Wednesday, 18 January 2012

Special Update- XJO Top?

I know I am going early, but everything is aligning here to me for a great low risk short in Australia.

The 60mins has now clipped the 61.8 Fib retrace with waning momentum. Just as we had bullish divergences on the low, we now have bearish divergences coming in right here. I belive this could complete an ABC flat off the low. Note this would coincide nicely with an S&P500 top. Everyone will be thinking that we have "broken out" from 4200. Bull trap?

XJO 60mins:

XJO 5mins:
A perfect 5 wave move into this high. Divergences also in place.

Am I going early? Sure. However, this setup is just so appealing right now. If you want a entry trigger, use a move back down below 4200 to get short.


A Few Lessons

Morning All,

Yesterday wasn't my finest post. Yes my view in Australia was wrong but more importantly, I really didn't outline an alternative plan or scenario should the market not sell. This was brought to my attention by my good friend at Market Letters ( and it is so true. If the market fails to do what you expect, what is your alternative scenario? I have always stressed the importance of being flexible and heeding the underlying price action. Fortunately, I was able to dig myself out of a hole in my day trading by stepping back and recognising the underlying strength. However, I did not make this clear in my morning report for my readers.

SPI 5mins Yesterday:
My plan yesterday was to short the 40s right at the previous days highs. However, we opened well above that level immediately and I was stopped for a small loss. Gap ups that hold and consolidate, especially above the previous days highs, are bullish. There were many buy signals throughout the day after the morning consolidation.

I managed to redeem myself somewhat overnight. I have continued to stress shorting the S&P500 in the high 90s with stops at 1305. On twitter last night with the market trading just short of 1300, I really stressed this:

Austin Mitchum

I am still in short mode. It is in the slot zone! Got to be willing to sell when everyone wants it
Austin Mitchum

$ES_F/$SPY- actually think tonight is the perfect conditions for a top and climatic spillover
Austin Mitchum

$ES_F: Clearly trading above the double top area. However, I just know this is the area to look for a top/climatic reversal. Broken record?

I couldn't have stressed it more. The market hit a high of 1302 and then gave back all its gains and more to hit a low of 1286. Is the top in? I don't know yet but once again, the market failed miserably to breakout. The trend is tired. Momentum continues to wane. And this is the perfect spot for a high.

S&P500 Emini 60mins:
I posted this double top chart yesterday. We did see a small spillover and then a sharp reversal. This is bearish to me and I remain short.

S&P500 Cash 60mins:
3 peaks are now in. Momentum continues to diverge vs price. It will take one more down day to open up some real selling

S&P500 Daily:
Sometimes you have to step back and look at the bigger picture. We are trading right into some serious overhead resistance. This is not the area that strong breakouts occur. Buying the market in this kind of zone just does not offer a good risk/reward.

Australia was strong yesterday but on light volume. The whole of Asia caught a very strong bid in anticipation of China GDP numbers. Is this a genuine move higher? I don't think we can say this has broken out and indeed the futures are indicated back down to 4177 today. My bigger picture view has been that we are within a triangle and I expect this to break to the downside. The chart below shows the targets for this rally and we are trading right in the zone. For my swing trading, I have always been of the view that you develop that low risk/high reward trade and keep trying at it until proven wrong. Well I am still happy to short this move at strategic spots until I see more evidence this is a real move higher.

XJO 60mins:
Res levels of 4200 and 4220. There is also an open gap target at 4235. Any strong close below 4200 now would confirm to me that we have seen a high (breakout and failure). Any move above 4250 and I will abandon my bearish mid term view

My SPI range today: 4160 to 4195. Outlier levels 4145/50 and 4200

My Day trading plan today: We are indicated at 4175 first thing this morning. This puts us right in the middle of yesterdays range. Despite my views that we are building a high, I have to respect yesterdays strength and we may see 1 more retest of yesterdays highs. Thus, I will be looking to buy 4160/4165 early as a long scalp with tight stops. The other area to look for long scalps is 4145. Any move below 4145 is bearish and I will join the momentum lower should this occur. On the upside, I will look to short fade 4190 and 4195 with stops above 4205.