Monday, 19 March 2012

Monday Monday

Morning All

As part of my Monday routine, I like to scan the Weekly Charts of major Equity Indicies. As I look at the weekly charts of the US markets this morning, I see pretty strong closing action above the significant 1370/1380 resistance zone. Thus, last weeks lows of 1366/1370 should become a line in the sand for Bull and Bears alike.

One of the main reasons for my bearish stance of late was a  confluence of a major resistance points coupled with waning breadth and volume. This resistance zone comprised  the May 2011 highs at 1370; a previous breakdown zone in 2007 at 1370; and the final major Fibonacci retracement level at 1380 (the 78.6 fib level). See the chart below. If the market was going to turn, for me it was going to be into this low risk short area. We did see a small pullback of some 30pts but ultimately this proved to be short lived and the market went from strength to strength after this event. Once this level broke, we saw a rapid short squeeze up into the 1400s. It sounds so binary but resistance is resistance until it is no more. I think some of our best market information comes from good trade ideas that don't work out. If you think the market should be selling but its not, the market is sending a loud message.

S&P500 Weekly:
1370 to 1380 level decisively broken with a strong closing candle.

DOW Industrials Weekly:
A similar zone of importance was broken. Does this now open up a retest of that internal trendline and possibly the highs?

At a simple glance, you could now say that the break of this zone opens up a retest right back up to the previous 2007 highs! Now I am not going to forecast this far out as this is just not my timeframe. However, my real point is that I now have no interest in fighting this trend higher nor have I tried to since 1370s broke. I tried to short and it didn't play out. This market is going to go where it wants to go- it could top at 1450, 1550 or catch most people off guard and top here right now. For me, only if I see a major price reversal that took out the lows of last weeks candle would I be looking for short setups once more. In the meanwhile, continue to look for pullbacks into the trend on your timeframe.

As we start the week, the S&P500 seems stretched in the short term and testing minor resistance at 1405/1410. There are many "timing" experts out there who are highlighting the importance of the Autumanal equinox adn thus a potential turn- do what you want with this. I will be looking for pullbacks into my 1385/1390 support zone for buy setups first.

To Australia today. Price is clearly consolidating in the short term and I anticipate a breakout early this week to challenge the recent cash market highs and possibly beyond.

XJO 60mins:
Price has still not hit my target zone at 4315/4320. Into this zone I would be looking to scale out of longs and get on the sidelines. I doubt we will suddenly breakout after such a strong run up without some further consolidation first.

XJO 15mins:
A clear flag type pattern over the past few days. We will test the top end of this flag today at 4300 and breakouts would open up the 60min target into 4315/4320.

My SPI range today: 4300 to 4335. Outlier levels 4280.

My SPI day trading plan: We are indicated at 4315 given the SYCOM session. As ever, the match on Monday can be something of a lottery given the influence of weekend news and events. As per above, I do think we have the possibility of breaking out of this recent tight range and test the previous cash market highs (possibly beyond). Thus, I will be looking to buy any dip to 4305/4300 early with tight stops. If this fails to hold, then potentially we could be looking at another dip down to the 4280 support zone. On the upside, the June previous high was 4315 so this should be early resistance. Short term traders/scalpers should be looking to short this with tight stops for a fade only. Ill be looking for a strong breakout candle on the lower timeframes above this to join the trend higher targeting 4330/4335.

SPI Continous June 15mins: