Thursday, 23 February 2012

Thursday Plan

Morning All

I am rather torn here in the short term. I see the S&P500 pulling back into a great support zone in the short term. However, certainly there is growing evidence that the market could be on the cusp of a more meaningful pullback. The past few weeks have shown me the importance of following the trend at such junctures and thus I am inclined to look for buy setups in the next 24hrs.

Hopefully these charts illustrate my thinking in the US markets.

S&P500 Cash 15mins:
Breakout and retest of the breakout zone. Our highest probability trade is to buy this with stops below 1350. If we do see a solid break of 1350, I would be inclined to think that 1368 was indeed a more meaningful top. For now, buy this dip.

S&P500 Emini 60mins:
This is my Buy zone in the Eminis at 1350 to 1355. The pullback off the high looks corrective and the high was made on peak momentum. Peak momentum readings imply a retest of that high at a minimum. The target for any rally is 1370 to 1375.

AUD March Futures 60mins:
I also think that the Australian Dollar is at a great support zone here. Any bounce and break of that downward trendline should buoy risk markets. We have a perfect A=C off the top and a failed breakdown through support yesterday.

However, this is what is making me torn. Clearly we are in the final throws or sub divisions of this trend as we approach the May high of 1370. Breadth and volume continues to deteriorate (although this has not seemed to matter so far in this engineered bull market). The Dow Industrial has made a new high above the previous May highs whereas the Dow Transports looks to have topped out well short of its May highs. This is a bearish non-confirmation although not a sell signal in itself.  Furthermore, sentiment readings are no doubt at extremes. Thus, these buy setups I show here are for short term swings only.

It does seem to me we are in the final waves of this move higher as per my count below:

S&P500 Cash 60mins:

DOW Indutrial 60mins:
None of these wedges have worked in the US of late. However, once again we see a clear ending wedge pattern/3 Indians just as the DOW clips the 13,000 level. Will this setup lead to a sell off? Just need the confirmation.

So in sum, I am looking to BUY 1350/1355 in the Emini S&P500 looking for a swing back up to the previous highs at 1370. Any strong move below 1350 would be bearish to me.

My setups and trade ideas in Australia have worked very well the last few days. My SPI ranges have been on the money and just following that trend on the lower timeframes has paid dividends. We have hit my targets in the SPI and the cash market made a high yesterday just shy of 4310. Thus we are now at the top end of the range but the short term trend is still up. Also note that we have seen strong momentum and thus my highest probability trade is to buy the first pullback into the trend.

SPI 60mins:
Hit the top end of the range and target. However, we have seen strong momentum and thus I am looking to buy the first meaningful pullback. Obviously if we clear this 4285/4290 level, that would open up a potential bullish breakout.

My SPI range: 4270 to 4295. Outlier levels 4230 and 4300.

My SPI day trading plan: Will the political situation in Australia have an impact today? I do think that any potential challenge or overthrow of Labor leadership will be taken as a major positive by the market. However, I am probably getting way ahead of myself here. However, markets do like to think ahead and discount the future. We are indicated at 4260 this morning given the overnight session. Once again 4250 provided great support yesterday and was the low. I will buy this level straight up once again today if we get the chance. Please see the chart below. On the upside 4290/93 are potential short fade levels and 4300. Ultimately we will be stuck within yesterdays range but I have a bullish bias given the trend. Only a break below 4250 would open up more meaningful short trades for me.

SPI 5mins:
4250 continues to be great support. Keep buying it until it drops.