Tuesday, 19 June 2012


I continue to post at http://marketletters.blogspot.com.au/ and am only updating this blog from time to time. Pls keep reading and I value your support as ever.

I wanted to let the dust settle and gauge the early price action this morning before I wrote. Obviously at first glance it appears that the market is "pleased" with the results of the Greek elections with the Emini S&500 gapping up almost 10handles. Currencies have also gapped up but the EURO is slowly giving back all its gains which is bearish. 

I believe this price action remains part of the short term countertrend bounce scenario I have been stressing in my recent posts. These are difficult events to time and markets will usually go higher and for longer than one deems possible. The important thing to stress is that we have confirmed trend changes across Equity markets. Use this bounce opportunity in coming days to re-initate the bigger picture shorts for investors/position traders. Shorter term traders will just have to wait for this "risk on" mentality to play out for now.

  • The key market in this countertrend bounce scenario is the S&P500. Price has now clearly broken through my first target of 1330/1335 and this opens up a move to the next major resistance zone at 1350/1365. See the 60mins chart below.My line in the sand remains 1305/1310 cash.
  • A possible inverse Head and Shoulders/base pattern has been triggered. This actually targets up to 1380/1390 and thus would take most bears completely off guard. A similar violent squeeze occured in May 2011 before the big sell off. This is not my primary view but it is worth considering. 
  • Both AUD and EUR have rallied strongly and are now testing key resistance zones in an established downtrend. These markets bottomed before everything else and once again I believe we will see weakness in these pairs as a prelude to a equity top.
  • The Hang Seng is the strongest market currently in the Asian region. A solid base pattern and breakout has formed. An idealised short level would be 20k but I doubt we can rally that high. 
  • ASX200 has some catch up to do this week. 4100/4120 has been solid short term resistance. Looking for breakout trades in coming days up to 4200/4250. However, this remains the weakest market in the region and I would prefer to be short this vs other markets as a pair. 
  • A Shares/Shanghai composite broke through the key trendline but the sell off thus far has not been impulsive. The bigger picture remains bearish. 
S&P500 60mins:
Key overhead res zones. My tactical view was to look for bounces from 1280/1290 to 1335 then 1350. I believe this has almost played out. Strategic view is position short at 1350/1365, stops above 1400 for the bigger picture short. 


AUD Daily continuous:
Remains an overlapping mess. However, price has now rallied into the downward 55ema and previous support. There is also a potential downward trendline coming in here. 

EUR Daily continuous:
Flag pattern into resistance. A low risk short setup forming here. 


XJO Daily:
Short term overhead resistance at 4120/4125. Once again we are struggling to break above this today. Remains in a downtrend. Only breaks above 4125 would confirm a base pattern and continued move higher. Weakest market in the region. 

HSI Daily:
19,500 to 20k is the key res and short zone. 

A Shares Daily:
E leg of the triangle potentially complete. Only a move back above 2450 would put this scenario in jeopardy. 

KOSPI Daily:
Topping pattern, breakdown through support, now solid bounce back into the downward moving averages and established downtrend.