Thursday, 19 January 2012


XJO has opened right into the A=C zone and showing a small reversal. This is it for the bear case:


Morning All

US opens on lows, holds, rallies all day to close on highs. Urgh. I am still short the S&P 500 Eminis with stops at 1307 but its not looking good for the bears. Cant really argue with that price action. Or can you?

The IMF, ECB, FED, you name it are throwing everything at this to try and keep the juices flowing. And it is working. However, to me it is such a house of cards. As it stands my outlook has been wrong but this is what happens when you try to pick inflection points. Keep it small. I have always believed that the real money is to be made by identifying the low risk/high reward trade and pursuing it continuously. As I scan through charts today, I still view the technical situation as precarious. I just cant justify being long up here currently for a bigger picture trade. At some point this "buy the dip" recklessness stops and I guess I just have to be patient.

Let me show you my thoughts very simply:

Nasdaq 100
Market is parabolic right into overhead resistance and double top area. Can price really keep up this trajectory? You could even throw some bollinger bands on this chart to show how overdone this move is. As a trader, I just don't know how you could be positioned long up here into this.

DOW 60mins:
This is a classic ending wedge. Momentum continues to diverge vs price.

NYSE Advancing Issues
Strong markets rise with improving breadth and an increasing number of advancing issues. Not the case here. The number of advancing issues peaked in December and continues to make lower highs despite price grinding higher.

NYSE Advance/Decline:
This should be going higher in a healthy uptrend right?

S&P500 15mins:
Another new high last night with momentum not following through. Complete 5 wave advance to finish everything off?

In sum, I am still short but looks like I will be stopped. This market could keep grinding all the way up to 1325 but I really doubt it. Picking inflection points is always tough but when I look under the hood and when I look at the juncture we are at, it makes sense to me from a risk/reward standpoint.

Australian futures are indicated at 4220. If this is a genuine top as per my special update yesterday, we should immediately sell off: The 61.8 Fib retrace for the futures comes in at 4220 and A=C off the lows at 4230. I will be waiting for confirmation out of this zone today before putting on any shorts. This could equally be a genuine breakout above 4200 (i doubt but have to be prepared). Any sell off should find short term support at 4200/4205 and look for scalp longs there. A genuine longer term swing short should only be put on if we close meaningfully back below 4200.

SPI Continous 60mins:

(UPDATE) XJO A=C 60mins