Friday, 9 March 2012

Resistance Is Futile

Morning All

The heading of my post this morning is a quote from a Trader who I used to work with. He used to mock Bears and say that resistance is meaningless in this algo driven rip fest of a market these days. Well I guess this kinda ran true last night. European trading went from strength to strength on continued chatter of this Greek debt participation deal. This took the Emini S&P500 up to the top end of my 1350 to 1357.50 res zone and before you knew it, stops went off and up we go. Resistance is Resistance until it is no more. The old cut and reverse.

Emini S&P500:
Market tests resistance, fails to sell, stops go off and up she goes. That's all it is really.

Most of my analysis appears to be rather meaningless in this environment. It doesn't really matter if we have increased momentum and breadth to the downside- if they want to take this market higher they just will. I guess it all about understanding what the pain trade is, where the stops are likely to be positioned, and understanding failed patterns. The AUD was an excellent tip off yesterday as it failed to breakdown through 1.05 (futures) despite a very bearish jobs number. Somebody wanted to get started early.

So I am really not sure where this leaves us in the S&P500 and so I am back on the sidelines. I took my stop quickly and move on. I like to keep it very nimble at such junctures. That strong Daily down candle was recaptured which is bullish. However, volume was woeful but when is it not when we go up? We have NFP tonight and thus really anything can happen. I cant rule out a retest of the previous highs at Emini 1377 which would be an interesting fade area.

When you start adding lines onto a chart to try and come up with new resistance levels, you know you are probably in trouble. One could argue that we are merely retesting a neckline on the DOW and S&P500 60mins charts and thus a Head and Shoulders is playing out. I'm not so sure.

DOW 60mins:
Head and Shoulders? Only if we see a big reversal and like now.

Emini S&P500 60mins:
Trading near the top end of the range. This could just be a vicious wave 2 type squueze but that is unlikely. For me, I would want to see a period of consolidation before joining any breakout higher.

Interestingly, AUD never really got going last night after breaking out above 1.06 futures. An interesting divergence with equities. I still think we could be tracing out somekind of 4th wave type pattern but I would only short this if it falls back down below 1.06 again. See chart below:

AUD 60mins:
Base pattern under previous support. Fails to breakdown yesterday despite a very bearish jobs number. For the short term trader, when resistance breaks you have to flip to long. That 1.058/1.06 level is now very key and has to hold for the bulls.

To Australia. We have been given an absolute gift here I believe for the bears. Quite simply, price cannot recapture 4250 if this is a genuine sell off which I very much believe it is. Pls see the following posts for full details:

 We are indicated at 4200 first thing. Therefore, longer term traders can start really building shorts here with stops above 4250. Short term traders should be looking to short fade 4200 with tight stops, and potentially looking for a small grind higher if it fails to sell early.

SPI Day session 15mins:

My SPI range today: 4180 to 4205. Outlier levels 4150 and 4220.

My SPI Day trading plan: Straight out of the blocks I will be looking to short fade the 4200/4205 level with tight stops. This is round number resistance, an open gap, and the 38.2 retracement off the recent 4320 high. The target for any shorts should be down to 4180 initially where I will look to cover. If we fail to sell early, I will look to flip long for a quick trade up to 4220 max. Up there, this really is an aggressive short and I will load up, with stops above 4250 for a bigger picture play.

Thanks and Happy Friday