Friday, 6 January 2012

An Important Juncture

Morning All,

The S&P500 opened on its lows last night, made a low in the first 10 to 15mins holding the important 1265 level, and then rallied all day to close just off its highs. That is good price action particularly given what was happening in EUR and European financials, and makes me believe that we have higher to push up to 1293/1300. A move up to that zone is a great shorting opportunity and could mark a good bearish turning point. Price is trending higher on weakening internals, breadth and volume which are the conditions to anticipate a climatic turning point or reversal.

The S&P500 chart below shows a number of levels that the current market is "testing". I have also marked a Fibonacci time projection on this which shows that the current rally is a 0.618 time period of the previous move from the market top to October low. This is the ideal place for a "top" in respect to time and this resistance zone is certainly a good area in respect to price. Also note that January is often marked by seasonal tops and highs.

S&P500 Daily
In late October and November, I stressed that the market needed more "time" for a big picture lower high to form: This rally is now fulfilling this requirement and if this is a genuine market top in place, we should anticipate a turning point soon. Also note that we have a full moon on the 9th January. Don't laugh but a few days out from a full moon has coincided with a number of short term peaks:

S&P500 15mins:
Breakout and retest which held last night. We have a potential A=C projection coming in at 1293 which coincides with the resistance zone shown in the Daily chart above. We could be looking at the final subwaves of this C wave but this is of secondary importance. That 1265 line has now become a line in the sand for bulls. My play is to wait for a move up to 1290 and begin shorting with stops above 1305.

And so to Australia. I previously believe that we were transitioning into a new uptrend. Yesterdays price action was certainly weaker than I had expected but we are still looking at a possible breakout. Certainly if the S&P 500 does top, this will lead to a false breakout in Australia. For now however, I will continue to look for a move higher as long as 4100 holds.

ASX200 15mins:
Double bottom, breakout from base pattern, and retest of breakout zone. Still looking to buy vs 4100.

SPI March 5mins:
Note how 4100 was well defended last night. Yesterday we made a high at 4140 on the open so this becomes our key resistance level today.

My range today: 4110 to 4145. Outlier levels 4100 and 4180

My plan today: The SPI is indicated at 4134 and thus bumping right up against yesterdays 4140 high. I will thus look for short fade trades early vs 4140/4145 for a scalp and have stops above. We could have seen a low at 4105 yesterday thus if 4145 lifts to the upside, I will join for a breakout. Note that yesterday was a very slow day yesterday after the initial open and we might see a similar theme given it is a non-farms friday and we seem to still be in holiday season.

UPDATE: The Australian market continues to grind lower and 4100 has broken in the futures. The cash market is still holding onto 4100 but only just. I dont hold much faith given it is a Friday with Asia looking weak- I imagine we will close on our lows. It looks increasingly likely that this recent rally in January is a bear market rally. I had hoped for a move much higher but really not sure if this is the case any longer.