Time for a breather. Mon Nov 2

November trading has begun with a drop of more than 2% after the US resumed its focus on the fear that TARP programs will soon run off leaving the prospect of a double dip recession. We dutifully followed that lead with a fall which reached 130 points early on and is now (midday) at an improved loss of 96 points. It feels like time for a break and a probable retracement rally.

I haven't really done anything but watch. I'm fairly pleased that Fmg didn't just plunge to new lows as I'd bought a reversal in a risky market. It is down to 372, but for a volatile stock that's quite manageable.

Otherwise, Tls is having a pull back but I want to stay with it for a while longer so unless it falls to 316 I'm still long. Qan is down to 271, I did buy half of my short back at 273 (v 286), and the rest are slightly weaker.

A couple of interesting conundrums (conundra?).

Here's Gff.

I went long at 166 on a 1-2-3 breakout. It wasn't a perfect set up because it was coming from a lower low but nevertheless a buy signal in a defensive stock when the market is turning down is not too shabby. This morning it opened below my stop which was the low of 4 bars back. I didn't stop out because I wanted to wait and see; my guess was that our worst point would be soon after the open and I preferred to see if there was any sustained selling. The stock is back to 160 with the stop at 158 and I'm not out of danger here but it's an illustration that it can pay to use your judgement rather than to be too system driven.

The other puzzle is in Lihir Gold.

There was a potential reversal buy on Friday which I wasn't interested in because although the stock is still making higher lows in terms of the larger swings, the rally was perfunctory, there was a gap which means you have to chase the stock and in Elliot wave terms it looked like a 4th wave retracement which would make a new low. Today that new low hasn't happened despite the opening fall and the stock is close to breakeven on the day. Gold has held quite well in US dollar terms and with a 4% drop in the AUD over the last week that translates to a rise in our currency. What if it continues to rally today, or holds and then pushes through to make a little buy signal tomorrow?

I'm not sure what my response should be. I'm still leaning towards my initial summation that it's just a choppy rally but if gold were to move overnight I could be tempted to give it a go.

2.01 It's one of those days where it's too late to sell and too early to buy. The market is down 94 and hinting that it could sell off again intraday. However, the Nikkei and the Hang Seng are only down a touch over 2% and they often overreact one way or another. US overnight futures are firmer.

3.29 I'm wondering why we haven't had much of an intraday rally off the lows, perhaps it's the Melbourne cup coming up tomorrow so that most players are waiting till Wednesday before having a look.

4.12 The Xjo fell 103 points or 2.2%. We've had 3 waves down for a 5 wave pattern in the Xjo chart. The 5th wave could have further to travel of course but the risk reward suggests a retracement.