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.

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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.