Mmmmmmm

Markets go UP and they go DOWN. The last week or so we have seen the forces of gravity do its thing...and then some. Make no mistake, this is the biggest casino in the world and when the herd finds itself caught one way, a sharp panic ensues. For all the work and progress throughout the year, and despite improving "fundamentals", the trend that has been in place can come undone very quickly indeed.

I didn't see this recent pullback coming in US markets. I guess that is the nature of how tops should form. They should catch everyone off guard in a wave of euphoria when things look their best. However, certainly I have been concerned with the technical picture down here in Asia and put up several posts noting serious topping patterns. These can be re-read here:

Australia topping pattern: http://swingtradersedge.blogspot.com.au/2012_04_03_archive.html

Asia concerning: http://swingtradersedge.blogspot.com.au/2012/03/asian-daily-setups.html

So where does this leave us now? It really is a difficult one as this market will go as low as it needs to flush out trapped longs and low enough to get Central Bankers pumping more liquidity into the system. It is just so tiring. Pump trillions into the market to generate a low volume synthetic bull market; then try to turn off the liquidity taps only for the market to throw its toys out of the pram. Central bankers intervene once more to come to the rescue. Wash, rinse, repeat. I really don't know if we put in a low soon or whether this just keeps snowballing.

The low of that weekly candle I blogged about a while ago has now been clipped. This was a line in the sand for me. Thus at a minimum we are looking at a change of trend/deep pullback.

S&P500 Weekly:
Breakout above 1370 only to be slapped back down. Note the several other occasions throughout this run up when we have seen bullish candles filled- a significant pullback at a minimum.

S&P500 Daily:
My 55 moving average was breached last night. Price has sold off into a generic upward trendline but I don't really use these in my trading. I guess the logical target for this move for now is 1340 support zone and then we have to see.

S&P500 60mins:
Potential trend channel coming in also at 1340.

In sum, at some point we will make a low and I will be looking for a consolidation pattern/base pattern first before getting long once more. I thought we would hold in last night but clearly this is stronger than anticipated. I don't think this will be a V-shaped type low thus being patient and waiting for the setup is key. I also don't think now is the time as a swing trader to be looking for shorts. That has played out in the short term. In my experience, these are the points to not get too bearish. Also note that currencies barely sold off last night despite US weakness, an interesting divergence.

To Australia. This has been such a frustrating sell off from the high. I talked about a clear topping pattern in our market BUT it has been so difficult to get into, especially as a day trader. for the last 3 sessions we have gapped down only to grind higher for the rest of the day. And now we are indicated at 4250 which was my original target for this whole pattern!!!! I wrote the target for this pattern here: http://swingtradersedge.blogspot.com.au/2012_04_04_archive.html. Frustrating indeed.

SPI 5mins:

So we are looking at another gap down this morning into good supports. Will bulls step up once again and BUY this? Really is a tough one and I just don't know. You just have to follow the price action. Some things to note though in Australia:

1) A complete 5 wave advance into the high on the 60mins timeframe. A Head and Shoulders top has formed and been triggered.
2) Clear Failed breakout pattern on the Daily
3) Breakout above the 200 day moving average only for price to be slapped back down through it.
4) BHP is set to break 33.80/34 today which is obviously a big support level.

XJO Daily:

SPI 60mins:

My SPI range: 4240 to 4270. Outlier levels 4220 and 4200.

My SPI day trading plan: This is going to be a very difficult day to call and thus I am hesitant to call anykind of range. Bottom line we have gapped down into supports at 4240/4250. I would be looking to buy it early with very tight stops if I see the right confirmation. Any failure to bounce is bearish and we could be looking at a genuine flush. At some point, the bulls may just have to give up. I will not hang around if we cant hold and will flip to short targeting the low 4200s. Have to be patient today and wait for that early range to form.

Thanks
Austin