Moving Day

Today's post can be found here: http://marketletters.blogspot.com.au/2012/04/moving-day.html

Just to re-emphasise my action plan today, here are my trading thoughts for the SPI:

My SPI range today: 4305 to 4335. Outlier levels 4298, 4290 and 4340.

My Core SPI day trading ideas today:

i)SHORT fade 4315 early with tight stops. This is right into yesterdays highs and decent overhead resistance. If we fail to sell from here then we know that a breakout back up to 4335 is on the cards so flip to long.

ii)BUY a breakout above 4315. Look for a strong 5min candle above this zone. Target 4330s.

iii)BUY a retest of 4300/4298. Any early weakness into this support zone should be bought with tight stops.

SPI 5mins:

SPI 15mins:

Monday Morning Setups

For the first time in a long while, selling into resistance in the S&P500 worked. On Friday night I put up a great short setup into the 1385 resistance zone and this played out: http://swingtradersedge.blogspot.com.au/2012/04/ides-of-march.html

Emini S&P500 Setup:
This was the sell zone that I showed on Friday

Emini S&P500 60mins:
And this is what we got.

Right here it is a tricky one. We are right into the low end of the range and decent supports at 1355/1360. A number of things make me think that we will actually hold in:
i) The S&P500 cash does not look like an impulse from its Friday high
ii) Underlying breadth was not particularly weak. In fact, the no of declining issues was 2298 vs a high of 2618 on the 10th April and 2500 on the 4th. Clearly we are now seeing divergences
iii) Currencies did not really sell on Friday night and are now retesting big supports which I think they hold.

Thus, I have got out of most of my short position. I do want to hold some but it just doesn't look right for now. Having said that, the weekly close on the S&P500 was bearish in my eyes and we closed BELOW my key 1375/1380 pivot. Especially given my thoughts re the month of March, I do very much think that this will be a bigger picture pullback. Thus I am rather torn between the short and long term perspectives. For now, look to see how we act in the 1355/1360 Emini support zone.

 S&P500 Weekly:

Asia could be on the cusp of a Wave 3 down type moment. No doubt there are very rare but they are low risk short setups. I am not seeing enough confirmation yet to have confidence with these but it is no doubt worth having in mind if Europe and the US keeps selling in the short term.

ASX200 60mins:

I highlight a potential ending diagonal on Thursday and looking for possible long trades: http://swingtradersedge.blogspot.com.au/2012/04/thursday-plan.html. This played out but price was stopped in its tracks by the 61.8 Fib. If we give up the gains seen on Friday, I think this would be bearish indeed.



SPI 60mins:

You can see a clear retest of the neckline on the SPI futures that failed. We had a very sharp sweep up to the 45 level that was beaten down straight away. A blow out lower high?

A Shares 60mins:

A sharp rally has taken this market back into a great overhead resistance zone. This could be a possible ABC flat? A small gap down this morning but not enough confirmation yet of a new trend lower. I would continue to look for low risk fades here.

The next 24/48hrs will be very interesting indeed.

Thanks

Austin

Exciting Developments

Morning All,

Some very exciting personal developments are taking place. My long term friend and trading colleague, Rich Sexton at http://marketletters.blogspot.com.au/, is launching a new Technical advisory service and I have been asked to come on board to head up the Asian equity market analysis. We see a real opportunity to offer first rate analysis and trading opportunities for Asian timezone traders.  Analysis for traders written by real traders.

The new site is still someway off being launched and initially we will be focused on wholesale clients.
Until the new site is up and running, I will be posting at the marketletters blog with my usual analysis and focus that you read here. I will get a redirect feature setup from this blog.

This is a great opportunity for myself. I have always thoroughly enjoyed writing and sharing my analysis as an extension of my personal trading. Taking this to a new level of professionalism is exactly the career trajectory I want to take.

I have received so much great feedback from my readers here since the blog started. Thus, this opportunity would not have been possible without you the audience. Thank you. This is not a goodbye but obviously just a recognition of the support you have given me.

Running a bit short of time now before the open. I will put up a post later with more detailed market analysis.
Thanks
Austin

The Ides of March Update

Beware the Ides of March! A quick glance on google informs me that the "Ides of March" refers to a date on the 15th March on which Julius Caesar was assassinated in 44BC. A turbulent event no doubt. In this post, I wanted to highlight the effect that the month of March has on the stock market. I think you will be amazed at the turbulence it provides. Back when I worked for Morgan Stanley, my old trading colleague used to stress to me the importance of this month as a turn window whether it be an important high or low. The examples I show here will no doubt illustrate this. The key is the underlying sentiment as the window approaches.

As I analyse the global indices today, I am amazed once more at the influence of this seasonal window. So many markets have turned right into this and I think the evidence is growing for a significant top.

Firstly, let me show over the last 10years how the S&P500 has traded around the month of March. Lots of charts here but really this should be quite easy to scan through.

S&P 500 Daily March 2000:
The big 2000 market top that ended the tech bubble. Where did the S&P500 peak? Right into March. A initial 200pt panic sell off ensued.

Where did this initial sell off bottom? Right into March 2001

March 2001:
March 2001 proved to be a strong intermediate low. A 250pt rally followed.

March 2002:
March 2002 topped out a countertrend rally. A destructive sell off followed from 1175 down to a panic low of 780!

The wave 2 low and bottom of the bear market was....right into March 2003

March 2003:

March 2004:
Although not topping out the entire Bull market, certainly March 2004 led to an intermediate high and a 6month sell off from 1160 to 1060 followed.

March 2005:
Again, another important intermediate high right into March 2005. The market sold off quite sharply from 1230 to 1140.

When did the first rumbles of the US housing bubble emerge? You guessed it, March 2007. This time was associated with a panic low in the S&P500.

March 2007:

March 2008:
In 2008 we were on the onset of a crisis. The market put in a intermediate low back then in March 2008 as BEAR STEARNS was bailed out by the FED. Bearish sentiment was at a fever pitch at this point- cue bear squueze.

March 2009:
And just when things seemed their worst, just when it seemed like the financial world was ending as we knew it, the market bottomed in March 2009.

March 2011:
The Japanese earthquake led to a market top in February thus a bit earlier than the window. However, after a 100pt sell off, sure enough we bottomed right into March.

And so here we are now in March 2012. Bullish sentiment levels are at extremes. Underlying momentum and volume despite the run up has been deterioarting for many months. Each new high has produced weakening breadth readings. And finally we have seen a small pullback. Will this produce something more meaningful? I am betting it will.

S&P500 2012:
The cash high was 2nd April (futures high was 27 March). The correction thus far has been roughly 60pts. If history is any guide, expect a whole lot more down the line.

A quick look at other markets shows interesting tops right into March as well. The sell offs look impulsive.

Eurostoxx Daily:

Hang Seng Daily:

Nikkei Daily:

BEWARE THE IDES OF MARCH.

Thursday Plan

This is an Asian Trading blog. I am based in Sydney and my main purpose for setting this up was to share Asian trading setups and technical analysis. I didn't see enough blogs doing this and thus I really wanted to make an impact and provide some quality analysis of the region.

No doubt at times it pays to look overseas. Sure one has to be careful to not get involved in "analysis paralysis" and I strongly believe that you have to really focus on your underlying trading vehicle and market. Just focusing on the bearish setups in Asia coming into the end of March proved this point as we preceded the highs of the US: http://swingtradersedge.blogspot.com.au/2012/03/asian-daily-setups.html. Look how that Nikkei trade played out! If I had been relying on the S&P500 to make some of my decisions, I would have really missed out on what is going on in Asia.

However, this morning I have been looking at a few Daily charts in Europe and US. The more and more I look, the more I think that we really have seen a meaningful high in the bigger picture. Now may not be the time to short this but any strength in the next 2 weeks I think will provide a great opportunity. Note that March very often produces a major top or bottom throughout history. This has kinda snuck in.

Eurostoxx Daily:
This is clearly an ABC pattern. We have now seen overlap and thus this really cant be an impulse off the October lows. This topped right into a resistance zone and the sell off from the high is looking increasingly impulsive.

DAX Daily:
Clearly the DAX has been a stronger market. However, I can also make the case for a complete ABC move off the low topping right into res. Once again, the top occurred right into March.

S&P500 Daily:
Last night we held that generic trendline I had drawn. However, bigger picture we are trading below my 1370 key pivot. This count was shown to me by my friend at marketletters. Note the momentum divergences into the high AND breadth was also seriously lagging. I am not saying be short here, but a bearish picture is emerging.

RUSSELL Daily:
The Russell is often know as the beta index. What I find interesting is that unlike the S&P500, this market did not break above its May highs but topped some way short. This is a bearish divergence. Furthermore, we have seen a clear FAILED breakout. These are my favourite trading patterns and imply genuine weakness.

So there are a few things to think over. As ever, timing is everything and I don't think being short after the first big sell off is the best trade. I hope to update you as this plays out.


To Australia. Yesterday was another frustrating one as a day trader. We traded in a 15pt range for most of the day (despite a big sell off in the US). We then finally broke down in the last 15minutes of trade right into my target area.

SPI 60mins:

I could make a case for somekind of ending wedge pattern here. Clearly we are not breaking down impulsively like other markets for now and we are into a decent support area. Potential short term bounce coming but wait for confirmation.

XJO 15mins:

My SPI range: 4240 to 4280. Outlier level 4300.

My SPI day trading plan: We are indicated around 4260 on the open. This is right in the middle of the recent range and thus I don't have an early obvious trade. I will be looking to BUY 4245/4240 if we see an initial sell off and I will be looking to short fade 4272/4275 with tight stops. Note that there is also a possible outlier res level at 4280. Any genuine strength above 4275 (yesterdays high) opens up a potential move back into 4300 and higher. This would trigger that ending wedge pattern above. The trend is still down obviously so waiting for price to confirm is key.

Thanks
Austin

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

Happy Easter All

Morning All

Yesterday was a classic example of why trading the Australian stock market is just so difficult. We had an obvious breakdown through a neckline of a Head and Shoulders pattern and clear support. However, this led to a classic short term bear trap. I wrote about this my post as I expected as much: http://swingtradersedge.blogspot.com.au/2012/04/wednesday-plan.html. The market failed to breakdown and we grinded higher throughout the day, closing on the highs. And then as soon as the day session is closed, prices really start to sell off and we are now indicated below yesterdays lows! Tough. As much as I hate to say it, we are still very much pawns of our overseas brethren. That EUR short setup I talked about sparked all last nights weakness.

Thus you really have to make a choice as an index trader in this timezone. You either day trade and close all positions out at the end of the day. This way you cant be beaten up by offshore moves and you can comfortably turn off your screens at the end of the day. You are not going to catch the big chunky overnight moves and much of the trend, but equally your risk is quantified. The alternative is to swing trade the index and this will obviously require much wider stops. Your trade idea may be spot on but your overnight position will be at the mercy of offshore moves. You have to accept this. There will be many times when you will be stopped out unfairly or unexpectedly. Its tough. It has taken me a while to come to a realisation of what works for me in this timezone and I believe many traders need to undergo this process.

And so to today's trading. Obviously it is Easter Weekend and this will be the last trading session until Tuesday morning with a nice non-farm payrolls figure coming on Friday. I think it goes without saying that most traders will be shutting up shop and closing positions with this kind of headline risk. Thus, given that the weak overnight lead, it is very possible that we see some genuine selling today in Australia with "investors" not wanting to make any big bets here. This is just me talking out loud here so trade what you see.

SPI 15mins:
This is the fake breakdown I talked about yesterday. Very frustrating for most. I show this just as an example as I have seen this pattern time and time again. Its why I blogged about it yesterday pre open.

SPI 15mins:
More importantly, now that this "false breakdown" is over, it actually opens up the potential for a genuine move lower! Bulls who have bought into this zone repeatedly are now underwater and key short term supports have now dropped. The targets are 4300/4305 but more importantly down at 4270/80. That does look like one serious topping pattern to me.

XJO 60mins:
We are indicated at 4312 in the futures which is around 4300 for the cash market. Thus we are set to open BELOW that key breakout zone I talked about. The key will be gauging the early morning move. Any failure to bounce is bearish indeed. Note the 38.2 fib retracement from the high to recent low comes in at 4288 as a small outlier.

My SPI Range today: 4280 to 4325. Outlier levels 4330

My SPI day trading plan: Yesterdays low was 4318 and we are indicated below this at 4312. Straight from the open I would be looking to short against this level with stops above 4325. An ideal short level would be 4320 I believe. The target for any initial short is down to 4305/4300 and I will cover into there. There is a confluence of supports at 4300/4305 and I would not be surprised if we held in there for a while. Any failure to bounce out of there and I will short for a breakdown trade, targeting my 4275/4280 levels cited. Given it is the day before Easter, if we don't break 4300 than this could be a fizzler in the afternoon.

The key as per yesterday is gauging the early morning strength. Yesterday the cash market bottomed straight after the open and there were back to back bullish candles on the 5min charts. You have to heed this and don't fight it. Similarly today, if we fail to sell early than I will heed the markets message.

As a side note, the 200day moving average for the cash market comes in at 4293 today. Also every man and his dog will be watching BHP at $34. Just some pointers for you.

XJO Daily:
Breakout and retest. Just keep this on your mind. How many times has this been hit!!!

Wednesday Plan

Morning All,

A mixed picture as I look across markets this morning. The Emini S&P500 sold off sharply late in the session due to FOMC comments, but the key support at 1400 was held and there was a sharp snapback. Clearly that market is in a range now from 1385 to 1420 and we seem to be bumping along in somekind of wedge like pattern. As long as 1400/1397 holds I remain bullish and would continue to buy dips. Breaks of this open up a move back down to the low end of the range to 1380/1385. Trade the levels.

Currencies are giving me real cause for concern. Firstly to the AUD. Yesterday, we saw an impulsive sell off after the rates decision as it looks increasingly likely there are more cuts ahead. AUD is now testing key support for a 3rd time and in my experience, these 3rd tests are often the prelude to a breakdown. More importantly, each move lower is impulsive whereas each bounce thus far remains corrective i.e. this is a clear downtrend.

AUD June 60mins:
The original double bottom trade I posted on Friday last week worked BUT the bounce off the low has clearly not been impulsive and a lower high has been made bang on an A=C target. Now we are retesting supports and I would not be surprised if we see a genuine break here. Simply, look for breakdown trades below this level. My friend at marketletters made a very good comment that the whole move off the top is a overlapping mess and thus most people will think this is not a genuine move lower. Well these are probably the ideal conditions for a genuine breakdown. Pls read: http://marketletters.blogspot.com.au/

EUR 60mins:
I posted this chart a while ago and I believe we have now seen confirmation of a failed breakout. The catalyst last night was these FOMC comments. Irrespective, a clear base pattern was formed and price failed to move higher. This is a bull trap. Last nights sell off was strong and there has been no bounce thus far. You cant manipulate currencies as easy as stocks. I think this is the prelude to a new trend lower back down to those recent lows. I believe this is bearish for other risk assets.

A Shares 60mins:
I have not updated my A shares 60min chart here for sometime. This has been one of my best calls for a while. This market is still in a clear downtrend with strong momentum. Sure there will be a bounce at some point but these should be sold. Australia's well being is completely linked to this country and market right?

And so to Australia. Today is a difficult one. There is a Head and Shoulders pattern that I am sure every trader will be looking at. I hate these patterns as so many times I see them fail to play out and actually lead to great bear trap setups. All you can do is be prepared for this if the market fails to sell.

I just want to run through the charts to try to paint a clearer picture.

XJO Daily:

Breakout above the 200day ma. We are now retesting the previous breakout zone and this ma which is natural.

XJO 60mins:

4310 to 4320 should prove good support early today as per the chart below.

SPI 15mins:

However, we are indicated at 4325 early and thus below the neckline of this H+S pattern below. Thus, this pattern will be triggered first thing. The target would be down to 4270 and the potential gap fill.



Thus, I think we could see somekind of attempted breakdown early that actually holds in. I think the better trade is to short a bounce into that neckline after the initial foray is over.

My SPI range today: 4305 to 4340. Outlier levels 4275 and 4355.

My SPI trading plan: I will be looking to BUY 4320 early with tight stops. This should be a good area of support for the cash market and I think that there is the potential for a bear trap early given this H+S pattern. Obviously if I see bearish red candles on the open, I will not hang around and get short targeting 4305/4300. My targets for any bounce out of the 20s is into 35/40 where I will look for short fade trades and more aggressive shorts.

Trade Ideas:

1) BUY 4320/25 with stops at 4316/17. Buy the weakness early into support and if it fails to hold, then we are likely to be looking at a genuine move lower. I will cut and reverse if this doesn't work, looking for 4305/4300.

2) SHORT 4335/4340. Stops above 4340. This should be solid overhead resistance and a low risk short entry.

3) BUY scalps at 4300/4305 for tight trades only. If we fail to hold here than short once more targeting 4270/80.

A Fresh Start

Morning All

A new month, a new p/l, a new high for the S&P500, new personal enthusiasm, and now onto the next trade. I am sitting here and smiling away to a favourite song of mine right now aptly called "NEXT GIRL" by the Black Keys: http://www.youtube.com/watch?v=x_PrT25o8Vs&ob=av2e. Its awfully cliche but this really is the tune I need right now to move on and stay positive :)


The post I put up on Friday played out very well with the S&P500 cash making a new high overnight and the DAX rallying relatively strongly off the A=C low: http://swingtradersedge.blogspot.com.au/2012/03/month-end.html.

Emini S&P500 15mins:
This was the setup I put up on Friday. We saw the breakout above the downward sloping trendline and last night we tagged the target area. We did fall a bit short of the previous highs at 1420 whereas the cash did make a new high. Is this signalling divergence?

What is the next trade? In the short term, we are trading at the top end of the short term range in the S&P500. This could also be somekind of 3 Indians/ending wedge although I personally think this is more likely a consolidation pattern before another genuine push higher up to 1440/1450.

S&P500 Cash 15mins:
This is the chart that concerns me in the short term. We are no doubt approaching some solid resistance after a strong 2 day run up. I think it is possible we see one more push higher into the 1420s and I will be on the lookout for potential bearish reversal candles.
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The Emini S&P500 has sold off back into some supports. Thus I think the trade here is to look to buy once more around 1407/1410, stops below 1400, looking for a swing back up to 1420/1425. If we see real bearish reversal candles out of that zone than perhaps it is time to short.

Emini S&P500 15mins:

To Australia. Yesterday was a impulsive trend day lower. I havent seen a bearish day like that for a while. It was a classic gap up on euphoria and dump. Note that this happened right at the top end of the range after a clear 5 wave advance. Thus I think that we have put in a short term tradeable high and will be looking for fade trades in the next 24/48hrs in this market.

XJO Daily:
Bearish reversal candle right out of the top end of the range. A move back below that dotted line at 4300 would be bearish indeed and indicative of a false breakout.

XJO 60mins:
This is looking like a complete 5 wave advance with bearish divergences. These momentum divergences yesterday were a key tip off for that failed gap up. At a minimum, I would expect continued weakness throughout the week back into 4300.

SPI 5mins:
Yesterdays sell off was IMPULSIVE. We opened on the highs and sold off all day, closing on the lows. Thus I think the highest probability trade is to look to short this morning gap up into resistance levels. 4360 to 4370 should provide good short entries early.

Todays RBA interest rate decision at 2.30pm will obviously be the main event. The market has priced in no rate cut thus any cut will obviously be taken as a major positive for equities and bear this in mind.

My SPI range: 4330 to 4370. Outlier levels 4305 and 4380 on the upside.

My SPI trading plan: I will be looking to use this gap up early to get short into resistance levels. The bigger picture trend is up but I believe we have seen a climatic short term reversal. Using gap ups into resistance levels is a great low risk short fade setup. If we fail to sell, then look for possible breakout trades above consolidation to get long.

Core Ideas:
1) SHORT 4360, stops above 4365

2) SHORT 4370/4375. I am not sure if we will trade up this high but if the first fade level doesn't work, I will look to short this level more aggressively. Any move back above 4380 would clearly prove me wrong.

3) BUY a retest of 4330 and yesterdays low for a long scalp only.

Thanks
Austin