Tuesday, 29 May 2012

Market Update

This post was originally written on Thursday May 24th: http://marketletters.blogspot.com.au/2012/05/market-update.html.

In Tuesdays post, I called for a tradeable low and looking to buy retests of 1300/1290: http://marketletters.blogspot.com.au/2012/05/oversold-bounce-time.html. This played out to a small degree yesterday. We now wait to see if the market can take out some minor overhead resistance levels and pick up some steam. In short:

  • The S&P500 tested and HELD the key trendline and 1290/1300 support zone. A bullish hammer was left on the Daily chart and higher lows on the smaller timeframes. I believe this is part of a bigger bounce sequence that could lead to a retest of 1330/1350 in time.
  • Note that type of swings usually begin with simple short covering after the market fails to make a new low. This then triggers more buying as we tick higher and higher. 
  • Key risk for bounce scenario is a break of 1290 and this would be the trigger to re-initiate shorts once more across risk assets. I would actually be very concerned if this level dropped.
  • Central to my oversold bounce call is the USD. Both AUD and EUR remain at key buy zones/short cover zones. However, for now we are just not seeing decent bullish confirmation. If we are to rally, these pairs must move higher and NOW. I show a potential short term breakout pattern in AUD below.
  • Asia continues to be a laggard as anticipated. Today, XJO tested Fridays low as did the Hang Seng. Both made higher lows. These could be short term double bottom patterns but obviously we will need a strong offshore lead for these to play out (joys of this timezone).
  • Any decent bounce in the upcoming fortnight in S&P500/DAX/EUR should be used to re-iniate big picture shorts in Asia. It is tough to try and pin point a level for now but simply we will need both price and time before initiating shorts. 
S&P500 Daily:
Retest of key trendline that holds. Bullish Daily reversal candle. Need to see breaks of 1325 to open up a bigger bounce. 

Tactical View: Looking for continued bounce up to 1340/1350.

S&P500 Daily ii:
Note I do not use Bollinger Bands in my own trading. My point here is that a buy signal has been triggered now that price has closed back into the bands after a climatic overthrow. I have noted a few examples on this chart in the past year or so. Obviously this could be an "outlier" event but the essential point is that we hit a price extreme, and buyers are now stepping in.

AUD June 15mins:
This is the key short term setup I am watching tonight. If risk is going to catch a bid, AUD needs to break out of this basing pattern. Last nights low once again tagged the lower end of the trendchannel line. We now need to see price recapture and hold 9770/9780 futures.


XJO Daily:
Certainly not enough evidence to call a low yet. The trend is down. Price has tagged the first major target zone but the first rally attempt was slapped down yesterday with more bearish follow through today. I don't have a trade here other than to look for good bounces to re-initiate shorts.

Hang Seng 60mins:
Like Australia, little confirmation of a low or turn yet. This trend down has been very powerful and there is no need to fight this. Note we have hit an interesting relationship between the initial waves down. Need to see bullish follow through to confirm.

A Shares 60mins:
In no-mans land for now