Party Like its 2007!

Morning All,

I haven't posted for a while as I have been away from trading screens and have quite a lot on at the moment. In my last post, I talked about a potential buying zone in global equity markets as a good risk/reward trade. We did see a strong bounce up to the 1295 res level and 4600 on the XJO with strong underlying breadth. However, this has been firmly slapped down once more given the overnight move. The character of this market has really changed. Every buy the dip spot is not working for longer than 2 to 3 days. In fact, to me it all feels a bit like the initial sell off back in 2007. Certainly there is a huge level of complacency in the market with the VIX only just breaking above 20 last night despite an 8% wash out from the highs in the S&P500. We saw this back at the highs in 2007. It takes time to transition from Bull market to Bear. The hardest thing to do in trading is adapting to changing market profiles. I don't believe we are on the cusp of a market collapse but I do see more weakness down into 1240/1250. The best shorting opportunities will come in my opinion a month or so out once this initial downtrend has ended.

I thought I would show a number of charts focusing solely on the S&P 500 to illustrate some of my points. To me it seems we may be re-living a fractal of the initial move lower in 2007.

S&P 500 Cash Daily 2007:
Note the 2007 top came with a "Double Top" or failed breakout. The sell off from this high was overlapping and stair-stepped lower, eventually bottoming near the August 07 lows. I believe we are at a similar juncture i.e. near the March 2011 low. It was only when the rally out of this level and wedge pattern failed, that the stage was set for a genuine trend change and bear move lower.

S&P 500 Daily Current:
Similar to 2007, the market failed to break above its previous highs. The ensuing sell off has stair-stepped lower. Every bounce has been short lived thus far. However, we are entering the low end of the range thus the best shorting opportunities are not in this area. If the 2007 pattern plays out, look for a breakout of this wedge type pattern and look for shorting opportunities higher up.

S&P 500 Daily off March lows:
The big bull market trendline comes in around the 1250 zone. I have also added the 200SMA and the 200EMA. I do not use these as trading levels but many market participants do thus it is important to bear this in mind. For a good read on how to trade these "classic" moving averages, please read this: http://highchartpatterns.net/buy-the-first-test-but-never-the-second/

S&P 500 Fib relationships:
There is also a strong confluence of fib supports coming in at 1235 to 1250. These are:
i) 1235- 38.2 retrace from the June 2010 low
ii) 1245- 38.2 retrace from the August 2010 low
iii)1250- 61.8 retrace from the Nov 2010 low

In sum, the S&P500 remains in a short term downtrend and I believe we will see more weakness in the ensuing days down to the 1250 zone. Price opened on its highs and closed just off its lows last night thus I would expect somekind of continuation at a minimum today. The bigger picture is looking eerily similar to the technical picture of 2007. If that scenario was to play out, expect a strong snapback out of the 1250 zone that fails at 1320-1330. The best shorting opportunities will be out of this strong thrust. In the short term, being nimble remains the winning play.


My biggest concern for this market is the EUR. Price has re-entered the previous breakout pattern and topped at a 76.4 retrace level i.e. a lower high and Wave 2 spot. Last night's action was bearish indeed and I believe there will be more follow through to the downside. Look for the recent lows to break at 1.40 and price to move to the upward trendline at a minimum.

EURUSD Daily:
The EURUSD topped at a 76.4 retrace of the 1.50 high to the 1.40 low. 1.50 is not a bad spot for a serious high

Some Elliott Musings

Morning All,

Looking like some inital positive follow through for the SPI this morning with night session closing at 4575. The key overhead resistance this morning is the 4580/4585 level. I will fading this level first with tight stops and then joining the breakout if there is somekind of consolidation pattern to play to define a low risk entry.

In my recent posts, I have been talking about buying supports in the low end of this range on the XJO and keeping it tight. I don't think there is a good risk/reward payoff for being short here and I continue to believe this. Remember the Tudor quote :)

I read a very interesting article the other day which ehoes some of my thoughts on the US markets more succiently: http://zortrades.com/bounce-or-flash-time-for-the-sp500/. Last night we had our first green day in the US and I am hoping for some more folow through should 1295 on the Cash index break to the upside. My 1277 buy level on the Eminis was a good one thus far.

Some quick charts for the Ellioticians out there:

S&P 500 Cash Daily:
Fib relationships between the waves, Wave 2-4 Alt, price now hitting the trend channel. This could quickly be invalidated but I like this buy zone.

S&P 500 60mins:
Possible A=C move at 1280. Low risk area to buy for the bottom fishers.

S&P 500 15mins:
Big bullish divergences leading into last nights low. Momentum precedes price. Potential base forming and watch these levels

End of day summary- downtrend continues

Good Evening All,

The ASX200 failed to mount any kind of bullish follow through today and the downtrend re-asserted itself once more. The inability for the market to stage any bounce or follow through in the first 30mins was a lead indicator. From a day trading perspective, buying supports and shorting when it drops continue to be the name of the game. I still believe that we are trading at a great support zone in the bigger picture thus I don't think this is the area to be pursuing short trades from a risk/reward perspective as a swingtrader.I put up a quote today on twitterfeed from one of my favourite traders, Paul Tudor Jones: "I develop idea on the market and pursue it from a very low risk standpoint". I feel this is particularly apt in this current market.

XJO Daily:
It has been a real volatile ride for the Australian market this year. We are now trading right at the low end of the range once more. There was no follow through from yesterdays hammer candle but there are support levels a plenty from 4475 to 4550. We just have to be patient in this zone.

SPI 60mins:
This downtrend has proved very whippy and volatile. Price has made a new low once again but is trading at the low end of the recent channel. Consider swing buys on breaks above 4585/4600.

SPI 5mins:
The market built a range in the first 30mins today with little follow through from yesterdays bounce. As the morning range broke, a strong sell off ensued taking out the 4555/4560 support zone cited on twitter. Get short when support drops. Nice shout out from Simon at 4520!

The pattern is not particularly clear to me in the short term. Support is 4500 and 4520 with resistance at 4545/50 now.

Financials Daily:
A inside day formed today in the solid support zone. Look for a possible expansive move higher tomorrow if we take out Tuesday's highs.

MQG Weekly:
I am hearing a lot of doom and gloom for MQG right now. However, there is actually a very interesting confluence of support from 30 to 31.50. The chart below shows the 61.8 fibonacci retracement from the 2010 high to 2009 low.

MQG Daily:
There is also a fibonacci relationship between the major waves down from the high. 30.50 is a level where C=1.618A. Note also that the 30 level was a key low in May 2009 bfore the strong lift off. There are strong bullish divergences in place currently.

Shanghai Daily:
Shanghai continues to put in a constructive basing pattern at this support zone. Is this a lead indicator for markets? There is an aggressive entry above the recent highs but the big level to me remains at 2850 which this market must clear.

In sum, the market continues to make lower highs and the trend down remains in force. However, we are trading right at the low end of a solid support range and the market is getting quite oversold. For aggressive traders, this remains an area to look for buy setups and low risk setups. If bounces fail to materialize, be quick to cut positions as ever.

Thanks
Austin

p.s. Looking for a low at 1277/1278 in S&P 500 Emini futures tonight based on fib relationships. Write that down :)

Buy the dips, Sell the rips

Good Evening,

I put out a rather bearish post on equities after the US overnight sell off on the 1st June: http://swingtradersedge.blogspot.com/2011/06/1st-day-of-month-ouch.html. For the first time in a long while, a strong initial breakout from a solid basing pattern failed to lead to a sustained move higher. This was a warning sign for weakness ahead. We have seen subsequent bearish follow through with the S&P 500 approaching my first target of 1285/1290. I believe it is far to early to call this a major bearish trend changeat this stage. A change of trend would only be confirmed to me if price closed below the last intermediate low i.e. the March lows at 1250.

I think we are seeing a natural rotation out of risk assets as we approach the ending of QE2 and as the financial situation in Europe intensifies. It is unfortunate to be on the receiving end for our Asian markets but it is the reality of this coupled world.

Tome,the best strategy to be followed at this stage is buying the dips and selling the rips, and being more short term until a clear trend does emerge once more.Looking through the charts, it appears we may be at another opportune time to buy the dip in the short term. The XJO is approaching the low end of a major range defined over the past year or so. As traders, we buy support and sell it when it fails. Today's action was encouraging with a short term double bottom pattern and a hammer on close. It is early days and the short term trend remains down, thus be nimble off these support levels.

XJO Daily:

SPI 5mins:
I called out the 4545 as good support today on twitter and was looking for breaks of 4555 for more bullish momentum. This worked out well today. This double bottom trade is indicative of base building once more.

Oz Financials Daily:

The Financial broke the recent trendline I had in place but are also right into the low end of the range. Note that price has fallen in a sharp ABC pattern where A=C. A hammer formed today and thus a tradeable low is in place.

Shanghai Composite Weekly:

Shanghai Composite has been a real regional laggard. I showed a number of key levels in the 2800 region that went some weeks back. However, looking at the weekly chart, it appears that price is respecting a major trendline off the 08 lows. I don't believe this is tradeable for now but bear in mind that price is holding in here.

Eurostoxx 60mins:

Eurostoxx June is testing it's previous lows here. Bullish divergences are in play and the setup is ripe for a Double bottom trade with tight stops.

In sum, we have seen some genuine selling since the 1st June warning. It is too early to be calling this a major bearish trend change at this stage but certainly breadth has supporting the move lower with initial supports at 1310 decisively breaking. Despite this, I am looking for tradeable lows here out of 1285/1290 and then 1250.

1st Day of the Month- Ouch

Morning All,

Well I certainly wasn't expecting that overnight. Perhaps I have been somewhat complacent after seeing a great turn out of my buy zones. 1345 in the S&P Eminis and 4740 in the SPI were my first targets but I was anticipating a much higher bounce in the upcoming days. We may not get that.

A few things from last nights session in no particular order:
i) European Indices closed right back down into their previous base zones. This is bearish and indicative of a failed breakout. I for one thought we had seen a strong range expansion but price has swiftly reversed. There is no new low yet but this is bearish.

ii) Breadth in the US was solidly bearish. NYSE Declining issues closed at 4.3:1 vs Advancing issues on strong volume of 1.1bln issues.

iii) High beta US indices noticeably underperformed with the RUT -3%. The S&P 500 opened on its high and closed on its low with no bounce of any sort. I would expect somekind of continuation of this move at a minimum.

iv) Last night was the first trading day of the month in the US. The performance on the first trading day often sets the tone for the rest of the month. I showed an interesting chart reflecting this on my previous blog and I will dig this up.

v) Price failed to hold above the declining wedge pattern. Thus, it looks like a bull trap has played out here. No new lows have been made yet but if 1313/1315 breaks on the Cash index, I think we could be looking at a much larger and deeper move right down to 1290 and possibly even 1250.


I hate to turn bearish after 1 night of action especially given no new lows have been made. However, the stage was set for a good rally after a long drawn out overlapping corrective move off the Osama top. The rally has now quickly been beaten down. Any break of the recent lows will open up a lot of selling.

In the SPI/ASX200 today, we must always trade our own market based on its own characteristics. We are looking at a possible 70 to 80pt gap down. Thus, my gap strategy is firmly in play today but I will be very wary of any failed rallies in morning trade.

Support levels of interest:
i) 4630/4635- this was the previous key pivot on the 25th and 26th of May leading to the recent breakout. The night session also closed here overnight.
ii)4615- open gap but this is a minor level I believe
iii) 4600- round number support. I will be playing this

Resistance levels:
i) 4650

I will leave you with some charts showing my concerns:

Emini June 60mins:
Failed breakout

Dax June 60mins:

Good Luck
Austin

European Update

There was an interesting comment on Twitter feed today with a trader considering shorting yesterday's breakout gap in the Dax, looking for the gap to fill. I often use a similar gap trading strategy and this did occur today in the ASX200. However, in this instance, I believe this is a real low probability trade given the recent base pattern that has formed in this market and across many others. When there is a genuine range expansion out of such patterns, the market is giving a loud signal of genuine strength. You must go with that move. Ranges beget price expansions. I thought this made for a good post and to show my current European setups.

DAX June 60mins:
Here is the recent 60min base pattern that has formed over the past 4 to 5 trading days under the 7200 level. Yesterday we saw a gap up that consolidated and continued to trend higher. I would not be fading this but looking to join the trend via retracements. Note the strong bullish divergences that formed on the low vs price. This market has transitioned from downtrend to base and is now breaking out in a new uptrend- once again don't fade unless scalping.

DAX June 60mins:
The bigger picture pattern is a clear corrective move off the high. Note that the low was formed at a perfect C=1.618A fib relationship. This implies a thrust right back up to the highs.

Eurostoxx 60mins:
I have showed this setup many times over the past few days. This is the "heart of the crisis" and yet the whole move off the high has been overlapping and corrective. Like the DAX, there has also been a strong breakout from a solid base pattern under 2800/2825 and the targets for this move are 2900 and beyond.

EURUSD Daily:
This pair was my major concern for the market. It is quite amazing but price has managed to hold the low end of the pitchfork posted here some weeks back (there was an overspill no doubt). The picture was looking scary but the 1.40 level held like a dream. Here is my initial post: http://swingtradersedge.blogspot.com/2011_05_16_archive.html

EURUSD 60mins:
We could be possible looking at a very good base pattern under the 1.445 level. I will be looking for a possible breakout trade in the ensuing days up to 1.46 and beyond.

In sum, I believe the higher probability trade is to go with the range expansion and gap after a solid base has formed. As traders, there is this tendancy to short something after it has had a strong move higher- I think you have to do better than that and really understand the market context.

Thanks
Austin

Targets For Ze Rally

Morning All

I received a very flattering email last night from a reader and I thought I would re-publish here to start the post:

"I’ve been following your Blog mate and it is so impressive.The content and presentation are first class so well done and I hope your analysis is paying dividends.

Why am I writing? – I’m not really sure other than to say how impressed I am with the huge amount of work that clearly goes into it each and every day. I will certainly recommend it to those who deserve it!

Well done old boy."

Thank you. Receiving emails like that really makes writing this worthwhile. I started this blog first and foremost to help my trading by structuring my ideas and setups. I also wanted to reach out to others who trades these markets in Asia. No doubt trading can appear a rather insular world at times. By communicating with others and by relating experiences, I believe traders can gain enormous value not only to improve trading but to alleviate a lot of the loneliness associated with trading. We live in a social networking age thus we should be using this to our advantage. 

And to the markets. This morning the SPI is indicated at 4735 which is almost at the open gap at 4740. Thus the Eminis and SPI have reached my first target levels. There are an array of targets from here all the way up to 4850 for this bounce. My plan is to focus on this uptrend as I really don't know how high or how quickly this move will materialise. Bear these levels in mind and look for possible reversal candles for short term scalps only. The bigger picture is bullish for now and let the experiences of the move off the Feb/March low be a guide. 

ASX200 Daily:

These are the Bollinger bands I showed the other day which were a major source for my contrarian bullishness. As you can see, once a BUY signal is given (a close back into the bands), price has a habit of snapping right back to the other side of the upper band. This would coincide with roughly 4800+ currently

SPI Futures 60mins:

I believe the major target is 4800 which is the big round number and the former breakdown level. Note the 61.8 retracement level also comes in at 4850. All these are reasonable targets for this move. 

SPI 15mins:

Today note there is resistance at 4740 i.e. the open gap, and former highs from 4770 to 4780.

My plan today: We are looking at a 20 point gap up from yesterdays close at 4711. Thus my Gap strategy is in play this am. I will wait for the first 15mins to trade and buy or short breakouts from this morning range. Certainly, we have risen quite rapidly over the past few days so price may need to consolidate or fill the gap before moving higher. However, let price action do the talking. I will also be looking for possible fade reversal trades at 4770/4775 and I will be looking to buy support at 4710 and 4700. Any ST consolidation patterns should be used to get into this trend.

Just as a reminder, the chart below shows how the rally manifested itself in March this year. No pattern ever plays out exactly but I show this to show the importance of following the TREND once it becomes clear we are in a new phase. We do have target levels but they are merely that. Never let your eyes off the underlying price action

SPI 60mins March 2011:

I have some other interesting charts across various Asian indicies. Got to hop now but will post later

Thanks

Austin

Wedge Breakouts Confirmed

Recently I have been showing some great risk/reward BUY setups in the S&P Emini 500, the Eurostoxx, AUDUSD and the ASX200: http://swingtradersedge.blogspot.com/2011/05/when-crowd-panics-keep-your-head.html AND http://swingtradersedge.blogspot.com/2011/05/let-snapback-begin.html.

I wanted to now update these setups to show how they have played out. As I write, we are now seeing strong follow through indeed. The initial entries are now over, managing the position is key.

Eurostoxx 60mins:
A strong base pattern formed, 2800 has been recaptured and we are now testing the final downward sloping resistance line after todays gap up. Look for breakout trades to add.

Emini June 60mins:
A great long entry was identified at 1310 and then above 1325. We are now seeing a strong breakout indeed. Watch the overhead previous resistance levels at 1340/45 in the short term. I think we are still going a lot higher however.

AUDUSD 60mins:
Breakout of the wedge pattern after the "E" low reversal. Bullish divergences lead the price action here.

The initial entry triggers for these patterns all occurred over the last few days. It is only now that we hear of "Greek rescue packages" and the like which add fuel to the fire. As ever, price leads and hopefully these recent posts have clearly illustrated this. Most importantly, I hope you made money.

Thanks
Austin

Let The Snapback Begin

Morning All,

Yesterday's morning post proved to be timely and effective: http://swingtradersedge.blogspot.com/2011/05/when-crowd-panics-keep-your-head.html. There was a strong gap up in Australia and the market built on these gains throughout the day. Scanning across my Australian charts, I believe the stage is set for a strong snapback up to 4800 and possibly beyond.

Let me just run through some of the charts I showed yesterday and update:

ASX200 Cash Daily:
Price closed outside of the lower Bollinger band highlighting a panic extreme. Yesterday we closed very strongly back within the band which gives a BUY signal according to this system. Very nice bullish reversal candle. Note all the previous occurrences over the past year or so have seen very strong rallies in the following days.

Financials Daily:
Strong bounce and wide ranging candle right off my target area. Note the completely engulfing candle. The higher degree trend is down so this is a short term long swing only

Materials Daily:
Price once again hit and respected the upward trendline. Would need some more confirmation today for me to confirm a strong low in place.

AUDUSD 30mins:
A great recovery out of the low end of the wedge pattern and the initial long entry shows some good gains. Watch this downward trendline carefully for confirmation.

SPI June 30mins:
A clear 3 wave push down lower followed by a strong initial bounce. This is one of my climatic reversal patterns and I am looking for a bounce higher back into 4800 once more and possibly beyond.

As for overseas markets, the markets that I had labelled as Good in my good, bad and ugly post, just got a bit better. http://swingtradersedge.blogspot.com/2011/05/bull-trap.html


Eurostoxx 60mins:
This is the height of the current crisis. Well this pattern looks clearly corrective to me and price has recovered the 2800 level. Price needs to now break beyond this open gap area for a clear long signal and change of trend

Emini S&P 60mins:
A great recovery out of the low end of this wedge pattern. Resistance at 1325 broke yesterday and I am now looking for a break of the downward sloping trendline to confirm a more meaningful low

In sum...buy it. Aitken probably went long on the low yesterday :)

Thanks
Austin

Day Trading Gaps

I thought I would write a post match analysis given that today was an ideal illustration of my morning Gap strategy. I called this out on twitter throughout the day but I thought now would be an opportune time to go through this more thoroughly. As I said the other day, I am in the process of drawing up a Day Trading programme and setups like this are an integral part of my Day Trading plan.

From the outset, nothing here is particularly new or revolutionary. Countless traders have devised strategies on opening gaps and morning breakouts most notably T.Crabel and M.Fisher. This is my take on what works for me through my own testing and experiences trading the Australian market. It is very very important to have a plan to trade these morning moves as they often set the tone for the rest of the day.

A Gap occurs when the cash session opening price is greater or lower than the previous days cash session, creating a "gap" in price levels on the chart. Given the futures markets are almost 24hrs, I always have my SPI futures chart setup to mark the beginning and end of the DAY session only to show these gaps. I switch off the night session trading which is based on a completely different set of influences. I suggest you do the same if you are an Australian Day trader.

Gaps represent emotional extremes. To me, they are so important because they tell us a lot about the upcoming market action for the day and offer great trading opportunities. A strong gap up that holds and consolidates in the morning is bullish, setting up strength for the rest of the day. Conversely, a gap up that finds little support or buying interest in the first 15mins is a candidate for a pretty sharp reversal. In essence, a gap is either going to hold or it is going to fill. Keep it simple. Have plans for trading both.

Here is today's intraday chart:
SPI June 5mins:

As per my twitter feed, I went long at 4634, sold half at 4645 (at the previous days high which was v.v. lucky) and then held rest for end of day getting out at 4655. No doubt there are areas for improvement and subsets of trading this, which is also partly the reason I write this.

The system in essence:

Entry- 2 ticks above the morning range. Range is defined by the first 3 opening candles

Stop- 8 to 10pts. Need to give it enough room without risking too much. 

Exit- Hold to close. Partial out if need be. 

Here is what transpired: 

1) Entry- Wait for 15mins to trade and for the first 3 five minute candles to close. Note the very strong opening 5min candle today was a lead indicator of genuine strength. I then place a buy stop 2 ticks above the intraday high and a sell order to short 2 ticks below the intraday low. Filled at 4634. There was no indication at all from price that this gap was being rejected. (Some traders would like to go earlier. Again, this is what works for me).

2)Sold half at resistance- only a small initial move but I like to immediately lock in quick gains especially into yesterdays overhead highs on a partial amount. However, the key is to hold at least a partial to the close. We are aiming for a strong trend day.

3) Retracement and then 1.30pm breakout to upside once more. Aggressive traders would have seen that the 30s dropped but soon recovered. There was a small trendline break thus could have added/bought back here.

4) Break of intraday highs at 4645 setting up a strong run into the close. Add

5) Exit- let the market take you out as it moves higher into the close. This is the hardest thing to do but the KEY for success. Large range days will close at or near the high if it is an up day so you have to able to extract the most amount from this. As L.Williams says "..for short term traders, to catch a winning trade, the most profitable strategy is to hold to the close".


Thats it. This is not meant to be hindsight but a run through of a powerful and simple trading setup. Trades like this happen quite frequently in Asia given the overnight moves so you have to have a plan.

Would value any feedback, comments or questions as ever.
Austin

When the crowd panics, keep your head

Morning All,

On the twitter feed yesterday, there seemed to be A LOT of panic and all the charts that were posted were forecasting huge breakdowns, iii of 3 downs, crash etc. I picked up on particular comment where an astute trader said "IMO everything is looking cataclysmic to me". Now I am not trying to be a hero as picking a bottom is fraught with danger and some of these points raised were very valid. However, the important thing to gauge from this is that in these situations, it is very very likely that the crowd and the market will be FEELING exactly the same. Everybody is looking at the same charts and the collective social mood will be wrapped up in this bearish mentality. This is the worst time to trade. In fact, these are the exact moments when you have to be prepared to do the uncomfortable and fade the crowd. Sure enough there was quite a sharp snap back last night. I believe there is a genuine possibility of a bear squeeze to come.

No doubt I tried to call on a turn on the 16th May and this was short lived: http://swingtradersedge.blogspot.com/2011/05/turning-point.html. However, by identifying low risk opportunities with the correct stops, no damage is or was done.

The S&P Emini futures did break the wedge type pattern I posted yesterday during Asian hours. However, there was a very strong recovery and the downward trendline was recaptured. This is indicative of a solid bear trap. Note also that there are Fibonacci relationships in place between the waves that indicate the end of this corrective pattern. More confirmation is needed but I like this as a low risk trading opportunity. That is what we do as swing traders- keep identifying low risk areas to get into the trend. We never know which one will play out but the winners will far outweigh these small loses as long as you are obeying the stops.

Emini S&P 60mins:

Interestingly, AUD also manged to recapture the downward sloping trendline I had in place. This could be irregular type triangle or a wedge pattern. No matter, we now have a failed breakdown, a bullish inital price reversal, momentum divergences in place and a clear corrective pattern. Low risk entry here or wait for price to clear the downward trendline.

AUDUSD 60mins:

I thought I would quickly show the Australian Sector indices as they are coming into some very interesting areas of support.

Materials Sector Daily:
2 Signifcant trendlines coming in here

Materials Sector Daily Zoomed in:

Financials Sector Daily:
This sector does look rather weak with a lower high in place and a strong thrust lower. However, we are now approaching the low end of the range and a 61.8 fib retracement. Time for a pause and possibly look to buy oversold names on confirmation for a short term swing only.

Energy Sector Daily:

ASX200 Cash Daily:

I find this chart very interesting indeed. Firstly, the market is approaching an upward sloping trendline and natural area of support/the low end of the range. This is not the time to be initiating new shorts Furthermore, I have overlaid some simple bollinger bands over the price action (2 Standard Deviations). As you can see, when price closes or trades sharply out of the lower end of the bands, there is a strong buy signal once price closes back into the band. This represents panic as the market loses its head and the rubber band snapsback. We are approaching a similar juncture.

Certainly, this kind of market action across asset classes calls for ALL traders to be incredibly nimble and careful. Don't get married to a position for too long. However, I do believe we are seeing an emotional extreme in the market place which offers yet another great risk/reward buying opportunity. Some markets look quite horrible (most notably China) thus I am certainly not forecasting a strong impulsive move back up to the highs yet. However, being a trader is all about identifying low risk/high reward setups. This is another one of those opportunities soon I believe.

Thanks
Austin

Day Trading the SPI

A lot of my trading energy of late has been spent day trading the SPI on the SFE (ASX200 futures). I have been registering some really good results of late and I am in the process of writing up a more thorough Day Trading programme for trading this market. This is not just a programme covering trading setups but encompasses the characteristics of our market and the essential skills needed. I think this will be of great interest to many readers here and those on the convore chatroom who are day trading Australian stocks. I genuinely believe that successful trading is all about skill development, having a back tested trading plan, and discipline. This is even more apparent in Day Trading which requires a very particular skillset. It is my hope that my programme builds on all these areas and will be of great value not just to myself, but for others.

I do gain a lot of inspiration from the works and teachings of SMB Capital, a proprietary trading firm in the US that is a real pioneer in trading development and education. Why can't this model be replicated here in Australia? It certainly can. I write this blog to offer educational material and I hope to take these initial steps even further. Yesterday was a great trading day in the SPI. I called out some of these setups on twitter  and missed others. As ever, I find so much value at the end of the day from studying my recorded video via Casmasta and the charts. Look at this 2min chart below and ask yourself how many of these setups are in your trading repertoire? When you combine these setups with strong trading skills and the ability to read the order book, you are on your way for a truly profitable trading career.

SPI 2mins:

1) Fading the morning gap down- these trades play on the herd behavior and panic. Target is yesterdays close i.e. the open gap.
2) Joining the downtrend to get short- the morning rally ran out of steam at the moving averages. Note the bearish reversal candle right at the gap target. Short as supports break.  Higher timeframe trend is firmly down (see 60mins chart)
3) Cover short at previous intraday low- possible low risk Long at these level? Stopped out
4) Buy major support- the SPI is always defended at the round numbers. I called out size on the bid at 4601 and 4600. A real low risk play
5) Breakout play- strong thrust off 4600 with a higher low formed. Buy as price makes a new high thus defining a new uptrend. I called out big offers at the lows 20s- once they lifted we were off back to the 40s.

SPI 60mins Downtrend:

Thanks
Austin