Tuesday, 28 February 2012

Looking For The Short

Morning All,

There was a solid bounce off the lows in the US markets overnight which led to new highs across the majors.....just. I believe this now sets up for a perfect short trade in the next 24hours. Yesterday I wrote:

"A ideal setup (Emini S&P500) would be a push above 1370 to 1375/1380 and then a sharp reversal back down below 1370. This would be a short signal for me".

I believe this trade is now very much on track. Once again, despite the higher high, underlying advancing issues made a lower high coming at at 1600 vs 1800 on the 24th and 2174 on the 23rd. What I find very interesting is the back to back 4th wave type patterns i.e. Flats. Ultimately this implies that we are in the final throws of this impulse.

S&P500 15mins cash:

S&P500 Daily:
Right into the previous highs and the Double Top zone. Have to be anticipating a climatic reversal here.

S&P500 60mins:
There are clear momentum divergences going on into this clear 1370 resistance level. Furthermore, I can count an almost complete 5 wave advance into this recent high. Nice channelling, nice alts between 2 and 4, 3rd wave the strongest etc etc. Its all there.

The NASDAQ 100 looks tired at this 2600 level. The DOW Industrial is grinding higher and not impulsing in a clear wedge/overlapping type pattern. All in all, its setting up for me and now you just have to have a clear short signal/plan before pulling that trigger.

We are also seeing clear confirmation from Asian indicies. These are often the first to turn and are a lead indicator I have found. Yesterday the Shanghai A shares had a very significant reversal out of 2600. This is a clear climatic turning point to me and I see a decent pullback over the next week or so at a minimum. The Hang Seng is still grinding lower after making a high at the A=C target and 61.8 Fib retracement perfectly.

Shanghai A Shares Daily:

A shares 60mins:

Australia opened on its highs yesterday right into the sell zone, and trended lower for the rest of the session. .

XJO 5mins:

My SPI range today: 4250 to 4280. Outlier levels 4295 and 4300/4305.

My SPI day trading plan: Yesterday we trended lower for the whole day from high to low. Given the bounce in the Eminis overnight, we are indicated at 4270. Thus today is a question of whether we pop and drop to continue yesterdays trend, or are we going to have one more push into the highs? I really don't know the answer to this but I think the strongest play is to short early into 4275/4280. If we fail to sell off from here early, then I could see the market rallying all the way to 4300 and possibly 4310. Thus, I will be short fading 4275/80 with tight stops and looking to cover in the 4250s. Look to re-short if 4250s drop with a target down to 4220/4200 although very unlikely today. If we push above 4280, I will flip to long trades targeting 4300/4305

SPI 15mins Bearish Chart:
Target hit with a clear spillover and reversal. Breaks of 4250 will flip this trend to down and open up a genuine move lower.

XJO 60mins Bullish chart:
The XJO never quite made a new high. I could possibly label yesterdays move a C wave as part of a flat. We had something similar in the S&P500 overnight. This implies a retest and possbile break of 4315 before we begin a new downtrend. Thus if we dont sell early, be on the lookout for this.