Thursday, 3 May 2012

Caution Australia

Morning All,

Just thought I would focus solely on the Australian market today. Yesterday was an inside day and rather quiet indeed. We are indicated relatively unch from yesterdays close and thus it would appear we are set for another range bound session again. I gather the good old boys at Macquarie have been hosting a big conference that has all the fund managers, dealers and sales staff off the desk. They might return at some point today with a bit of ammo but more likely give them until next week when the hangovers have worn off.

To me, it would appear the market is a bit overextended here. I would not be surprised to see a pullback over the next few sessions.

XJO 60mins:
We are at the top end of 2 different channels here which should offer meaningful res in the short term. Potentially we have seen a climatic spillover post the RBA decision. I do think we are likely to see a pullback into the previous breakout zone of 4390/4400 at a minimum. The inability of the market to really push higher post this "surprise" 50bps cut has me concerned.

XJO 15mins:
Here is the short term channel in more detail.

SPI 5mins:
We are indicated at 4430 first thing. This puts us right into yesterdays range. I have outlined the clear boundaries in the short term with 4400 offering good resistance and 4420/25 support. Thus quite simply I will be playing these levels until we see a breakout either way. If 4440 breaks to the upside, I will short once more at 4445 vs the 4448 spike high on Tuesday.

I showed these charts a few days ago and it is time to update. The underlying major single stocks give me cause for concern at this juncture. Once again, I would expect us to consolidate here at a minimum but some "profit taking" is the more likely scenario.

CBA Daily:
The 61.8 retrace off the last major high comes in at 53.25 i.e. yesterdays highs. Note there is also a meaningful barrier at $54. It is time to get out of longs into this formidable zone.

CBA Daily 2:
Price is almost parabolic into this resistance zone/sell zone. Potential climatic overthrow here. Once again, caution in the short term.

BHP 60mins:
61.8 Fib retrace off the last swing high comes in at $36.50 i.e. yesterdays high.

BHP 60mins 2:
Top end of trend channel into resistance; bearish momentum divergences; a potential 5 wave move off the low complete. All in all, that should be a formidable wall.

My SPI range: 4415 to 4440. Outlier levels 4400/4395 and 4448.

My SPI plan: Buying 4220s with tight stops and shorting 4240s more aggressively. If I see a solid break through the 4220, I will short targeting the round number. Note there was size on the bid yesterday at 4223/24 and thus look to see if it is again there today.