Wednesday, 11 January 2012

That Worked, Now What?

Morning All

Well we got the breakout in Australia and subsequently in the Eminis yesterday as forecast here: The power of Tuesdays I hear you cry. The Eminis broke out and traded just short of my 1293 short zone before selling off and giving back some of its gains. As I write, they are now trading as low as 1284. To me, I think this completes the final legs of this rally and am looking for swing short opportunities. Remember, it is all about low risk/high reward trades and I think fading this market in 1290/1300 with stops above 1310 is the best trade right now. Breadth is waning, volume is not picking up despite the market making new highs, and we now have a clear climatic ending pattern forming in the S&P500 in the form of a 3 Indians (pls see below).

Emini Breakout
The breakout played out perfectly yesterday. Any move now back down below 1280 confirms a failed move higher and a significant high.

S&P500 Daily:
This is the res zone and sell zone. If u are a daily chart trader, wait for that bearish candle confirm out of here. If u are more short term, its time to be switching to fade trades.

S&P500 60mins 3 Indians
A climatic 3 Indians pattern is shaping up. 3 peaks with 3 lower highs on the momentum indicator. Use your appropriate entry signals and anticipate a move lower.

To Australia. My short term low update at ASX200 4100 worked very well:

Yesterday I wrote in the SPI:
"I still remain in buy mode today given the previous 3 day sell off, the bullish divergences, and the support levels coming into play. Holding above 4100 would indicate a retest of 4115 at a minimum and possibly as high as 4130/4140."

This morning the SPI is indicated at 4148. I think there are 2 possible scenarios here. There is the potential that this is the end of the move higher and we sell off straight away from 4150, resuming the daily downtrend. Or, we continue to grind up to 4180 and retest the previous highs. I am not sure which one will play out obviously but if the Eminis are going to peak here, I cant see Australia rallying much higher.

My range today (SPI): 4120 to 4160. Outlier levels 4180

My plan today: As per above, I will now be switching out of buy mode and potentially looking for a high/bearish reversal. I will short fade 4150/4155 early with stops above 4160. If there is no sell off early, look for this short term trend to potentially grind higher up to 4180 which would present a lower risk short entry.

ASX200 Cash 15mins:
I showed this chart 2 days ago at 4100. We have now seen the breakout and are retesting key Fib res areas.

SPI 60mins continuous:
Yesterdays breakout extended overnight. 4140 is the 61.8 fib retrace and 4150/4155 marks an open gap which could prove some early res. If we don't sell here, we are going to 4180.