Tuesday, 3 January 2012

Happy New Year

Morning All and Happy New Year

Well I don't know about you, but I am kinda pleased all the festivities are over. It takes it out of you! And then comes Australia Day. And then Anzac Day. And then....

Anyway, as the weeks progress into January,  the volumes should start to return as Traders put their fresh balance sheets to work. Last year was an excellent trading environment for the prepared and experienced, and I cant see why that should not be the case again this year. We all know there is a multitude of problems  facing our global economy which will provide continuous volatility. Furthermore, the inherent bearish sentiment currently will lead to dramatic squeezes a plenty for those who are prepared. I am sure there are a whole host of traders who learnt some stern lessons last year and our now hungry to put into practise. The one major point that was reinforced to me again last year was the need for flexibility. Really anything can happen. There really is no point trying to overanalyze the words of our political saviours or to try and work out where this global economy is headed. It just will not help. Our job, as sad as it is, is to make money. Have the setups prepared, follow the market price action, and be disciplined enough to take your stops whether losses or gains.

And so to the markets. On the 30 December I wrote: "the SPI is now re-testing the previous 4065 breakdown level. This is a great fade/short level straight up with tight risk. Thus I will be looking to SHORT early with stops above 4080."

This played out although the market fell a lot further than I thought with a number of sell orders hitting the market into the New Year holidays. Now we are trading at the low end of the range and it is time to cover shorts/begin looking for a swing trading low. The 60min chart below I have shown a number of times and is updated below.

SPI Continuous 60mins:
Price is now "testing" previous lows and support levels. I believe we could be entering a period of transition from downtrend into sideways consolidation/base building. Thus, in the coming days I will be looking for support plays and possible breakouts to the upside if a good base builds. It takes time for a market to transition and I would not expect a dramatic low straight away.

SPI March 15mins:
In the last 2 trading sessions, we have seen price open on its highs and close on its lows- bearish indeed. However, I have often found that markets trade from high to low in 3 days. Thus, given the most recent peak was 2 trading sessions ago, we may well be looking at a short term low soon.

My range today: 3095 to 4035. Outlier levels 3075/3080 and 4080. (UPDATE. This range is WAY OFF as market has opened 4080. SHORT!)

My plan today: The market will potentially open below Friday's close given the US trading session. Given the charts adn analysis above, the market is now right into a great support area and it is time to be looking for long trades in coming days. I will scalp long at 4000 with stops below 3095. I will also look to scalp long 3080 should we see some initial pressure. Look to get out of longs/get short at 4025/4030. Ultimately, longer term traders need to wait for a clear base and breakout of 4150 before the big picture LONG trade

(UPDATE: The market has opened well above my initial range. Don't know the news yet, but currencies haven't budged. This doesn't change my big picture view i.e. coming into supports and look for long trades. However, short term I now have to fade this/get short with stops above 4080. This is just day trading. Outlier levels are 4100 on upside and 4050 on downside)