Wednesday, 4 January 2012

Welcome Back

Morning All,

A continued rally in Europe and the US overnight sees the SPI indicated right in the middle of the recent range at 4100. My 60min ASX200/SPI futures chart has guided us very well thus far with the SPI making a short term low in the low 4000s, right in the target range. Volume has been horrible of late which makes me cautious that we have seen a genuine turning point. Nonetheless, yesterday I said:

"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."

I believe this is playing out and we just have to be patient for this base and sideways pattern to develop. Please see the updated charts below. 

SPI Continuous 60mins:
Price made a low at 4018 right in the cited target range. We have now transitioned from downtrend to sideways. A break above 4150 would confirm a new uptrend and breakout trades for Swing traders. 
SPI March 15mins:
We are indicated at 4105 this am which is right in the middle of the recent range. Key levels to the upside are 4140/4150 and support is 4050 and 4020.
I did make a howler yesterday when writing my morning report. I didn't realise that Europe re-opened on Monday for trading with a 2% gain (Emini futures were closed). Thus I did not see the SPI opening at 4080! Not a great way to kick off the new year but ultimately the analysis presented here is still on the 
money- we are looking for support plays and possibly breakouts of the recent base. 

My Range Today: 4080 to 4120. Outlier levels 4055 and 4145.

My Plan Today: I will be looking to short this move early out of the 4100s. This is a short term short scalp only. I find that the round numbers often prove to be very good short term trading levels as a day trader. I will look to cover any shorts at 4080. If there is no sell off in the first 10 to 15 minutes, then focus on a potential move up to the top end of the range at 4140. Once again to reiterate, swing traders should be looking for confirmation above 4150 that a new uptrend is underway to get long. 

I am not one for long term predictions. I believe that the ability to forecast a market drops off dramatically after 2 to 3 weeks even. I have learnt this the hard way. Sure I can see Daily setups which imply a strong move in a certain direction, but I know there can be many twists and turns along the way. I cant stand those Broker reports that hit the presses come January of the new year with projections a year out. So utterly useless and untradeable. Watch them be re-written and revised in a matter of weeks. If the last 4-5 years has taught us anything, it is to expect the unexpected. 

Here are a few Daily charts that I am looking at. These always form the backbone of what I do. They are setups and a means for characterising the market- not long term predictions. I posted some of these in a recent post so pls re-read for more detail:

Australia Daily:
We are at the low end of the recent range. Down here I would be looking for short term support plays and a possible breakout trades to the upside. In the bigger picture, I really do not know which way this market is headed but clearly we are very offered at 4350/4400.
Hong Kong:
One minor trendline breaks but still within a broader consolidation pattern.

This remains the key chart to me. I wrote this on 28 Dec and this remains my view: "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."  We are now testing the upper end of these levels and as a short term trader, I will be shorting 1295 to 1300, stops above 1310.