FX Update

There has been a lot of volatility in the FX markets over the last couple of weeks and I expressed this in my post about trading bias: http://swingtradersedge.blogspot.com/2011/05/bias-in-trading.html. I am seeing a number of interesting developments currently and thus I thought this would be an opportune time to post.

Firstly, the USD index certainly seems to have put in a meaningful low on the Daily chart. The recent move has been strong and impulsive, with a sequence of very strong wide-ranging candles implying a shift in trend. The initial trade is done however. No doubt there is a huge short base out on this index and this really is the driver currently as positions are being unwound. Similar to March 09 in Equities, this is going to go as high as the short base determines. I don't know when that is.  I do have short term levels and potential targets coming in here but the key is understanding the shift in momentum in the bigger picture.

DXY Daily Continuous:
The break of the December 09 low proved to be a strong bear trap. Price has regained the 74/74.5 breakdown level with real strength. This is a strong, big-picture Double bottom pattern

DXY Daily Continuous:
Zooming in, the strong thrust off the low looks a lot clearer. Note the bullish divergences that formed prior to the low and the subsequent price confirmation. Price has formed a clear V bottom and broken out of a downward trendchannel. We have hit a target at the 38.2 but it remains to be seen if this is meaningful.

DXY 60mins:
This is the first bit of evidence I look at to suggest that the rally may be cooling somewhat. Price has made 3 higher peaks with my momentum indicator making 3 lower highs. This is a major warning sign and an ending pattern I see time and time again across markets. See USDCHF on the 5th May on the 60mins as an example of a 3 peak ending pattern.

EURUSD 60mins:
This is the similar pattern for EURUSD. It is still early days and we need to see confirmation from price given the downtrend. However, price is looking good for a reversal here especially at the major psychological 1.40 level. In the bigger picture, I would be looking for a good bounce back up into the 1.44/1.45 level to short but that is someway off yet. For now, focus on this potential breakout trade.

EURUSD Daily:
Price is also coming into potential channel support on the Daily. The mid line served to be a very accurate area for the recent high and now we are entering the low end of this channel.

I am seeing some signs of life from AUD which add weight to a slowing of this USD move. AUD has held the 1.055 level on several attempts and I believe this is a tradeable bullish area for nimble traders. Note the strong bullish divergences in place. A bigger picture triangle pattern may be forming so being nimble around here is key until 1.075/1.08 lifts.

AUDUSD 60mins:

AUDUSD Daily:
Price topped recently on peak momentum. In my experience and in my extensive studies, markets very rarely top on peak momentum readings. There is often a subsequent "test" or a failed breakout leading to bearish market divergences. This has not happened yet. Price has retraced to the 38.2 retracement level and hit the rising 55 ema. I think this is a good area for swing longs. I don't think this is cooked yet in the bigger picture.

GBPUSD Daily:
In quite opposite fashion to AUD, GBPUSD appears to be very weak indeed. After months of building a range under 1.63, price initially broke out only for higher prices to be violently rejected. Momentim has gone nowhere. This is a failed breakout and I will be looking for failed rallies and bear flags over the coming weeks to get short.

In sum, USD appears to have put in a major low but is potentially running out of steam in the short term. Some markets like EUR and GBP appear to have put in major tops whereas AUD could well have another assault at its highs and beyond. I think this is all in line with a major market topping process and dislocation as we approach the end of QE2 come June. These mixed signals across asset classes and the strength in the US 10YR imply real dislocation. Trading each market based on its own individual merits and setups is more important than ever now I believe.

The Top or Consolidation?

Going through my charts this weekend, I saw a number of consolidation patterns forming across a number of Equity markets. Certainly, the sell off in some assets such as EUR, Silver and Crude Oil does look impulsive indeed. Yet, Equities seem surprisingly resilient in the face of this. Dislocations like this are not a healthy thing no doubt and thus it could be argued that the equity market will be the last shoe to drop. I don't think we are at this point yet. The consolidation patterns I am looking at imply yet another surge higher and I believe this will coincide with even more dislocations and divergences similar to 2007. Either way, this will be quite a key week for markets as the low end of the range and supports will be tested. This need to hold.


S&P500 Daily: 
A simple Daily chart of the S&P500 shows 2 vanilla trendlines coming in right here. I have marked a target box here illustrating this potential zone of support from 1320 to 1330. The 55 exponential moving average is rising and also comes in right at this area. If we can see a bullish reversal out of here, I will be looking for a potential move up to the 1400s which may set up a "3 Indians" or 3 peaks topping pattern of some sort.

S&P500 60mins:
Short term, price is testing the low end of the recent range. I think we will see more weakness before a meaningful low ensues. An ideal bullish scenario would be a break of 1330 down to 1325 that fails to follow through. Any strong hammers or strength back above 1335 would be a good initial signal to get long, adding above the downward trendline in place. Note there is an open gap at 1320 and a potential A=C projection at 1319/1320.

Nasdaq 100 Daily:
The Nasdaq has been holding up remarkably well and I believe this is a strong bullish indication. We are building a short term consolidation pattern or flag at the top end of the range. Buy the breakout or short the breakdown. Simple as that and WAIT for your signal.

And to Asia. It appears to me that many markets are also tracing out consolidation patterns or triangles of some sort. Indeed, there has been no urgency yet in any of these markets to go higher or lower in fact. These patterns all imply more work to do before we can confirm that the uptrend is healthy once more.

BHP Trendline

BHP Daily 2009 to Present

Friday's lows right on the trendline. Zoom in to see how well this was respected. Kinda key?

Bias in Trading

I haven't posted in some while. To be honest, this is because I have been plain wrong of late with most of my bullish setups and scenarios swiftly wilting away. Some of my support areas have worked but the bounce thus far has been anemic. In perfect hindsight, this is one of those moments as a trader when you say to yourself "I should have caught that move" or "that was so easy, why did I miss that?" And this got my thinking of a great post that no doubt happens to us all- the bias we fight as traders. Not just bias in regards to the way we view the market whether bullish or bearish, but also hindsight bias with our desire to seek patterns and order in retrospect. No doubt this delves into Trading psychology which is not my speciality, but I believe it makes for interesting reflection.

First things first. I was looking to buy pullbacks into the trend in a number of markets- AUD, the ASX200, and the Emini S&P500 etc. I saw markets breaking to new highs on strong momentum, I saw markets shrugging off countless bearish news headlines which implied genuine strength, and I saw this price action coupled with good underlying breadth. Thus, when presented with 2-3 day pullback into the Daily trend, you bet I was looking for the retrace trade and pullback trades. I spelled this all out here: http://swingtradersedge.blogspot.com/2011/05/dont-fight-trend.html and http://swingtradersedge.blogspot.com/2011/05/asx200spi-bullish-pattern-developing.html

I focus here on AUD but similar events happened in the Eminis and the ASX200. AUD went from 1.10 to 1.08 and I looked for the bottom. I looked for hammers, flags etc to get into the trend. All I was thinking was bullish bullish bullish despite the 60min trend being firmly down. We bounced and failed. 1.07 was the next stop and still I looked for that bullish turn. This level lasted for a couple of hours before once more we cracked lower to a low of 1.055. All the while I was looking for that low and we had fallen almost 500 points! Thus my bullish bias had actually kept me from following the short term trend and making significant money on the downside. And by the time AUD hit 1.055, I had completely given up and suddenly thoughts of an AUD top entered my mind. No doubt that was the low and I was not prepared to make that long trade anymore. I didn't lose any money here other than perceived opportunity costs. I was not so fortunate in the Eminis where I stepped in only to be viciously stopped out.

There are a few things to gauge from this. The simple fact is that when markets become exceptionally volatile (which they certainly have over the last week), they make large moves. Large moves to traders appear like incredible opportunity and naturally, we get angry at ourselves when our results don't reflect this opportunity. We begin to regret our actions and express our frustration via "should have" and the like. As humans, we inherently try to make sense of the world. However, the key thing to understand is that markets are highly unpredictable and ambiguous. Really anything can happen and no edge or strategy or setup will work every time. Thus, missing a 500 point move down in AUD is not necessarily a bad thing if this is not in accordance with your trading plan. And I have realized it wasn't. There wasn't a clear topping pattern, there wasn't a process of distribution, the Daily had made a new momentum high and I don't fade these type of moves. In strong bullish trends, I look to buy the retrace. I have made the retrace trades countless times throughout this bull market and they have been highly profitable. It is not going to work all the time and thus I shouldn't be getting upset.

One of my favourite quotes by Brett Steenbarger so eloquently sums what I am trying to say here: "Given the limits of what we know and what is ultimately knowable, not all movement is opportunity. The  key to trading success is finding the patience to capitalise on those things you do know and the wisdom to except what is uncertain". 

In regards to market bias, no doubt this clouds ones ability to see other setups or price action that is the antithesis of what is expected. Indeed, whilst I was busy anticipating my AUD and Emini long setup, I completely missed a breakdown trade in EUR which was a very valid setup in my trading plan. I don't often put on pair trades and a short EUR position didn't fit with my bullish AUD outlook. I doubted whether the breakdown was genuine and thus I passed. The irony is that I was given the EUR signal before anything else! Now this is poor trading and this was the genuine mistake throughout this all. This was an opportunity and I failed to follow through. Not following the gameplan is the undoing of most traders I believe.

And once again this brings us back to Brett's point. If we can develop a plan through research or experience, then this is the genuine key to success. If we can accept that the market can do anything, if we accept that we are not going to catch every major move in every market, then there is nothing to fear. The best we can do as traders is devise a methodology based on exhaustive research and experience- and follow it!

In sum, I am sure there are many elements here that strike a chord with most traders out there. We have a natural tendency to kick and question ourselves after the move has happened. We think we can catch every move. However, really the question we should be asking ourselves is did that trade fit with the trading plan? Be honest. If it did, what plans and procedures can we take to condition this setup. How can we control our emotional biases when trading going forth? For me, instead of beating myself up I need to condition the EUR pattern once more. Writing this down helps. I also need to print the trade out and go over it again and again. I need to go over all my breakdown trades in the past. Most importantly, I need to associate following the plan as a good thing and the key to success.

EUR 60mins:

Support Areas

Looking across the screens I see weakness across a number of risk assets. I just wanted to throw out a number of great support areas for traders to bear in mind coming into Asian Trading. Support levels are one thing, but waiting for price to respect and reverse out of these levels is another. I always use confirmation when entering a position as it keeps one out of trouble and increases the chances of a profitable trade. No doubt I have been looking for a low in the ASX200 the last few days but my trigger timeframe for position trades, the 60mins, has not given me an entry signal so this has kept me out of trouble. If I could give any advice it would be this- Price should confirm the  direction indicated by the setup before taking a position. If your setup indicates a long position, you should require the market to move up in some specified manner before you should be comfortable taking a position. Whether it is the market taking out a previous high/low, a strong reversal candle, consecutive follow through candles etc etc, you must must have a predefined way to enter the market that confirms your setup. This is an expensive lesson I have learned through the years and I really hope you can use this to improve your own trading.

And so to the levels:

ASX200/SPI:
4700- Pshycological round number; market indicated here on open
4690- Open gap from the 24th March
4685- 61.8 retrace level

Thus there is a good confluence in the 4685/4700 region. An ideal long signal would be a break of 4700 on the open with a sharp spike into the 90s that is completely recovered and 4700 level regained. Look for hammers out of here to confirm.

Nikkei June Futures:
9800- previous breakout level on 60mins
9700- open gap and a confluence of moving averages on the Daily

S&P 500 Emini:
1338/1340- previous breakout level and the 38.2 retrace from the last swing low


Shanghai Composite:
2825/2850- Trendline off the lows; previous major swing lows; the 61.8 fib retrace off the last major low


AUDUSD:
1.07- Round number and previous consolidation area prior to the strong breakout

I will be looking to play a number of these levels today. In a number of markets, we have traded from high to low on 3 consecutive days- this now sets up the potential for a bullish reversal

Good luck
Austin

UPDATE: Shanghai Final Levels

Shanghai Composite Daily:
There are the final support levels for this market. This is key to the health of the region I believe

Asian Setups

Here are a few Daily charts of the various Asian markets I trade. Certainly this rally has been stalling somewhat over the past week which has taken me by surprise. Some markets such as Singapore and Taiwan are testing key support areas whilst other such as India have already broken down. It is going to be an interesting few days that will decided the overall fate of the region I believe.


MSCI Singapore Continuous Daily:
The rally out of the recent flag pattern failed to gather momentum. 3650 is the key support level and price needs to hold here to keep my bullish scenario intact. The reversal out of the recent high does look bearish but until supports break, I want to follow the strong base pattern and the trend by looking for buy setups.

MSCI Taiwan Continuous Daily:
Taiwan looks the strongest market in the region with a bullish inverse Head and Shoulder pattern in place. The low of the recent strong candle at 3100 should offer short term support. I am still looking for a retest of the Daily highs

Nifty Continuous Daily:
The Nifty has sold off strongly since hitting the downward sloping trendline. Price is now testing the previous breakout level. For short term traders, look to get long against this level with very tight stops and join the momentum lower should this area break. The recent range on the 60min chart has broken down and this is bearish for now.

Nifty Cont 60mins:

Shanghai Composite Daily:
Price is beginning to hold at my 2850/2900 support area. If price can trade above the highs of the recent strong down candle, I believe this is a bullish development. In the big picture, this market is still in a sideways consolidation pattern with not clear trend yet

In sum, it certainly does feel like some of these Asian markets are losing momentum. However, as long as the supports identified hold, I will continue to focus on the uptrends in place.
Thanks
Austin

ASX200/SPI Morning Thoughts

Morning All,

Yesterday in the Australian market there was no follow through from Monday's strong bullish reversal. As I stated yesterday, position traders should continue to look for long swings only ABOVE 4840. In the short term, the trend remains down and we are indicated at 4755 in early trade, below yesterdays lows. I do have a strong target area at 4745/4750 for this down move and this really must hold to keep my bullish scenario intact.

SPI 60mins:
4745/4750 is an open gap, an A=C target, the low end of a parallel trend channel, and the 50% retracement level. Thus, this should be a strong confluence of support. However, as ever, wait for price action to confirm and look for price to regain 4765+ as a trigger

SPI 15mins:
We are indicated below yesterdays lows. Look for bullish reversal candles out of 4745/4750 to get long or wait for price to regain 4770. The short term trend is down so use tight stops and be prepared to short and join the momentum if we cannot hold

I must also stress that yesterday was a rather choppy session for the SPI. Indeed, for the first time in several days, every time I hit the new intraday low price failed to follow through to the downside. This shows to me that these levels are being defended and momentum to the downside is slowing. We will soon see today if this is the case once more.

I will post some other Asian setups shortly
Thanks
Austin

Asian Morning Thoughts

Morning All,

I have a bit on before the open so this will be a quick post. At the close of yesterday's session, I put out a bullish piece on the ASX200/SPI:http://swingtradersedge.blogspot.com/2011/05/asx200spi-bullish-pattern-developing.html. For position traders, there is no trade unless we see a strong bounce out of 4790/4800 in opening trade, and get long on breaks ABOVE 4840. Key support levels are 4790/4800.

For my Day Trading, I am looking for 4790/4800 to hold in the first 10 to 15mins. I will buy a 5min candle close above this morning range should we hold targeting 4835/40. Should there be no bounce off the open range, I will short breaks of 4785 targeting 4765 then 4745/4750

Thanks
Austin

ASX200/SPI- bullish pattern developing

Good Evening,

Today there was a very strong reversal in the Australian market and I think this sets the stage for a good rally to come with a possible retest of the highs at 5000. My morning plan on Twitter was, "SPI, #XJO- looking for a morning reversal out of 4845/4855 targeting 4800 once more. Breaks of 4800 open up 4745". The first part of this trade worked out very well indeed as the market continued its recent downtrend. However, the market bottomed at 4765 prior to my ideal target, and proceeded to rally all day to close unch.  As a trader, you have to be flexible and pay heed to the price action- today's rejection of lower prices and close back above 4800 is bullish.

SPI June 5mins:
The SPI is building a great base pattern under 4840. Position traders should be looking for breaks above this level tomorrow to get long, targeting 5000. Stops below today's low.

SPI June 60mins:
A bullish reversal candle out of this mornings lows. There is a potential ABC corrective pattern in place which implies a breakout and retest of 5000 in time.The short term trend is still down so I am looking for a bullish follow through day tomorrow to confirm a low is in place.

ASX200 Cash Daily: 
A very strong hammer candle out of the moving averages and support.

BHP Daily:
The heavyweight of the index put in a strong bullish reversal candle. I am looking for price to take out Fridays highs to confirm a low and potential breakout of a wedge/flag pattern. Looking for a retest of 50.

In sum, I believe the SPI futures and XJO have put in a short term tradeable low. Breaks of 4840 tomorrow should confirm this and is a trigger to get long. Stops should be below today's lows.

Don't Fight The Trend

Good Morning All,

The saying that "Bull Markets climb a wall of worry" seems more apt to me day after day. Over the last few days I have encountered a number of traders, market commentators and blogs who are all growing increasingly nervous here and looking for a top....again. The factors these sources are citing include topping patterns in Copper and China; speculative bubbles in Silver; Dow theory non-confirmations; sell in May and go away; the anniversary of the May flash crash; financials underperforming; the end of QE2; spurious Elliott Wave counts etc etc etc. I don't think many of these issues have validity and last time I checked the S&P500, Nasdaq 100, Dow, Russell, AUD were all at new interim or all time highs. Over the last 2 months this market has shrugged off the European Debt Crisis, the horrors of the Japanese earthquake and an S&P downgrade of US debt- this is stong action! As ever, the charts and the technicals are my primary guide and I wanted to show a number of global markets to illustrate that this market still has some way to go yet.

Emini June Daily:
This is a great basing pattern under the 1340 level and we have successfully broken out. Any retracement back to the 1345/1340 level is HEALTHY and a great buying opportunity. The target for this pattern and market I believe is 1430. This is in line with my 2007 parallel scenario that we are still following very closely: http://swingtradersedge.blogspot.com/2011_04_15_archive.html

AUDUSD Daily:
The AUD continues to surge after breaking out of the multi month consolidation pattern. We have reached my first target of 1.10 which is a 100% projection of the previous range. However, momentum has made a new high and thus we should be looking for buy the first pullback. I don't want to sound like a broken clock but once again- DON'T FADE THIS.

AUDUSD Daily ii
I have been following this pitchfork channel on AUD Daily for a while and it has been working beautifully. The 3 reference points are the 2008 November lows, the Nov 2009 highs, and the 2010 low. The market then went on to hit an interim high at the median line in late 2010 and a major low recently in Feb 2011. If this channel continues to play out, we are looking at a potential target up at 1.13/1.14.

China Composite Daily:
China remains in a consolidation pattern NOT a topping pattern. No doubt I was early in my bullish market call but I don't see any reason to change this until the supports at 2800/2850 breaks. Wait for confirmation as which ever way this breaks, there will be a strong impulse.

Copper Continuos Daily: 
Copper is often seen as a lead market for risk assets and I couldn't agree more. Currently, this market is consolidating in a clear range. Certainly, it has been underpeforming other commodities but this is no reason to turn bearish. The 400 level is key support and keep this on your radar. Note that this consolidation is occurring ABOVE its previous 2008 highs and ABOVE the entire weekly range which is bullish.  Look for breakout trades here

Weekly:

Certainly, there are a number of fundamental macro risks out there and I am not naive enough to think it is all plain sailing. However, the reason why I use technicals and price action is because its puts you on the right side of the market. Timing the market using fundamentals is close to impossible. Hopefully these charts have illustrated my point and put you on the right side of the market in the coming weeks.

Thanks
Austin

Update Asia is where it's at

Morning All,

I was honoured to wake up this morning and see that my recent post, "Asia is where it's at-take notice Australia", has been reprinted at an excellent Asian trading site:  http://www.cfdtradersedge.com.au/.

If you are unfamiliar with this site, I urge you to read further. Alan has a depth of experience and this is portrayed throughout his many articles, posts and webinars. Furthermore, a convore chatroom has been created for traders to share ideas across a number of different topics: Futures, International Indices, ASX chart discussion, Software questions, Trading Education etc etc. If you are serious about improving your trading edge, and are looking for a forum to communicate with fellow traders, get involved in this high quality service. I look forward to posting some of Alan's articles going forth

Thanks
Austin

China- it's do or die time

Good Evening All,

It was great to get so much feedback on yesterdays post. I received many personal emails and I thank you for the contact.  It was also somewhat timely seeing the performance of the ASX200 yesterday, closing firmly down despite a 1% positive lead from the US. Certainly, it seems that many of us in Australia are very aware of the inherent US/Atlantic bias that perpetuates our society.  No doubt this was reinforced during the Financial crisis which brought home the realities of a globalised world. However, as we continue to recover from those extreme events, I believe the processes of de-coupling here in Asia will foster the necessary modifications in our social psychology leading to genuine change and action.

It has been a while since I am updated my outlook on the Chinese and Indian market. Both markets appear at quite critical junctures to me and need to get moving to the upside very shortly otherwise my bullish scenarios are invalidated: http://swingtradersedge.blogspot.com/2011/03/asia-top-setups.html

Shanghai Composite Daily:
Price broke out of the initial base pattern and the 3000 level, so I got long. However, price clearly failed just short of the Daily downward trendline and I was stopped out as price reversed. The recent high is now our marker and closes above this level are bullish. Position traders need to be patient once more

Shanghai Composite Daily (ii)
The longer term consolidation pattern

Price should not trade lower than 2800/2850 to keep the bullish scenario intact. These levels are the 50/61.8 retrace levels from the last major January swing low; previous support levels; and the upward trendline. Wait for bullish confirmation out of these levels. If the market keeps falling through here than this would potentially be a bearish setup.



India has also struggled at the downward trendline on the Daily chart. The market has spent the last 2 weeks consolidating in a clear range. This is a great short term pattern to exploit and wait for a trigger entry


Nifty Continuous Daily:
I do believe the bigger picture is bullish given the strong base pattern. Momentum made a new high thus we should be looking to buy the first pullback or consolidation pattern. 

Nifty April 60mins: 
Look for a clear breakout of this range as the entry trigger

It is set to be an interesting few sessions and I will update when I see anything meaningful
Thanks
Austin

Asia is where it's at

Australia take notice- Asia is where it’s at!

Morning All,

I am feeling recharged after a nice 5 day holiday here in Australia. I wanted to take a step away from my usual angle in this post this morning. Often as a trader I become so bogged down in trading setups and scenarios that I often neglect other issues outside of the markets that would be great to put down on paper (and often more important). My market view has been well documented in recent posts and can be found at the links below. Bottom line, I believe the markets are going a lot higher. It has been a great few days and the best course of action as a trader is to be positioned and do NOTHING. I don't want to over think here, I don't want to be scared out of my position by news or economic data, and I don't want to day trade in a strong trending environment. We will soon see if this plays out but in strong trending environments, you do not want to miss out:

Asia: http://swingtradersedge.blogspot.com/2011/04/asian-end-of-day-summart.html

Currencies: http://swingtradersedge.blogspot.com/2011/04/currency-update.html

US Markets: http://swingtradersedge.blogspot.com/2011_04_15_archive.html 

And thus, this allows me the freedom to write about the central issue of this post- Australia's continued inability to wake up to the economic opportunities in Asia. Several years ago I moved to Sydney, in part to take advantage of the huge tectonic shift that is taking place in the world economy with the emergence of China and India. We are in an unbelievably fortunate position here in Australia fundamentally and geographically.  And yet what amazes me is how preoccupied we remain with events in Europe and the US. This was a great point stressed in a weekend article in the Morning Herald entitled “wake up Australia”. I couldn’t agree more. There is an Industrial revolution going on in China and India fuelling an endless demand for commodities and raw materials. The sheer demographics of these regions will continue this thirst for years to come. Australia is in an unbelievable position to benefit from this given our abundance of Iron Ore, Coal and Natural Gas- so why don’t we give the respect to these regions they deserve? 

Time for some simple numbers. China's latest Q1 GDP number came in at 9.7% YoY and Retail Sales came in at 17.4% YoY. This is not surprising given they have hit these kind of numbers for years. The big question in China is how to keep the economy in check, and not how to keep it alive as it is in the US and Europe. Central bankers in China have been raising rates and doing everything in their power to cool speculation and asset growth. For Australia, 4 Asian countries namely China, India, Japan and South Korea counted for 55% of our exports. The value of Australia’s merchandise exports to India alone outstripped those of the entire EU. America and Britain accounted for only 10% of our exports. 

However, every morning I wake up and I am bombarded with reports and summaries from our financial institutions about economic developments and market summaries in America and Europe. We shouldn’t care. Our economic fortune is tied not to these countries but to those right on our doorstep. Why can I not be bombarded with detail about India, China or even Indonesia?  Certainly it seems easier to stick with the crowd and report on America and Europe. Both fundamental and technical analysis here in Asia is massively lacking in quality. When I turn on the TV (which is becoming increasingly rare), the financial stations spend hours debating the economic outlook of America with live interviews of various traders on the US floor. GREAT- how does that help me trade our region? There are no such interviews of a local trader in Sydney, Hong Kong or India. I have to admit we are slowly getting better but there is such a long way to go yet.

No doubt the US and Europe remain big sources of foreign investment in Australia. However, Tim Harcourt, chief economist at Austrade says China, India and the Association of South-East Asian Nations are catching up. Investment in Australia from ASEAN has trebled in the past 5 years eclipsing that of Switzerland and Germany. Why does our government want to hinder this investment by putting up massively restricting walls such as a mining tax and carbon tax to name just a few?  It’s not only our commodities that are in demand as shown by the attempted SGX bid for the ASX. There is not enough space here for me to give a true account of my thoughts regarding the failure of this deal. However, Australia has shown itself to be xenophobic once again of the highest degree and it is a real shame that our politicians cannot actually recognise what is in our “national interest”. Our national interest is actually so directly aligned with that of Asia. There will be a lot more attempted deals, more and more investment so lets no mess this opportunity up.

The reason I started this blog was to provide real value add technical analysis of the Asian region. I don’t see many other blogs doing this. I’m sure they are out there but I just haven’t found them yet. If I type the S&P Emini future into Stocktwits I can find 1000 technicians in a second offering their thoughts on the S&P 500. When I type in Shanghai, Nikkei or the Nifty, I struggle to find anything at all yet I know there are thousands and thousands of traders and technicians here in Asia trading these markets. There is no symbol for the Australian stock market (although I am in the process of getting this fixed). Let’s wake up. Lets start showing setups of the Shanghai Composite on a 1min, 5min, Daily, weekly whatever chart.

No doubt I fall prey to this US/Atlantic vulnerability. I trade the Eminis and I often blog about what I am seeing overseas, trading setups etc. I intend to tone this down. Of course events on Wall Street have a disproportionate impact on smaller markets like Australia. However, you will be amazingly surprised how many times we actually LEAD our American and European counterparts. This occurred in July 2010 and September 2010 when Australia was the first market to bottom, setting off a chain reaction across global markets. Wednesday last week was yet another great example- Australia gapped up in morning trade, Hong Kong opens in the afternoon adding fuel to the move, the Eurostoxx then gaps up and suddenly all the bears head for the exit triggering buy stops everywhere, then finally the US comes in and the market opens at 1325 vs 1310 the day before! The whole cycle continues the next day. It happens time and time again. If we are here in Asia, we don’t need to be reactive. We are part of this global game and are actually right at the forefront. Lets take advantage. 

I may be something of an idealist but I dream of a community of technicians, traders, bloggers who given the level of quality to Asian markets that is already given to Europe and the US. The economic emergence of China and India is not going away and I am sure the trading opportunities will proliferate.

Thanks

Austin

Asian End of Day Summary

Today was a great trading day for the bulls in Asia. I thought I would keep tonight's post very simple and show a number of Daily setups after the close that clearly illustrate the bullish scenario across the region. I believe we are going a lot higher in the next few sessions/weeks thus we must be prepared. As I write, the Eminis are also charging, breaking my 1320 key marker (note that Asia led this move).

ASX200 Daily:
I talked about the 4800 level some weeks back and reiterated it yesterday: http://swingtradersedge.blogspot.com/2011/04/asian-morning-thoughts_19.html. Today we gapped up out of 4800 and rallied all day to close on the highs. This is a very strong closing engulfing candle right out of the moving averages. Look for retests of 5000 and beyond.

SPI June 5mins:
Clear trend day for Day traders. The gap strategy I have been talking about worked wonders today. Very simply, wait for the first 10 to 15mins to trade, buy a 5min closing candle above the high of this morning range and/or short a 5min closing candle below this range. Hold to the close!

MSCI Singapore Continuous Daily:
Price pulled back to the key pivot level and moving averages, put in a hammer and was followed by today's strong closing candle. We are breaking out of a clear flag pattern and I believe a move towards the previous highs is now in play.

MSCI Taiwan Continuous Daily:
Similar to Singapore, price retested key support, held, and today's follow through was very strong. Don't be afraid to join as this market is set to go higher. A inverse Head and Shoulders pattern has now formed.

Hang Seng Continuous Daily:
A strong gap up and follow through day should be the confirmation for a strong move higher in Hong Kong out of the recent range.

Simple charts which all imply strong moves ahead of us. It is time to switch to breakout mode and don't be afraid to join this move paying higher prices- its going higher. 

Currency Update

Good Morning All, 


Sorry for the late post today. I was busy running around pre the Asian open and had no time to post. I thought now would be an opportune time to update on a number of currency setups I am looking at. In my last currency post, I warned of a strong resistance zone in EURUSD at the 1.45 level and advised caution for traders: http://swingtradersedge.blogspot.com/2011/04/currencies.html. 


I was cautious not just because of the level, but because I couldn't identify a low risk/high reward pattern to trade. This played out very well given the events on Monday with EUR trading all the way down to 1.42 and lower. Once again, the key takeaway from this is being able to think correctly as a trader and respecting the risk/reward in each setup. Don't let your emotions and the prevailing sentiment effect you, but instead stick to a rigid trading plan based around your best trading setups.


A number of opportunities are now lining up. My favourite plays are long EURJPY and long AUDUSD. 


EURJPY Daily:
The pair has almost retested the 116 breakout level. The move out of this breakout zone was impulsive with a new momentum high. Thus, we should be looking to buy the first pullback into the trend and here it is. This offers a great long entry with stops back below the breakout level

EURJPY 60mins:
The 60mins has pulled back in an ABC type pattern. Last night we saw a strong bullish reversal out of the low that I believe confirms a bottom. Note the fib relationship between the waves down where C=1.618A down. I look for these kind of relationships in corrective moves and they are very relevant. Monday's weakness has been recovered.

My entry is either:
i) Buy stop above 119.50 spot. This was the previous breakdown level and buying above here should confirm a new uptrend.
ii) Look for a "test" of Monday's lows that holds. A tighter stop can be used for this entry


AUDUSD Daily:
The Daily is forming a clear consolidation pattern. The trend is up, momentum is breaking out after months of consolidation, and there are no clear res levels above here. As I said previously- DON'T FADE THIS. Ranges beget price expansions and this is merely the beginning for the price expansion after a 6month range. 

AUDUSD 60mins:
The 60mins is forming a potential triangle under 1.058/1.06. This is a consolidation pattern and we should be looking to exploit this for a subsequent breakout trade

 My entry is either:
i) Buy above 1.060 joining the momentum higher
ii) If price fails in the short term at the resistance level, I am looking to buy a small pullback for the "e" leg of a triangle. 
The target for this move is 1.08/1.0850 and then 1.10.

AUDJPY 60mins is another great short term setup. The 60mins has been correcting lower in an ABC move lower. I am looking for a breakout here and a retest of the highs. 

And Finally to EURUSD. To me, the Daily chart is just not clear and thus I am happy to focus on the better setups. Momentum has been consistently weak since breaking the previous 1.42 highs, and this is shown by the divergences on the momentum indicators. Furthermore, there is a potential ending wedge pattern in place. The key short term levels are 1.44 on the upside and 1.42 should be good support. Trade the ranges. 


EURUSD Daily:

Hope these setups prove helpful. Best of luck and contact at anytime. Should be an interesting run into Easter
Thanks
Austin

US Market Overview

Overnight the Eminis got hit hard pre the Cash open on the back of the S&P warning. Certainly this invalidates my weekend post calling for a US market low as we made new lows across the board: http://swingtradersedge.blogspot.com/2011/04/important-post-us-markets-bottoming.html. As traders, we take the stop and move on. The setups looked great, we had initial confirmation from the market in the short term but there was no follow through above my 1320 key marker. That's the reality of trading and this should cause no emotional impact. I believe I identify enough good setups to consistently make money and thus we must move on to the next trade.

I don't think this is the beginning of a larger degree sell off. In fact I think that the alternative triangle pattern I talked about is the most likely scenario. Someone who has been calling this for a while and nailed it is Michael at EW Trends: http://ewtrendsandcharts.blogspot.com/. For now it is early days and I am happy to wait for a more meaningful base pattern before getting long once more. Breadth was bearish with Declining issues noticeably increasing on strong volume. Thus, I believe we will see a retest of last nights lows before a more meaningful low ensues.

Emini 60mins:
Price has come into the very low end of my support range. No meaningful short term confirmation yet. 1290 has to hold

One final word. No doubt there will be many Elliotticians who are now calling for a iii of 3 down! From my experience, these are the most fadeable setups and counts out there. Time and time again these fail to play out. Don't be trapped in this bearish mentality after the move has already happened! In fact, I ask any Elliotticians out there- how many times have you forecast a iii of 3 down and it actually played out in real time? Be honest. The whole concept behind strong wave 3 downs is that there are extreme events where the crowd and market is taken by surprise. Thus they are almost unforecastable. I struggled with this many times in my early career and I have learnt to trade more probable setups that actually make money and not a hopeful wish.


Key Levels for the Eminis:
Support: 1290, 1280
Resistance:  1303/1305, 1320

Thanks
Austin

Asian Morning Thoughts

Morning All,

The SPI is indicated at 4821 this morning after last nights sell off. Thus we are coming right into my support levels posted several days ago: http://swingtradersedge.blogspot.com/2011_04_12_archive.html. I have been stressing the importance of patience for postion traders and now I believe it is the time to consider buy setups in Australia once more. The key as ever is confirmation so look for hammers or somekind of bullish turnaround today/the next few days before going long.

SPI 60mins:
4800 is an open gap as well as the 38.2 retrace level

XJO Daily:
Todays sell off will bring price right back into the upward sloping moving averages.

Scenarios I am following today:
i) Gap strategy- wait for the first 15mins to trade and mark the highs and lows of the range. Buy a 5min closing candle above this range and short a 5min closing candle below this range
ii) Look for scalp longs out of 4800 with tight stops. This is a support play with tight risk. If 4800 breaks, look to potentially short and join the momentum lower for an intraday trade only

Bottom line, I think today could be a gap down, test of 4810/4805, and then a potential reversal day higher. The key is waiting for short term confirmation. I must stress the short term trend is down thus keep risk tight on the long side.

Thanks
Austin

FTSE Xinhua China Breakout trade?

I am seeing a potential Ascending triangle pattern forming here in the FTSE Xinhua China Futures. A break above 10,200 should be the bullish trigger. This is in line with the big picture bullish scenario I have been following for a while. Monitor this area closely:

FTSE Xinhua China April 15mins:

FTSE Xinhua China April 60mins:
This triangle and consolidation pattern is forming above previous resistance. Consolidation at the top end of the range is bullish

SPI Ending Wedge

Having a great day on the SPI today. I just wanted to update the Ending Wedge pattern I posted this morning. The key to this pattern is the 3 wave push into the trendline with bullish momentum divergences. Indeed, the momentum indicator made 3 higher lows despite price making lower lows. As ever, waiting for confirmation is key and when I saw a strong 5min reversal candle off the low with follow through, I got long at 63 average. In the short term the resistance levels are 4900/4905.

SPI 5mins:

These patterns appear time and time again across timeframes so learn this setup. 

Thanks
Austin