Bear Trap

Morning All,

I will keep this post relatively tight this morning as I had a rather late one last night trading the S&P500 Eminis. During European trade, the Eminis grinded lower and lower, and it looked set for a breakdown. However, I know from experience that these "tests" and breakdowns through support the first time round are often fakes. There were a number of patterns across markets that looked like corrective ABC patterns rather than new impulsive moves lower. I put this on twitter late in the evening:

"$ES_F: so does this thing crack or hold the neckline here at 1300s? I just have to buy support first despite being sooooo bearish"

I did buy the low 1300s with stops at 1295 and got v.v. lucky indeed. Sure enough, the market broke through 1300 only to trap the bears and a resulting strong squueze ensued. The S&P500 cash market gapped down, made a low in the first 15mins, then rallied all day. Encouraging price action indeed.

Here are some of the corrective patterns I was monitoring. Bullish divergences and an underlying higher time frame uptrend form important backdrops to these trades.

Emini S&P500 15mins:

Emini Nasdaq 100 15mins:

DAX Futures 15mins:

So where does this leave us? I wrote yesterday on the blog:
"Tuesdays are often my trend reversal days. Its possible that we may see a move back up to retest the 1333 S&P500 cash highs on Monday/early Tuesday, and this would provide a great low risk short entry. I personally will scale in at 1320 and then more up at the previous highs."I think last nights strong bullish reversal is all part of this move to "retest" that 1333 high (cash). I will be getting out of my longs into 1310-1315 and looking for shorts in 1320s. Use your fib retracements, res levels, candle reversals- whatever it is you use.

Is it now possible that we are looking at the right shoulder of a Head and Shoulders pattern playing out? A lot of bears will be cleaned out and discouraged given yesterday, which makes it an ideal backdrop.

Emini S&P500 60mins:

In Australia, despite the overnight volatile range, we are indicated at 4238 which puts us right back into yesterdays range. Sometimes it is best to keep things simple and the cash chart below shows our market coming back into decent supports in the 4250-4260 zone (cash). Thus, I will be looking for buy setups today as a short term trade for a potential retest of Fridays highs in coming days.

XJO 15mins:

My SPI range today: 4222 to 4260. Outlier levels 4285 and 4210.

My SPI plan today: I will look to  buy yesterdays low at 4230/4231 with tight stops and also look at the low 20s for another long entry. We may be under a bit of pressure early due to this (thanks Hipchat community): http://www.heraldsun.com.au/business/big-banks-on-notice-over-downgrade/story-fn7j19iv-1226257735392. The short term trend is still down so these long entries should be tight until we see more confirmation. I will look to cover any longs up at 4260 and will scalp short up there should I see price action tiring.

Monday Plan

Morning All,

I poured through the Daily charts over the weekend and put up a number of interesting setups on this post: http://swingtradersedge.blogspot.com/2012/01/weekend-homework.html. Please read this work as it provides the key backdrop for my current trading thoughts and plan.

On Friday in the S&P500 Eminis I wrote on this blog:
" I will be looking to short pullbacks vs last nights high on the S&P500 Eminis......I will look to get flat and/or buy at 1305 to 1310"

This worked well on Friday night with the Emins topping out at 1319 (the 50% retrace level off the 1330 high) and making a low at 1307. Price is now trading at the low end of the recent range. My strategy remains very much the same- looking to short at 1318/1322 and an aggressive short entry at 1328/1331. Use the appropriate stops based on your own timeframes and risk reward.

S&P500 Eminis 15mins:
The res zone labelled in red worked a treat on Friday night

Tuesdays are often my trend reversal days. Its possible that we may see a move back up to retest the 1333 S&P500 cash highs on Monday/early Tuesday, and this would provide a great low risk short entry. I personally will scale in at 1320 and then more up at the previous highs.

To Australia today. There was an interesting reversal on Friday right off the 200day moving average: http://swingtradersedge.blogspot.com/2012/01/weekend-homework.html. CBA put in a very bearish reversal candle, RIO reversed out of $70 and BHP out of $38 (see charts below). These are all warning signs but obviously need more confirmation before we can call a meaningful high. I believe we would need a "re-test" of Fridays highs and failure to confirm a more meanigful top.

My SPI range today: 4240 to 4270. Outlier levels 4230 and 4285.

My SPI Day trading plan: AUD has opened slightly weaker vs Fridays close and doesn't give any major clues early. The SPI sycomm closed at 4255 on Friday night. I would love a retest of 4280 to get short aggressively but we may not get that. There is also minor res at 4270 and this will be by intial fade spot. On the downside I will look to buy 4240/4245 with tight stops. I don't think that we see a breakdown today and am anticipating potential early weakness that holds and price grinds higher into cited res levels.

Good Luck
Austin

CBA Daily:
Bearish reversal candle. Is this a "fake" breakout in the making. The rally off the November lows looks like a clear "3" to me and not a new impulse.

BHP Daily:
Reversal out of resistance

RIO Daily:

Weekend Homework

Just some weekend work. These are all the Daily setups on my radar currently. The market feels tired and I have stressed this enough of late. We have hit/are testing so many important resistance levels globally. We have begun to see some reversal candles in some markets. Next week will be an interesting one indeed.

S&P500 Daily:
A pop above the pitchfork midline and above the H+S neckline. A Daily close back below this would be a classic pop and drop or climatic spillover as some like to call it. When you combine this setup with all the other markets, it looks ominous to me. 666.5 X 2=1333.

DOW INDU Daily:
Rally right into overhead resistance and setting up a classic Double Top trade. Price showed a interesting reversal candle on Thursday. The wedge like nature adds to the climatic appeal. Have an entry signal ready to get short.

NASDAQ 100 Daily:
Island reversal pattern right at the top end of the range. This is bearish. Note that this is playing out whilst Apple released blow out numbers. This is exactly the sentiment conditions and socioeconomic backdrop for a meaningful top. I stressed that just because price closed above the previous high, this does not make it a decent  "breakout" trade. I feel the lack of base pattern and the very overextended nature sets this up for a classic bull trap. Look at the ascent of those trendlines- we are clearly in parabolic stage. Is there much more room left?

EUROPE

DAX Daily:
Rally right into the 61.8 Fib retracement level and overhead resistance with price leaving a Doji star on Friday. These Fib levels are my favourite for a turn. I successfully identified the DAX low back in September and October and this served me very well with a bottom shortly following across the board. Please see these posts: http://swingtradersedge.blogspot.com/2011_09_07_archive.html AND http://swingtradersedge.blogspot.com/2011_09_13_archive.html
I feel that a very similar scenario could play out here to the DOWNSIDE with a top forming.

ASIA

ASX200 Daily:
We saw a reversal candle on Friday right out of the top end of the range. Look in the past at what has happened in this zone after a bearish reversal candle. I looked for a top last week and originally nailed the A=C high, but after much back and forth trading price finally broke out to the upside. However, I do still think this is all part of a bigger picture Wave 4/consolidation pattern, with a resumption of the downtrend to come.

ASX200 Daily ii:
Very interesting that Fridays reversal was right on the 200day moving average. This line acts as a magnet and look at the past examples labelled here. It has dawned on me that the market needed to get to this line much like the DAX, S&P500 etc. I was bearish early as this was the target for the XJO. Now we are here

HANG SENG Daily:
Rally right into overhead resistance. To me this really does look all part of a bigger 3 wave move. A reversal candle would confirm a meaningful top.

KOSPI Daily:
Rally right into overhead resistance and the top end of the range. We are seeing some reversal candles begin to form.

In sum, I have no desire to chase the market up here for a bigger picture swing. Keeping it tight and nimble in either direction until we see more confirmation is the play. I think we will see a decent pullback at a minimum in coming days if not a genuine high. We cross that bridge when we come to it.

Austin

666.5 X 2= 1333

Morning All

Hope everyone down under had a nice Australia Day. Coming back to work after a boozy Thursday is pretty tough, and lets see if there is any volume today.

So last night the S&P500 made a high of 1333 and then sold off all day long. You know that I have been looking for a top since the S&P500 hit 1300 and you know that I have been early. I do find it interesting that the S&P500 low back in March 2009 was 666.5 and if you multiply this by 2, we get last nights high at 1333. Looking at all the major US cash charts, we now have a Daily reversal candle out of clear resistance zones. I have shown these resistance zones on multiple occasions in the Nasdaq, DOW Indutrials and S&P500 so I will not do it again here but pls see my last post: http://swingtradersedge.blogspot.com/2012/01/you-cant-fight-fed.html.

Is the top in? I don't know but here and now is as good a place as any. The market tried to push on post the FEDs announcement but got slapped back down. The Nasdaq Futures tried to breakout but failed. That is all interesting information. A 20pt move from high to low was one of the biggest pullbacks we have had in a while. Thus very simply, I will be looking to short pullbacks vs last nights high on the S&P500 Eminis with stops above 1335. I will look to get flat and/or buy at 1305 to 1310.

S&P500 Eminis 60mins i
Hits top end of channel and reverses

S&P500 Eminis 60mins ii
Sharp red reversal candle and one of the biggest reversals we have seen thus far. Support still remains 1300/1305. Only a move below there would confirm a bigger picture top.

Nasdaq 100 Futures 15mins:

I also think it is interesting that so many markets in Asia are also hitting key resistance areas. Some such as the Kospi show clear reversal candles.

Hang Seng Daily:

Shanghai A Shares Daily:
Breakdown and retest

Kospi Daily: 

To Australia today. We are indicated at 4250 with Sycomm highs at 4280. I don't have a clear setup today but on Wednesday certainly there was a shift in the character of the market from bearish to bullish. Was this a one hit wonder and bull trap? I am not sure and we can only deem this a failed breakout if price closes back below 4220 Cash. All the banks showed very strong breakout candles last trading session and we should use these as a clear marker i.e. if price breaks through Wednesdays low, that is bearish.

My SPI range today: 4220 to 4255. Outlier levels 4200 and 4280.

My SPI day trading plan today: I am looking to short the 50s if I see a bearish reversal candle for a quick fade. 4220 was solid support last trading session and I will look for longs there and at 4200. The short term trend is up so I will focus on this unless we crack through Wednesdays low.

You Can't Fight the FED

Happy Australia Day All,

This will be just a quick post today. Australia Day is always one of my favourite days of the year and a great time to celebrate with mates and forget about the markets. Trading on Friday should be an interesting one ha!

So last night overseas markets looked very weak initially and pulled back right into support AGAIN. Then Mr Ben waved his wand. Then we went up...a lot. I am not a bitter man and I have always loathed those traders who cry conspiracy or rigged markets. It is what it is and we choose to play this game. Central banks are doing everything to keep this market awash with liquidity. Extending 0 rates until 2014 will certainly help.

Fortunately I covered my short position prior to the announcement but certainly I made a mistake in not pulling the trigger for the long trade out of support. Quite clearly, my bias played a factor in that. I wasnt able to be flexible. The information was there with the S&P500 holding support and then a strong breakout candle, but I didn't process it.

S&P500 Eminis 60mins:

Where does this leave us? I have no idea to be honest as I don't have a setup. Its as simple as that. The market is still right up against res, the breadth is still diverging, momentum is still waning, sentiment is frothy, BUT price doesn't want to go down. The trend remains up. The best way to play this is to keep it real tight and look for small moves in either direction for now. I talked about the Eminis needed to break 1300 for confirmation to get short and they didn't. The Nasdaq futures came off sharply as excepted but equally rallied post the FED announcement.

DOW Industrial Daily:
Coming into the zone. Maybe a bit higher to go? Either way, setting up for a great double top trade and resistance trade. Still looks ominous to me.

NASDAQ 100 Weekly:
I thought this was interesting. This is the move of the 2003 low. A potential big picture A=C comes in at 2465 i.e. right on last nights high.

NASDAQ 100 Daily:
There has been no real consolidation at all and thus why I deem this "breakout" highly susceptible. Any move back below yesterdays low will trigger a short to me. If you want to join a parabolic/vertical move then all yours. I know how they end up.

NASDAQ 100 Futures:
The Apple euphoria quickly got slapped down as I expected. A range has now built.

I will expand on Asia tomorrow.

Have a good one
Austin

Markets Top on Euphoria Right?

Morning All

Well the S&P500 held in AGAIN last night with that 1300 zone proving formidable in the Eminis. APPLE have just realised some blowout earnings results and the stock is trading up some 10% in after market. The Nasdaq futures are surging and are now well above the previous 2435 Daily high back in July 2011. Its game on right?

If you ask me, these are the EXACT conditions needed to form a genuine top. Remember when the market peaked on the euphoria of Osama bin laden? That was the top. All I am reading is "breakout" this and "breakout" that. Great but I really don't see the base pattern or the volume or anything to suggest this is the case. Am I being stubborn? Maybe but just bear in mind that these are exactly the moments and feelings that one should have at a genuine turning point. All markets are right up against previous highs or resistance points. Note the Eminis have not even made a new high yet above 1318. Have a quick read of twitter, and get a feeling for which way the crowd is leaning right now. I am reading predictions of 1338, 1350 and 1450 all of a sudden. All yours if you wanna join.

This has been my central case: http://swingtradersedge.blogspot.com/2012/01/new-week-same-message.html. Sure we haven't seen the confirmation yet. However, if the Nasdaq futures get slapped back down (which i think it will), that will be a bearish engulfing pattern and seal the deal to me. The S&P500 Eminis put in a climatic reversal at 1318 on monday night, and price is now "testing" this previous high. Any move below 1300 would now seal that market to me. If you want confirmation, that should be it. Remeber that tops are a process that take time with much back and forth choppiness. This is exactly what we are seeing over the past few days and sessions.

S&P500 Eminis 60mins:

To Australia. For the last 4 trading days we have opened strongly/gapped up, and then got slapped down straight away giving up all gains. That really is a tired market and has offered great trading opportunities for the bears. Is today the day where finally it gets going and breaks out? I really don't know but I will continue to fade that morning open into resistance. That is the low risk/high reward. The minute that stops working, then we probably do have a genuine move higher.


XJO 15mins

My SPI range today: 4220 to 4180. Outlier levels 4150 and 4235.

My SPI day trading plan today: The SYCOMM session closed at 4202 but we will obviously open above this given the move in the S&P500 Eminis and Nasdaq futures. 4220 offered solid resistance yesterday and I will once again short that level with stops above 4225. Previous highs were also at 4230/4235 which offers another shorting opportunity. If price shows nothing but green candles straight out of the open and drives straight through this, I will look for pullbacks to join a new trend higher. Until then, this is still within a range. As per yesterday, scalping long levels remain 4200 and the 4180s.

A New Week, Same Message

Morning All


(UPDATE: Eminis are trading 1313 and I have just gone short, 1/2 size. This is the exact breakout conditions I was hoping for and will put on the other 1/2 if this sells off back down with some bearish 60mins reversal candles)

Well this really is it. Every single chart I look at looks overextended and perilious. I wish I had a better message but I don't. I wish I could be more positive. I have traded for many years, I have studied many price charts, and I believe this experience all boils down to these few moments. I have no idea if this will be "the top" or just an intermeadiate high, but either way I want to be ready. Tuesdays are my reversal days. If I see one more push higher today, I will really begin to position myself. Options could really be the play here.

I will keep my message clear and simple as I always try to do.

S&P500 Daily:
Surging right into the overhead resistance. I have found the mid-point of these pitchforks to often be great targets and turning points.

Nasdaq 100 Daily:
Right into the double top zone.

Dow Industrials Daily:
Also surgin right into the Double top zone. You just have to be getting out of longs into this.

S&P500 60mins:
The market continues to grind higher in a wedge with waning momentum. We could be looking at the final subdivisions of a C wave here. Note that an A=C target off the Novmber lows comes in at 1310-1317

AUD Daily:
Right into overhead resistance.

ASX200
Rally and reversal right out of the overhead resistance. I have shown here how every bounce out of the October bottom has got weaker and weaker. Our latest bounce (which I have labelled the "E" leg) is overlapping and a clear 3 thus far- not a new impulse higher.

So price is right in the zone for a pullback at a minimum. Breadth continues to diverge since December peaks as I have shown in previous posts. In terms of sentiment, I red the other day that the latest bullish sentiment reading of the AAII Sentiment Survey came in at 49.1%. This is the highest reading registered by the survey since Feb 10 2011 (cast your eye back to what happened to the S&P500, ASX200 or any equity index subsequently-collapso).

Thus, I am still in short mode. An ideal scenario would be somekind of "bullish" ovethrow or stop hunt that quickly gets sold into come Monday night. I am sure there are many out there who are now saying this is a "breakout" above 1300- puurrrlease.

My SPI Range today: 4190 to 4225. Outlier levels 4180 and 4235

My Day Tradig Plan today: Modays are always tought to call. AUD has opened small positive which gives us a positive lead. We have solid res in the 4230s and I will continue to short this with tight stops. Any move above there could trigger a potential "breakout" and I will have to join although I do believe this will be short lived. Support comes in around 4190 to 4200, and I will look for scalp longs there only.

SPI 5mins

Morning Plan

Good Morning All,

Yesterday was a great trading day in Australia and finally we saw the bearish reversal I had been anticipating. I stressed the importance of an immediate sell off if this was to be the real deal, and we got it.

XJO 5mins:
Matched higher due to offshore lead, made a high in the first 10mins and then sold off all day. The press will tell you that the unemployment number led to the weaknesss, but the truth is that by the time the number actually came out, the sell off was already well advanced. The market actually had a good bounce post the number!

Yesterdays price action confirms to me that we are on the cusp of a significant turn in Australia and we now have great markers to place stops. Given the US session overnight, the SPI is indicated at 4225 which is not far off yesterdays 4237 high. Any retest of yesterdays highs is such a great low risk short trade.

ASX200 Daily:
Strong reversal candle yesterday in Australia right on the downward trendline. I believe this completes the "E" leg of this triangle and I expect a breakdown in coming days/weeks.

ASX200 60mins:
A perfect A=C move off the low that nailed yesterdays highs. The open gap proved to be the target for the bounce as they so often are. Note the continued bearish divergences coming into yesterdays high.

You have to look to sell any retest of yesterdays highs. Great low risk double top trade.

My SPI range today: 4200 to 4235. Outlier levels 4180 and 4250

My Day trading plan today: I will look to short any retest of yesterdays highs at 4230 to 4235. Stops to be placed above 4240. Once again, this should sell off early if this is a genuine turning point. I will only look to get long if we can hold the morning gap and breakout above 4240 later in the day. There is no data today in Australia and thus no obvious catalysts.


I was stopped out overnight in the S&P500 (probably the high now :)). That's what stops are for. The grind higher continues but I do not have a trade setup to get long. I continue to believe we are very vulnerable up here but I will wait for clear confirmation before re-entering any shorts. The following charts should be very clear and simple.

SP500 Daily:
Right into trendline resistance and a pop above 1300. Now watch it drop. Tops manifest themselves when everyone least expects it and when everyone wants to be "IN".

Nasdaq 100 Daily:
Right into the double top zone. This is setting up for a great short trade (2B trade according to Linda Bradford Raschke).

Russell 2000 Daily:
Massive underperformance which is not healthy. Right into the previous breakdown zone and resistance zone. Once again, looks like a small pop and then drop.

S&P500 60mins:
Spillover of wedge pattern? Any sharp move back down through this pattern will be my short trigger

AUDUSD Daily:
Rally right into downward trendline. I have been following this count for a while, and I believe we may be seeing the final legs of this triangle and breakdown tot he downside. Rates are going one way in Australia especially given the recent unemployment numbers- lower.

Even the DAX has hit its 200Day moving average and looks ripe for a double top trade. All in all, the setups are aligning for a short trade but it looks like I will just have to remain patient.

Austin

UPDATE XJO A=C

XJO has opened right into the A=C zone and showing a small reversal. This is it for the bear case:

Urgh

Morning All

US opens on lows, holds, rallies all day to close on highs. Urgh. I am still short the S&P 500 Eminis with stops at 1307 but its not looking good for the bears. Cant really argue with that price action. Or can you?

The IMF, ECB, FED, you name it are throwing everything at this to try and keep the juices flowing. And it is working. However, to me it is such a house of cards. As it stands my outlook has been wrong but this is what happens when you try to pick inflection points. Keep it small. I have always believed that the real money is to be made by identifying the low risk/high reward trade and pursuing it continuously. As I scan through charts today, I still view the technical situation as precarious. I just cant justify being long up here currently for a bigger picture trade. At some point this "buy the dip" recklessness stops and I guess I just have to be patient.

Let me show you my thoughts very simply:

Nasdaq 100
Market is parabolic right into overhead resistance and double top area. Can price really keep up this trajectory? You could even throw some bollinger bands on this chart to show how overdone this move is. As a trader, I just don't know how you could be positioned long up here into this.

DOW 60mins:
This is a classic ending wedge. Momentum continues to diverge vs price.

NYSE Advancing Issues
Strong markets rise with improving breadth and an increasing number of advancing issues. Not the case here. The number of advancing issues peaked in December and continues to make lower highs despite price grinding higher.

NYSE Advance/Decline:
This should be going higher in a healthy uptrend right?

S&P500 15mins:
Another new high last night with momentum not following through. Complete 5 wave advance to finish everything off?

In sum, I am still short but looks like I will be stopped. This market could keep grinding all the way up to 1325 but I really doubt it. Picking inflection points is always tough but when I look under the hood and when I look at the juncture we are at, it makes sense to me from a risk/reward standpoint.


Australian futures are indicated at 4220. If this is a genuine top as per my special update yesterday, we should immediately sell off: http://swingtradersedge.blogspot.com/2012/01/special-update-xjo-top.html. The 61.8 Fib retrace for the futures comes in at 4220 and A=C off the lows at 4230. I will be waiting for confirmation out of this zone today before putting on any shorts. This could equally be a genuine breakout above 4200 (i doubt but have to be prepared). Any sell off should find short term support at 4200/4205 and look for scalp longs there. A genuine longer term swing short should only be put on if we close meaningfully back below 4200.

SPI Continous 60mins:

(UPDATE) XJO A=C 60mins