Tuesday, 27 March 2012

In Ben We Trust

Morning All

Yesterdays breakout trade in the Emini S&P500 played out perfectly. By now I am sure everyone realises that the real move begins about 2 hours before the S&P500 cash open. I don't think you have to be a genius to figure out why this happens.

I got out of my long position from the 1380s into the previous highs at 1408 this morning, only to watch stops go off and a further surge into the close. Hindsight is always a great thing but I try to remind myself that I am a Trader and not a Fund manager. Here are the details of the swing buy position as it played out over the last few days: http://swingtradersedge.blogspot.com.au/2012_03_23_archive.html AND http://swingtradersedge.blogspot.com.au/2012_03_26_archive.html. I always like to go over all my trades to internalise successful patterns as well as identify things that just aren't working for me. I had been fighting this market for a while previously and clearly I was wrong.

The headlines today will all be about the Bernank today but clearly these setups and patterns all appeared before any "catalyst" came. This is why I use the technicals. I always stress this. You just have to anticipate.

Emini S&P500 15mins:
Last nights breakout trade to add to initial positions.

So where does this leave us now? Obviously it is difficult to make a forecast here given the strong move overnight and the frothy sentiment levels. However, I think you just have to keep on focusing on this uptrend. I really don't have any targets/meaningful resistance until 1440/1450. The FED couldn't be more clear that it will do all it can to keep liquidity awash and keep a bid to risk assets. I have tried to fight it at points and it just doesn't make for good trading. Of course at some point the whole things unravels but the market is sending a loud message it doesn't care. Also remember that we have managed to shrug off all weakness despite quite a serious turn date.

To the charts:

Emini S&P500 60mins:
It seems I made a mistake by getting out of my long trade. Clearly we have broken out above previous highs and thus I think the best trade here is to BUY a retest back to 1410/1407, stops under 1400.

Now I don't want to get ahead of myself here, but this is the weekly chart I have had on radar since the 1370 level broke to the upside. The next meaningful target zone to me is 1440/1450.

S&P500 Weekly:

What makes me concerned? Certainly one could count a possible 5 wave move almost complete off the recent lows. Also note that the DOW Industrial have not made a new high yet although I believe it is only a matter of time before they do. Furthermore, clearly sentiment is as frothy as I have seen it which never makes me too cosy.

S&P500 Cash 60mins:
This is in the back of my mind and not tradeable for now unless we see a real meaningful reversal.

To Australia. I came in bullish yesterday and got some of the initial move to 4300 only for the rally to be shot down. I failed to recognise this underlying weakness intraday and certainly my market bias effected my trading. As a day trader, you just can't have a bias and I continue to learn this day by day. In particular, the Australian market has had these amazing ability to frustrate bulls and bears alike so being flexible is paramount.

Today I could make a case for a strong breakout. I could also make a case for a pop and drop. Nice and binary hey.

SPI 15mins:
Key res level today is 4330. Breaks of this open up targets to 4348/4350 with 4380 a big outlier level. Note that I could easily label this a 3rd wave up move but we would need to see genuine strength for this to be the case.

XJO 60mins:
Here are a host of resistance levels the XJO needs to overcome for a "breakout". Bull markets climb a wall of worry and this certainly is a wall indeed. However, the more times this tests these levels, the more likely it is to actually breakout.

My SPI range today: 4310 to 4350. Outlier levels 4305 and 4380

My SPI day trading plan: We are indicated at 4320 early and thus almost right at the previous contract highs at 4330. I think any early dip down to 4310/4305 would be a gift to get LONG with stops under 4300. On the upside, clearly 4228/4330 is the short term target and aggressive traders could fade this early with very tight stops especially given the size of the early morning gap. After the intial 30mins of trade, I will look for strong 5min candles above this 4330 level to get long for a breakout, targeting 4350 and possibly beyond. We will soon know early if this is going to be a genuine move higher or a pop and drop scenario.

Trade Ideas:

1) BUY 4310 early. Stops under 4305. Yesterdays resistance was 4305 and I think 4305/4308 should now act as a decent support level.

2) SHORT FADE 4330/4335. Very tight stops. I will not hang around with this one but I think you have to look for a short fade into the previous highs in case there is no follow through. Be prepared to flip to long if it doesn't sell to join the trend higher.

3) BREAKOUT TRADE above 4330. I will be looking for somekind of consolidation pattern/range in the first 30mins to hour of trade under this 4330 level, and then I will buy a strong 5min candle above this zone.