Monday Morning Panic=BUY?

Morning All

Well I had a whole host of things I wanted to write this morning but I will throw most of this out of the window having seen where the Futures have opened. There is no point dwelling on what HAS happened, but rather an action plan for today and going forth. This post will focus on the shorter term outlook. I will update Daily scenarios in due course.

It all looks very ugly out there. However, these are the exact times to keep a cool head and be planned. It is also often the time to fade the crowd and do the uncomfortable thing. Looking through the charts today, I actually think we hold in here but I would be surprised to see a genuine bid until the Europeans and US step in. Asian traders will really need to be patient and perhaps sit on the sidelines or take low risk long trades with tight stops.

Emini S&P500
We have gapped down over 10handles right into the A=C target of 1345. If I see some bullish reversal candles, I will look to get LONG. A break back above 1355 is needed for confirmation. If this level doesnt hold then look for support in low 40s. I will not be shorting down here.

EUR 60mins:
Gapped down right into support BUT hanging on a thread. Possible bear trap but only if we see real bullish reversal candles.

Australia

SPI 60mins:
These are the support levels I have identified today. I think the bigger zone of support will be 4300/4290 and I will look for confirmation down there to get long. Note a minor support level at 4322 which is the 61.8 Fibonacci retracement.

XJO 60mins:
Looking like a gap down into the previous breakout zone. Keep this chart on your screens today. Should be a formidable buy zone after 3 days of weakness. 

XJO Daily:
Note that 200day moving average comes in today around 4300.  In the bigger picture, this double top pattern concerns me especially given the fact we topped right on the day of the 50bps cut- a bullish climatic event.

Japan

Nikkei Daily:
The Nikkei will be back online today. They will certainly be hit with a bit of a shock. Note the 2 major target levels I have labelled here. Once again, waiting for confirmation to get long is the right play. No need to fight this breakdown for now.

China 

HSI 60mins:

A-Shares 60mins:
Still in a wedge like pattern with 2500/2480 key support. My target range was not hit but note the res level on the Daily chart underneath. 

A Shares- Daily:

Bottom line, there is a lot of panic out there given the European headlines and markets are coming into some solid supports. I do think we will hold in but waiting for confirmation is key. No need to jump the gun. If this keeps falling and spiralling out of control- fine, let it do so. However, the best risk/reward shorts are not in this zone and if you are going to join this breakdown, you have to keep it nimble or have very wide stops. In the bigger picture, I could certainly make a bearish scenario but lets focus on the here and now.

Non-Farms Setups

Pls find my origianl post here: http://marketletters.blogspot.com.au/2012/05/non-farm-setups.html

Morning All

Yesterday I advised short term caution for traders in Australia: http://marketletters.blogspot.com.au/2012/05/bit-of-caution.html. The market was indeed lethargic with price opening on its highs and drifting lower/sideways for the rest of the day in a small range. Weakness in overseas markets overnight will see Asia open weaker again this morning and thus my caution was warranted. Now we are in a very interesting zone indeed across markets.

Australia

SPI futures 60mins:
I have shown this chart a few times of late with that upward sloping trendling capping the "breakout". Now we are indicated early at 4415/4410 which is right into the low end of the channel and previous breakout zone.

SPI futures 15mins:
I have zoomed in here to make the levels more apparent. We have minor support at 4415, then a stronger confluence coming in a 4405/4407.

Thus we are retesting the previous breakout zone and upward trend. This is a low risk buy for the intraday trader as long as price holds 4400/4398. We have the RBA monetary policy coming out at 11.30am. Obviously note it is non-farm payrolls tonight and thus I would be keeping positions very tight ahead of this, especially with French and Greek elections next week.

My SPI range: 4405 to 4430. Outlier levels 4398/4400 and 4440.

AUD 240mins:
The A=C short trade in AUD played out to a tee at the 1.04 level. However, now is the time to be unwinding shorts into this zone. I would really be surprised if this just kept breaking lower and lower without a pause at a minimum. This adds weight to the bullish scenario.

Japan remains closed today. Turning to other Asian markets.

Hang Seng 60mins:
I still remain bullish this market and I am still looking for the target zone to be hit in coming days. Obviously we will be looking at some small weakness early so look for potential buy spots into this upward trend. A risk to my view would be a meaningful break below 21k.

A Shares 60mins:
This is one market that I got wrong. After the return from holidays, the A-Shares broke meaningfully above my low risk short zone. Thus, we look to follow the uptrend once more. Only a close back below 2500 would make me bearish.

One of the best setups I see in the Equities land is the DAX. Price has sold off right into my ideal spot and I would be looking for low risk LONG trades with stops below 6000. See my original bigger picture post on this market here: http://marketletters.blogspot.com.au/2012/04/importance-of-dax.html

DAX 60mins:
5 wave move off the low and a corrective move lower back into support and the 61.8 retrace level. This support zone should be formidable. Note the outlier level at 6600 which is an A=C target off the recent high and open gap target.

S&P500 60mins:
The S&P500 is also retesting the previous breakout zone and thus a low risk buy area ahead of the non-farm numbers. I don't position ahead of these numbers BUT I think an ideal setup would be a relatively weak number and a quick break lower into 1385/1380. I would then look for bullish hammers/reversal candles out of there to get LONG.

Emini S&P500 60mins:
Last night the 1390 support zone dropped. To me, this could be setting up a bear trap. I have seen people touting this as a "Head and Shoulders" top which are my favourite patterns to fade. However, only a bullish move back above 1390 would trigger this. Tonight, as per the cash chart above, I will be looking for a flush down to 1380s to get long with tight stops.

In sum, we have seen good pullbacks into the trend in a number of equity markets. I think this is setting up for a potential low risk/buy area. Of course I am nervous given that we made a high right on the first day of the month, and a seasonally weak time of year. However, I still think this market has higher to go first.

Thanks
Austin

Caution Australia

Morning All,

Just thought I would focus solely on the Australian market today. Yesterday was an inside day and rather quiet indeed. We are indicated relatively unch from yesterdays close and thus it would appear we are set for another range bound session again. I gather the good old boys at Macquarie have been hosting a big conference that has all the fund managers, dealers and sales staff off the desk. They might return at some point today with a bit of ammo but more likely give them until next week when the hangovers have worn off.

To me, it would appear the market is a bit overextended here. I would not be surprised to see a pullback over the next few sessions.

XJO 60mins:
We are at the top end of 2 different channels here which should offer meaningful res in the short term. Potentially we have seen a climatic spillover post the RBA decision. I do think we are likely to see a pullback into the previous breakout zone of 4390/4400 at a minimum. The inability of the market to really push higher post this "surprise" 50bps cut has me concerned.

XJO 15mins:
Here is the short term channel in more detail.

SPI 5mins:
We are indicated at 4430 first thing. This puts us right into yesterdays range. I have outlined the clear boundaries in the short term with 4400 offering good resistance and 4420/25 support. Thus quite simply I will be playing these levels until we see a breakout either way. If 4440 breaks to the upside, I will short once more at 4445 vs the 4448 spike high on Tuesday.

I showed these charts a few days ago and it is time to update. The underlying major single stocks give me cause for concern at this juncture. Once again, I would expect us to consolidate here at a minimum but some "profit taking" is the more likely scenario.

CBA Daily:
The 61.8 retrace off the last major high comes in at 53.25 i.e. yesterdays highs. Note there is also a meaningful barrier at $54. It is time to get out of longs into this formidable zone.

CBA Daily 2:
Price is almost parabolic into this resistance zone/sell zone. Potential climatic overthrow here. Once again, caution in the short term.

BHP 60mins:
61.8 Fib retrace off the last swing high comes in at $36.50 i.e. yesterdays high.

BHP 60mins 2:
Top end of trend channel into resistance; bearish momentum divergences; a potential 5 wave move off the low complete. All in all, that should be a formidable wall.

My SPI range: 4415 to 4440. Outlier levels 4400/4395 and 4448.

My SPI plan: Buying 4220s with tight stops and shorting 4240s more aggressively. If I see a solid break through the 4220, I will short targeting the round number. Note there was size on the bid yesterday at 4223/24 and thus look to see if it is again there today.

Thanks
Austin

DAX Strategy

Despite being based in Asia and primarily focused on Asian markets, at times we have to look to our overseas peers to gain insight into market developments. In particular, at this juncture I see a genuine bullish turning point in the strongest European equity market- the DAX. Not only does this present a great trading and investment opportunity, but it is also of central importance to global markets I believe for the upcoming few months.

DAX Weekly:

• Price has retested and held the key upward sloping 55 day moving average and trendline. Here I have emphasised the importance of this 55ema since the start of the bull market began in 2009 in forming both intermediate highs and key lows.
• The sell off from the recent March high has been the first meaningful pullback and test of the 55ema since the price breakout in Jan 2012. Buying pullbacks into a clearly defined uptrend is a low risk/high reward play. Risk for the bulls is now clearly defined below 6500.
• As is stands, price has put in a bullish reversal candle. We await final confirmation at the close of today.
• The target for a new move higher would be up to the previous highs located at 7200 initially. There is very much the potential for a retest of 7600 but it is important to see how price reacts at 7200 first.

Weekly Bullish. Price must hold above 6500 with 6400 an outlier. The trend remains up and this "correction" should serve as a great opportunity for investors to increase exposure to this market. A weekly close below 6500 would put my scenario in Jeopardy.

DAX Daily (i):

• Price put in a low right on a confluence of the 38.2 Fib retrace off the last major swing low, and the upward sloping bullish trendline.
• Note most importantly that the high of the strong bearish breakdown candle on the 23rd April has been taken out. This is indicative of a climatic low and bear trap, especially when coupled with the support confluence.

DAX Daily (ii):

• Head and Shoulders patterns are "classic" chart formations that have a very high failure rate. In technical analysis, some of the strongest trading plays are actually failed patterns. The crowd is positioned for an outcome and when it fails to materialise, the market is forced to cover with a strong squueze ensuing. A market that fails to breakdown has underlying strength.
• The signal for a bear trap to get long is a bullish close back above the neckline. We have seen 3 consecutive bullish candles above this neckline and this is strong confirmation of a meaningful low.

DAX Daily (iii):

• Elliott Wave count highlights the potential end of a wave 4 correction with a retest of the previous highs up at 7200 the next probable swing.
• The key to this count is identifying the strongest momentum within the wave iii of 3 up. The recent low has formed in the previous iv of minor degree.
• A break above 6800 in the short term should signal a new swing higher underway and likely 5th wave up.

DAX 60mins (i):

• Dropping down a timeframe, we can see clear bullish momentum divergences coming in on the low and a strong subsequent rally. Price tried to break through key supports on 3 occasions but failed to follow through.
• This rally has now broken out from a trend channel and the short term open gap has been filled.
• After such a prolonged downtrend, it is likely that price will need to consolidate in a sideways like fashion between 6800 and 6600 before the next break higher ensues.

DAX 60mins (ii):

• The DAX looks to have completed an ABC corrective pattern off the high. Note the relationships throughout the pattern which validates this most notably Wave 1=5; Wave 3=1.618 (Wave 1)
• A move above 6800 would confirm this pattern and act as a trigger for breakout traders.

DAX 60mins (iii):

• Just keeping things simple, we have seen 7 clear waves from the recent high. This is a corrective pattern and thus implies a new trend higher. If price trades below 6500, this invalidates this interpretation and thus this becomes a clear marker and stop loss level.

DAX 15mins:

• Finally, we have seen a 5 wave impulse move off the recent low. This implies another 5 wave move at a minimum after a small corrective phase. I view this as evidence of a meaningful trend change and the beginning of a new move higher.

In sum, the correction off the March highs has halted right into the weekly uptrend. Buying dips into a clearly defined uptrend is the name of the game. The lower timeframes are displaying bullish price action and follow through off the 6500 low. Elliott Wave counts also point to a meaningful low and the resumption of a new trend higher. The risk to this view is a break back down below 6500.

In the short term, 6750 to 6800 is strong overhead resistance and this should cap price for the next few days, especially after seeing a clear 5 wave move up off the low. Price has also traded from low to recent high in 3 consecutive days so expect some weakness in today's trade. On the downside, there should be very strong support at 6600 to 6650 and short term traders should be looking to buy that dip. Breakouts above 6800 would confirm a new trend up into the targets below.

Targets for a new uptrend:
1) 6950 to 7000. This is an open gap target from the 4th April. Note the 61.8 Fibonacci retrace off the March highs to the most recent lows comes in at 6930.
2) 7050. Swing high and 78.6 retrace.
3) 7200. March high and major target for this move

Any break below 6500 would invalidate this bullish interpretation and short term traders should have stops under this level. Note for longer term traders there is a bullish outlier level at 6400/6350. This is the October 2009 high and the 38.2 retrace from 2012 high to September 2011 low.

Key risks to my analysis remains the EUROSTOXX and the unravelling of the debt crisis. Key support levels there remain 2250 and 2200. The latter level should be formidable.

Thanks
Austin

S&P500 Trading Plan

My Emini S&P500 trading plan for tonight can be found here: http://marketletters.blogspot.com.au/2012/04/emini-s-plan-tonight.html

Thanks and Good Luck
Austin

Tuesdays Tuesdays

Been some good calls of late. This mornings post can be found here: http://marketletters.blogspot.com.au/2012/04/morning-all-well-we-got-it.html

Thanks
Austin

USA Weakness Ahead

Morning All,

I wanted to spend some time talking through some setups in the US this morning. I think we are on the cusp of a potential breakdown into 1340/1350 at a minimum and thus this is of central importance to global markets. My Asia targets in the XJO, A Shares and the Hang Seng (1st target) were hit to a tee yesterday: http://marketletters.blogspot.com.au/2012/04/asia-setups.html. We hit 4377 in the XJO cash and 2500 in the A Shares, and then sold off. We are looking at a small gap down this morning and lets see if this now picks up steam.

So to the US. I wanted to give the rally the benefit of the doubt but clearly we have struggled in this 1385/1390 zone. My line in the sand was 1370 (cash) and the low overnight was 1370.5. Thus we haven't broken through supports yet but I believe it is only a matter of time. I was watching the Emini S&P500 intensely yesterday during the Spanish auction and there was a large offer up there at 1390 that just would not budge. Repeated attempts to break higher were slapped down. I have always said that to be a good trader, you have to be flexible- well I believe now is one of those points.

Let me expand:

S&P500 Daily:
We are still holding the upward trendline BUT each bounce out of this line is getting weaker and weaker. Each repeated test of this line implies genuine weakness. Price should bounce and not look back. When it becomes obvious, it is prone to a breakdown. In my trading, I use the "3rd test" as the prelude to a breakdown. Well here we are.

S&P500 60mins:
Keeping things simple firstly- this is a clear bear flag under resistance. Price failed to break higher. I could count this an A=C pattern off the recent low as price is overlapping and not impulsing. In the bigger picture, breaks through the 1370 support level open up a potential C leg lower but that is secondary consideration for now.

S&P500 5mins:
Zooming in more detail, price tried to break above its previous highs and failed last night. Some will argue that the move into the high looks like a 3 and the move lower last night also looks like a 3 wave move. Well pls note that the Emini futures did make a new high at 1390 vs 1388.75 previous high (18th April). This could be a truncated 5 wave move in the cash= bearish.

Emini 60mins:
Here is my simple short trade setup. I am shorting 1/2 size below the 1378 level. My stops will be above 1385 and if you can place wider stops use the 1390 level. I will add on confirmed breaks of that upward sloping trendline and the 1370 level cash (1366 eminis).


Confirming evidence.

DOW Industrial 60mins:
This makes me very bearish. An A=C pattern off the low completed; an attempted breakout through resistance that failed; and last night we broke through the low end of that trendline with strength.

Russell 2000 60mins:
How do the midcaps look? Well the bounce off the low was weaker and also a clear ABC overlap. Price could not break above resistance.

And the European bounce was slapped firmly back down yesterday.

Eurostoxx Daily:
Strong candle that was completely filled yesterday. The upward sloping trendline has broken. The target for this move is down at the 61.8 fib at 2200 so still some way to go

Perhaps I am jumping the gun. I was bullish primarily because of the AUD and this has not broken any supports at all yet and the EUR held in well. I have to trade the stock setups in front of me however and use the currencies as secondary considerations for now.

My SPI range today: 4340 to 4380. Outlier levels 4325 and 4395/4400

Thanks Austin

Asia Setups

Morning All

Last night we saw consolidation and a clear short term range in the S&P500 after Tuesdays strong gains. I sold half my long position in the mid 80s and am looking for the 1395/1400 zone to get out of the rest as I said yesterday. Certainly there are a few things that are giving me concern. The DOW and the RUSSELL 60min charts both look like clear A=C patterns off the low. They sold off the heaviest last night after the targets were hit. However, to me there are some clear markers in the S&P500 and until these are broken, you just have to focus on this uptrend, especially after Tuesdays kick off. This level is 1370 in the cash index and price must hold above here. Below there I start getting bearish. Over the last few days, I have seen so many technicians who are looking for a top/Wave "2" high in the 1390/1395 region- when the crowd are all looking for the same thing, it v.v.rarely plays out.

To the Asian setups. I wanted to start with the Australian Dollar and this is one of the main reasons for my positive outlook currently. The 240min chart v.aptly highlights my thoughts:

AUD continuous futures 240mins:
We had a prolonged downtrend that ended with a base pattern/my 3 Indians ending pattern. Note the bullish divergences coming into the low and the heightened bearish sentiment given the interest rate cut cycle. Markets price that in! Now price is beginning a new short term uptrend. This is how markets transition. All the moving averages are up on this timeframe.

AUD June 60mins:
Zooming in more detail. As you can see here, price clearly continues to hold 1.0220/1.0240. I think we are now setup for a continued climb higher into 1.0450/1.05 and I would be long into that zone. There is a lot of disbelief and skepticism out there towards this currency right now and that will fuel an extended move higher.

To stocks:

XJO Daily:
Still stuck in a broad range but testing the top end of the range. Like you, I have no idea if this does breakout and thus I continue to focus on the short term and making money intraday.

One pattern that I was watching v.intensely and played out perfectly was BHP.

BHP Daily:
This was a classic bear trap as everyone was transfixed on $34/33.80. Sure enough we saw a false break and price immediately regathered the breakdown level. If the ASX200 is to breakout, it will be this stock that leads us. Lots of resistance points but we are not far off breaking a small downward trendline.

XJO 15mins:
These are the levels I am watching coming into today. Breaks of 4350 open up a retest of 4380 in coming days. Yesterday we saw v.little intraday movement but the fact we held onto gains was encouraging.

My SPI range today: 4345 to 4365. Outlier levels 4388/4390.

Core intraday ideas:
i) BUY dips to 4345/40 looking for a retest of the 60/65 level.
ii) SHORT scalp 4365. If price fails to sell here, you must get long and join the breakout targeting the high 80s/4390.


Hang Seng 60mins:
I still think this is a bullish setup in Hong Kong and self explanatory. Get into this short term uptrend targeting 21,000 firstly then as high as 21,600 if markets continue to climb this wall of worry which I think they will for now.

Whats my one concern? The Shanghai Composite which is coming into a great short zone as a Trader. Perhaps this is an ideal hedge for long positions.

A Shares 60mins:
Overhead resistance at 2500 which is a previous breakdown zone and the 61.8 Fibonacci level. We also have a small outlier level at 2520 which would possibly setup up a 3 peak/Indian pattern and subsequent bearish turn. I am seeing bearish momentum divergences on the lower time frames with each move higher which is an important backdrop for a bearish turn.

Thanks
Austin

The Power of Tuesdays

Pls see todays post here: http://marketletters.blogspot.com.au/2012/04/power-of-tuesdays.html

Got a great move yesterday. Have to now keep the ball rolling

Austin

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