IMPORTANT POST- US Markets bottoming

Good Morning All

The S&P 500 gapped down on the open, tested the key 1300/1305 support level, bottomed in the first 30mins and then rallied all day to close on its highs, filling the gap down. This is bullish action no doubt and was in line with the scenario I was following yesterday: http://swingtradersedge.blogspot.com/2011/04/asian-morning-thoughts_14.html. The Eminis hit my target zone mentioned and also bounced very strongly into the close. A bullish hammer candle formed on the Daily right at the 55 exponential moving average. There was a strong breadth reversal with NYSE declining issues hitting a high of 2155 and then closing at 1376. Advancing issues were as low as 119 in the first hour and reversed to close at 1605. This is a strong reversal and indicative of a sold out market. Thus:

i) Have we hit good support levels- YES
ii) Has price respected these levels and reversed- YES
iii) Is there confirmation from breadth- YES
iv) Do we have good patterns to justify good risk/reward entries- YES
iv) Are the usual bearish suspects out calling a high/truncated top- YES

Thus, I believe we are putting in a significant low right here. The key short term support levels in the Eminis are 1295/1300 with resistance at 1320. I believe longer term swing traders should be looking for breaks of 1320 to the upside to get long targeting 1350 and beyond. The alternative scenario is that a longer term triangle may be playing out with a breakout possibly coming as earnings season draws to a close. Nonetheless, this is a great risk/reward area to be getting long. This market has held in despite social unrest in the Middle East, despite threats of a nuclear meltdown in Japan and more European countries going bankrupt. This is a clear signal we are in a strong bull market and I think any breakout will carry us all the way into August/September 2011 in line with a 2007 scenario I have been following for a while.

S&P 500 15mins:
Price tested yesterday lows and put in a significant price reversal closing above the previous days lows. This is a short term double bottom trade

S&P 500 60mins:
Strong hammer candle yesterday right at my target zone. This target zone is the 38.2 retrace level and the previous lows at 1305

Emini S&P 500 June 60mins:
Price has corrected down to this 1300 level in a clear flag pattern. The broader setup is a possible inverse Head and Shoulders pattern. Look for break of this flag to get long

S&P 500 Cash:
A hammer close yesterday right at the 55ema. The inverse head and shoulders pattern can be seen more clearly here.

Emini Nasdaq 100 June 60mins:
Does this look like an impulsive sell off to you? This is a great risk/reward pattern to join the higher degree trend which is up. Note that price made a higher low last night.

These setups confirm many of the bullish patterns I have been talking about in China, India, Hong Kong and Singapore.


For the Wave counters amongst you, below is a parallel scenario I have been following in the S&P 500 for a while. I believe this current advance has been very similar to that of 2007, and if this continues to play out, there is the possiblity of a very strong breakout and advance all the way into June 2011 in line with the end of QE2

S&P 500 Daily 2007:
The Wave 1 high in 2007 was made after a 4 month corection from the May 2006 high (note the parallels with 2010). The wave iii advance ended in Feb 2007 in a ending diagonal pattern. We then had a violent thrust down in March 2007 which proved to be a significant low.

S&P 500 Current:
The similarities with this current advance are striking. The current high topped right into the February window with a sharp pullback into March completing an ABC 4th wave down. I believe a strong breakout is coming soon indeed.

In sum, I believe the US markets are building a significant basing pattern. Breaks of 1320 to the upside would confirm this. If we see a pulback to the low end of yesterdays range, look to buy this with stops below yesterdays lows. If the market trades below 1290 then I think this bullish setup is invalidated.

Thanks
Austin

Asian Morning Thoughts

Morning All,

The S&P 500 attempted to recapture the previous breakdown zone at 1320 on the open and failed in the first 15mins. For the rest of the session the market grinded lower retesting the previous days lows. The short term trend is down and we made another lower high. I believe there will be another swing down to test the 1300/1305 support region before a meaningful low is put in. Bottom line, the key levels are 1320 to the upside and strong support at 1300/1305. Buy breakouts above 1320 and look for basing patterns in the low end of that range.

S&P 500 Cash 15mins: 
The short term trend is down and price failed at the previous breakdown zone. I am looking for a test of the 1300/1305 level.

We saw a strong bounce across the board in Asia yesterday, with Australia being the exception. This is all in line with my thoughts posted here: http://swingtradersedge.blogspot.com/2011/04/asian-end-of-day-summary.html. Indeed, Singapore put in a meaningful low right at the pivot level and closed above its previous gap down; China put in several intraday reversal bars right at the previous breakout zone and rallied strongly into the close; the Nifty surged in a clear trend day; and Taiwan bottomed right at the open gap. This is all indicative of a very strong move coming over the ensuing weeks. Don't be afraid to join this as yesterday was clear evidence of a swing low. I continue to focus on China and the Nifty Index as my strongest plays in the region.

The SPI is indicated at 4903, right at yesterdays previous lows. There is a potential breakdown trade in play to day if this 4900 breaks. Look to get short if this level goes targeting 4860 and then possible 4835. An astute reader here pointed out a flag pattern on the 60mins chart and I think this is valid indeed. Price struggled yesterday at 4935 and this is the clear short term resistance (it is also th2 38.2 retrace from 5000 high to yesterdays low)

SPI 60mins:
Price failed at the moving averages yesterday and made an overlapping ABC pattern up into 4935. 

SPI 5mins:
The SPI is in a short term range from 4900 to 4935. Look to trade these range and get short on a break of 4895/4900.

Nifty Long Trade

I have been waiting for a pullback in the Nifty Index on the Daily chart to get long and join the trend and momentum: http://swingtradersedge.blogspot.com/2011/04/weekend-observations_10.html

Finally price on the lower time frames is showing some genuine strength this morning. Price has rallied strongly since the open and recaptured the 5800 level. I am now looking to get long today targeting the previous highs at a minimum. Please see the charts below


Nifty Continuous Daily:

Nifty April 15mins:

Morning Thoughts

Morning All,
It was great to get so much feedback on last night's post. Thank you for your comments and please keep them coming. I value all questions, ideas and feedback so please continue.

US markets were weak last night as we finally broke the low end of the range. Once again, I do believe that the internals and waning momentum were a key backdrop for this breakdown: http://swingtradersedge.blogspot.com/2011/04/asian-morning-thoughts_06.html. The strong rejection on Monday night of higher prices was the initial confirmation from price, and yesterday we saw the follow through. Declining issues have increased on 4 consecutive days now and there was a slight pick up in volume.


Emini June 60mins Breakdown:

I do believe that the market is coming into an interesting buy zone very soon. I am monitoring the 1305 to 1295 zone in the Eminis for a long swing. The Daily trend is up and I am looking to join this. The key is waiting for a "test" or strong reversal bar before getting long. This has not happened yet and I will update in time.

Emini June Target Zone:
This is the 38.2 retrace area and previous important support area.

In regards to Asia today, not much has changed from my post after the close yesterday:http://swingtradersedge.blogspot.com/2011/04/asian-end-of-day-summary.html The setups and trades I am looking at are all summarised there. I will be looking for confirmation from the price action to get long.


The SPI is indicated at 4896, a gap down of 20points from yesterdays Day close. Until I see a deeper retrace into the Daily moving averages, I will continue to trade the shorter term setups. Note that the short term time frame trend is now down. We may see some selling exhaustion today but the scenarios I am following today:

i) Opening gap strategy. Wait for the first 10/15mins of trade and note the morning intraday highs and lows. Buy a 2min candle that closes above this high and short a 2min candle that closes below this low. I use a 10 to 12 point stop for this strategy. Like yesterday, note that a failure to fill the open gap is bearish.
ii) There is potential support at 4875. Only look to get long if there is a strong 5min hammer candle or clear base pattern. Get long with tight stops


SPI 30mins:
This is the potential open gap target

Good luck, I will update through the day
Thanks
Austin

Asian End of Day Summary

Evening All, 

What a day and finally my patience seemed to pay off. I have been stressing for a while that position traders should be out of the market at these levels and looking for the next setup with a better risk/reward. It took almost a week to get up to the 5000 level once we broke 4900, and yet in one day this is all wiped out. The irrationality of the crowd.

Today was a solid distribution day. The XJO put in a bearish engulfing candle right at the previous February highs. I am still looking for a deeper pullback into the Daily moving averages in the coming days to get long once more for a bigger swing up as per my post on the weekend: http://swingtradersedge.blogspot.com/2011_04_10_archive.html. I do not think this is a one day wonder.

ASX200 Daily:

SPI June 60mins:
4800 looks like an interesting area of support with a former gap up and the 38.2 retrace level. 4900/4902 is short term key support and look for breaks of this down to 4800.

For Day Traders, there certainly was some good money to be made today. Firstly we had a clear Ending Diagonal pattern or 3 wave push pattern coming into today. Note this nailed the 5000 psychological level. We gapped down, tried to take take out the intraday high but failed, and then broke the morning lows leading to a strong trend day down. My mistake today was covering in the 40s at support which is the wrong play on trend days- we have to be willing to hold to the close to gain maximum benefit. This happens time and time again.Continue to look for consolidation patterns to get back into the downtrend.


SPI 5mins Ending pattern:

SPI 5mins gap down setup:
Study these gap plays. These need to become a staple if you want to successfully exploit the Asian intraday moves. Wait for the first 10mins to trade, define the range, and then trade the breaks of the levels for increased momentum. A failed rally this morning out of the gap down was a key lead indicator. 

If you are interested in receiving more of these setups and charts as they happen- LET ME KNOW. I am happy to send these via email etc. I am trying to call out levels etc on twitter and I hope this has been of value.



Today's sell off across Asia has opened up a number of retracement trades I have been waiting for:

MSCI Singapore Continuous Daily:
Has now entered into the key pivot and the Daily moving averages. We made a new momentum high and have now traded from high to low on 2 consecutive days. Looking to get long here on a lower timeframe reversal bar.

Hang Seng Daily Cash:
Has now traded right back to the breakout level. This is a great low risk/high reward entry with stops below the gap at 23,600 to 24,000.

Hang Seng Cash 60mins:
We are retracing into an open gap and the moving averages after a momentum high. Look to buy this pullback. 




I certainly took a hit on my China position. However, price is now retesting the breakout level and the bullish scenario remains as long as the recent gap up and breakout area holds:

FTSE Xinhua China A50 60mins:

In sum, I believe this is the beginning of a deeper retracement in the SPI/XJO. 4900 is short term key support and my buy zone is down at 4800. I will keep trading the short term day setups until I see a clear longer term postion trade. Singapore, Hong Kong and China are all testing key breakout levels and I think they offer low risk buy entries with confirmation. The Nikkei held the 9550 key support level today and the range remains 9550 to 9800. I have moved my stop right up on my open short.

Pls pls give some feedback if you are enjoying some of this work
Thanks
Austin

Currencies

Happy Monday,

Everyone is talking dollar dollar dollar. This is no surprise given the USD break to new lows on Friday night. The 1.4250 EUR breakout level I highlighted post the ECB meeting proved to be a great entry level: http://swingtradersedge.blogspot.com/2011/04/eurusd-whats-trade.html. It seems to me that the USD double bottom trade is now off the table with EURUSD now in breakout stage. However, I would like to draw your attention to the 2 following charts which show a strong area of resistance right here.

EURUSD 60mins:

Price is now rallying right into the top end of the range. The trend is up on all timeframes but momentum has not followed through. This is not the time to be initiating new longs as a trader I believe unless you are a trend follower with wide stops.

EURUSD Weekly

Price did close strongly above the downward trendline. However, price has now rallied into the 61.8 retrace level and the mid line of a picthfork I have been following. 1.45 is the level.

To me, there were 2 clear trades in EUR recently:

i) Buying the inital breakout above 1.4250 after a clear consolidation pattern: http://swingtradersedge.blogspot.com/2011/04/us-market-summary.html

ii) Buying the retest of the 1.4250 breakout level post the ECB meeting:

http://swingtradersedge.blogspot.com/2011/04/eurusd-whats-trade.html

These trades are now done and it is really important to understand this. It is no good cursing the missed opportunities and then blindly entering the market. We must always "think"  correctly and we must always look for good risk/reward setups if we want to succeed consistently as traders. Right here there is no trade to me. If already long then tighten up trailing stops; if looking to get long then wait for a clear consolidation pattern once more. This is a valid resistance zone and no doubt sentiment is reaching a fever pitch.

The USD index broke to a new low on Friday night and thus invalidated the double bottom setup. Certainly this could still be an ending wedge or a bear trap but it is important to focus on the trend and the price action. Those wanting to pick bottoms should only get long above the key 77 level (June contract).

DXY June Daily:

AUDUSD has had a stellar run since breaking the 1.03 level. This market consolidated for some 5/6months and ranges like this beget strong price expansions. Don't fade this especially given the momentum expansion. Potential targets are 1.08 and then 1.10 based on projections from the consolidation pattern. I continue to look for buy setups on the lower timeframes to join this move

AUDUSD Daily:

AUDUSD 60mins:

The British pound is building an interesting pattern around the 1.63 level. Should 1.6350 lift, this could be a very strong cup and handle pattern implying a strong move indeed. For now, GBP is still in a short term range and we need more confirmation.

GBPUSD Daily:

In sum, EURUSD is rallying into a confluence of resistance levels and the USD doomsayers are all out in full force. These are the kind of areas where following your trading plan is key. Whats your setup and is the stop appropriate for this play? AUD is the strongest cross to me especially given we are in blue sky territory with little in the way of obvious resistance levels.

Thanks

Austin

Weekend Observations

Happy Weekend All,

I will be dealing with the Eminis and the USD in another post. Here I wanted to update the swing setups and scenarios I am following in Asia. The weekend is such a great time to get prepared for the upcoming week as well as analyzing previous trades and areas for improvement. I recommend it to anyone who is serious about stepping up their game.

The SPI closed at 4965 on Friday, above it's previous February highs. As I have been stressing for the past week, this is the area for position traders to be getting out of the market and looking for better risk/reward setups or focusing on the shorter term timeframes thus keeping risk minimal. No doubt the trend remains up and it is futile to fight this until we see a clear distribution pattern. However, this is a solid resistance area and we have to be prepared to get out and look for a clearer pattern whilst those around us panic into entering the market.

SPI Continuous Daily:
Momentum has made a new high and price has certainly been impulsive off the low. A pullback to the moving averages and support around 4800 would be a great area to get long once more for a bigger position trade. Short term SPI resistance levels are 4960 and then 5000.

SPI 15mins:
The market has been grinding higher in this megaphone like pattern for the past week. Look for breaks of this lower trendline and then 4900 to confirm a more meaningful top is in place.

The SPI night session closed at 4933 on Friday night thus there could be a 30 point gap down tomorrow right into that short term trendline shown. Day trading scenarios I am following on Monday:
i) Wait for the first 10mins of trading. Buy a 5min closing candle above the high of this opening range or short a 5min closing candle below the low of this opening range. Look to add to shorts if 4918/20 breaks.
ii) Look for a support play at 4900/4905 with tight stops. If this level breaks, expect a deeper pullback in the coming days.



The Nikkei had a strong rally on Friday retesting the 9800 resistance level. Certainly the price action did feel impulsive and the market put in a strong hammer low overnight on the 60mins timeframe. However, I am still short as my stop at 9855 was not lifted. If I see a gap down on Monday which holds, I will look to get out and reassess.

Nikkei June 60mins (night session included):

MSCI Singapore continues to grind higher with strong momentum. I still don't have a clear position trade here and am looking for a pullback to the moving averages to get long. There is a short term channel in place and if this breaks I would expect the deeper pullback to materialise.

MSCI Singapore Continuous Daily:

MSCI Taiwan showed an interesting bearish reversal candle on Friday right at previous resistance on the Daily and at the trendline resistance on the lower timeframe. Breaks of 3140 are short term bearish. There is an open gap at 3090/3100 and I will be looking for buy setups in this area to join the trend.

MSCI Taiwan Continous Daily:

MSCI Taiwan 15mins:

The strongest pattern in the region is Shanghai:http://swingtradersedge.blogspot.com/2011/03/asia-top-setups.html). I am looking to play this via the FTSE Xinhua China 50 futures. I see price beginning to breakout of a clear base pattern. 2 possible entry signals:
i) If price makes a new opening high on Monday, get long as price is making higher highs joining the momentum. This needs a wider stop but don't be afraid to buy a market as it is making new highs. This is a Jessie Livermore tried and tested technique (as well as most trend follower or momentum traders).
ii) Look for a flag or pullback to the 9900/9950 and get long on the lower timeframes on a strong bullish reversal.

FTSE Xinhua China A 50 Continuous Daily:

The Nifty has corrected in a clear ABC type pattern since hitting the 61.8 retrace level and downward trendline. The breakout from the base pattern has been strong with momentum making a new high. I think this is a clear flag pattern and will be buying if price can recapture 5900, adding above 5950.

Nifty Continuous Daily: 

Nifty Continuous 15mins: 

In sum, the best buy setups I have in the region are in Shanghai Composite and the Nifty. Australia has rallied right into its February highs and I believe it is best to focus on the shorter term timeframes up here and tighten up open exposure significantly.

Asian Morning Thoughts

Morning All,

The US markets closed relatively flat but with some wild intraday swings testing the recent range. The market remains in a clear short term range right at decent resistance levels. However, unless the low end of this range breaks in the next 2 sessions, I believe we may see a strong breakout to the upside. I have seen these kind of setups time and time again over the last 2 years and more often than not, it has paid to follow the higher degree bullish Daily trend. Often I have been on the sidelines waiting for a bearish break that doesn't materialise. Breadth and momentum have clearly been waning but this market is consolidating in time rather than price. As ever, wait for confirmation from price and trade accordingly.

Emini June 15mins:
Key supports are 1323/1324 and then a major pivot at 1320. Resistance remains 1334/1335

The SPI is indicated at 4933. Yesterday we saw an interesting gap up and failure right at the previous Feb highs. Similar to US markets, we remain in a clear short term range right at significant resistance levels (i.e. the February highs). I have been advising caution for position traders at these levels and I don't see any evidence to change this stance yet. The Materials Sector made a new high but there has been no follow through yet, setting up a possible bull trap. The Financials sector closed with a Doji star yesterday at the top end of the range. These are warning signals and not short signals. I do believe the strongest play is to wait for a deeper pullback to the Daily moving averages for buy setups.

Day trading scenarios I am following today:
i) Look for a retest of 4945 to 4950. Short if there is a clear reversal candle out of these levels, stops above 4952.
ii) Buy support at 4902 with very tight stops. If this level breaks, short for a longer term swing lower


Materials Sector Daily:

Financials Sector Daily:

I remain short the Nikkei for the reasons posted here several days ago: http://swingtradersedge.blogspot.com/2011/04/nikkei-june-short.html. Given last nights earthquake, there were some wild swings in the futures down to 9405 but price has recovered to 9550. We will see how today plays out when the cash market opens. Resistance levels remain 9680/9700 with support at 9400/9350.


Ill have more later in the day
Thanks
Austin

(UPDATE) EURUSD

EURUSD sold off right into my target box last night at 1.4250 and held. This was a great support play and shows the importance of following new momentum highs. This level now must hold to keep the bullish scenario intact. In the short term I am looking for a retest of the previous highs at 1.435

EURUSD 60mins:

EURUSD- whats the trade?

There are lots of opinions flying around in the build up to the ECB announcement shortly. As ever, let price and the charts be our guide. I have 3 charts here which are very simple and show the significance of these current levels:

EURUSD Weekly:
Price has rallied right into a significant weekly trendline.

EURUSD Daily:
Price is trying to break the previous highs at 1.43. This is still a potential Double Top trade/ Bull trap if we see price  reverse here and take out yesterdays lows. Furthermore, momentum is clearly waning here and price is trading in a potential ending wedge pattern

EURUSD 60mins: 
Yesterday we saw a strong breakout of the recent range with strong momentum. Thus, our trade should be to buy the first pullback against this breakout level. Price is correcting back to this 1.425 level currently. Thus, short term traders could be looking to get long here with stops below 1.4230. I would prefer to wait for the announcement and see a bullish reversal to confirm. Any close back below 1.42 is BEARISH and would trigger the Daily Double Top pattern.

Thus in conclusion, we are at a significant juncture. The bigger picture is indicating some real resistance at this levels and a potential bull trap/double top. However, price has clearly broken out on the lower time frame and as long as 1.4220/1.4250 holds, the short term trend remains bullish. Thus, focus on the price action and use these setups to guide your trade. I am looking to buy around 1.4250/1.4230 for the support play and will be shorting below 1.42 for a bigger picture short.

Thanks
Austin

Eurostoxx Bearish Setup

Coming into the European open, I am monitoring a potential bearish setup in the Eurostoxx. This market is trading in a clear wedge pattern with momentum waning. Yesterdays lows at 2858 once again managed to hold at the upward trendline. I am looking to short below this level targeting 2750 and possibly lower.  These patterns imply a sharp break lower and thus if there is no follow through, look to tighten up stops quickly.

Eurostoxx 15mins:

Eurostoxx 60mins:

Asian Morning Thoughts

Morning All,

US markets tried to breakout last night but failed at their previous highs and gave up almost all gains. The Nasdaq 100 once again underperformed. We continue to build a short term range right at previous resistance levels with deteriorating breadth and weakening momentum. It appears to me that this trend is tiring and I am looking for a deeper pullback in the next 2/3 days. I cannot rule out a breakout and I will be prepared to join should price continue to correct in time rather than price over the ensuing days.

I wanted to update on the underlying breadth figures. The number of advancing issues continues to deteriorate despite price making new highs. Last night the NYSE advancing issues hit a high of 1948 but closed at 1658. Once again we have seen another lower close:

21/3/11: 2473 NYSE advancing issues
30/3/11: 2212 NYSE advancing issues
5/4/11: 1658 NYSE advancing issues

The divergences in these readings with price is often a lead indicator. Indeed, I saw the same divergences on the lows that helped me identify a possible turning point: http://swingtradersedge.blogspot.com/2011/03/us-market-summary_16.html.  

Eminis 60mins: 
There was a small reversal out of the resistance zone. Use breaks of the upward trendline or the moving averages for potential short opportunities.

Dow Cash 60mins:

The Dow is still trading at the top end of it's range and a potential Double Top trade is still very much in play

Thus to Asia. There is no strong overnight lead for early trade. The SPI is indicated at 4922 just below yesterdays highs. The key short term range is 4902/4900 to 4930. As stressed yesterday, I do not have a clear swing trade up here as we are coming right into the February highs. For my day trading, I think today could be another range day. I am looking for breaks of 4930 to target 4945/4950 and I am also looking to buy supports. The ASX200 Cash high is 4944 and this appears to be the "obvious" target.

SPI June 15mins:
Look at this chart. Often the best trades are just the simple ones- look at how price has respected the moving averages continuously. For now, there is no need to fight this until we see a clear reversal or distribution process. 4900 is the key short term support

SPI June 5mins:
This is the short term range

I am still short the Nikkei for all the reasons posted yesterday. We are indicated slightly higher and will be retesting yesterdays breakdown level (see target box). Short term resistance levels are 9670/9700 then 9750. Any more strength above these levels, then I will consider covering.

Nikkei June 5mins:

MSCI Singapore showed an interesting exhaustion candle right at the 61.8 retrace level yesterday. It is still early days but I am looking for a pullback into the Daily moving averages over the next few days to get long once more for a larger swing trade. 3700/3720 are the short term resistance levels

MSCI Singapore Continuous Daily:

In sum, I do think this trend off the low is tiring with momentum and breadth deteriorating. However, as ever, there is no need to short until we see either breaks of support, a clear reversal candle, or a turn in the moving averages. Look for these signals. This market could continue to correct in price rather than time thus we must continue to respect the underlying price action.
Thanks
Austin