500 60mins:
If this is a A=C and swing low, price needs to move higher and now. Breaks of 1340 tonight open up 1330 and lower.

Emini S&P500 60mins:
Short term range from 1340/45 to 1360/65

ASIA

Australia
XJO Daily:
Multiple support here

XJO 60mins:

AUD 60mins:
Tagged the 1.00 level in futures last night. See yesterdays post for the significance of this on the weekly chart. Price needs to recapture that line to trigger long traders for me.

CHINA

HSI Daily:
Daily trendline broke yesterday which concerns me

HSI 60mins:
Price broke through my support zone yesterday. However, no lower lows thus unclear here to me.

A Shares Daily:
Reversal at the top end of the range. This was my strategic view.

A Shares 60mins:
Break of potential wedge pattern. Note 3 push higher on 3 lower peaks on the momentum indicator. 2500 is key support.

KOSPI Daily:
Multiple layers of support coming in at 1925 to 1950. Needs to hold otherwise this could be a genuine breakdown trade.

Thanks
Austin