What squeeze? Mon Nov 30

Not so much a credit squeeze as a short squeeze this morning. The half day's trading in the US on Friday was a session of relatively modest falls which helped the Europeans to bounce around 1% having fallen by 3% the day before. So, at 11.43 am, we're back up 110 points compared to a loss of 136 on Friday. This is 2.4% and probably a bigger gain than expected. The Dubai backdrop is that the UAE has undertaken to provide support and this has no doubt helped. Meanwhile, Japan and Korea are also ahead over 2% while US futures are up a tick.
My short positions have overall performed ok. Specifically, I've given back half of my Friday's gains while the index has clawed back more than three quarters of that loss. Of course, these positions have been driven by chart signals and not by Dubai's problems. I think most of the nervousness around the globe is based on fears of Chinese overheating so after this bounce back is complete I expect further weakness. I'm trying to assess which of my shorts are still valid so in one sense Dubai has muddied the waters by generating volatility.

11.55 I used the bounce to exit a long position in Arrow Energy at 393 (v 410). I was hasty to buy this in a stock where I was in two minds.

I'm fairly happy with the early days of using reversals to get into positions early but there are plenty of lessons to be learned. One of them is not to push my luck by looking for a second attempt to rally because it's probably not going to go too far and I could miss a good move down. Qantas is an example of this.

I succesfully traded the first bounce on a reversal in early November but then tried again which cost me some pretty obvious opportunities to go short. The reason not to expect too much of a bounce was that the fall into early November had clearly broken below previous lows. On the short side, I can see that caution might have been in order with the first sell signal 8 bars back (just after I went long), but the next one 4 bars back (when I cut my long) was a very decent opportunity.

The Xjo index has just make another minor new high but hasn't followed through. It's consolidating just below near term resistance and I'm hoping for a failure here.

12.36 The Xjo continued on with another little burst so that we're up 126 points, 5 points below the high. The big outperformers are the banks which are experiencing gains above 5% in the case of Cba and Mqg.

1.05 Fortescue is my worst performer today and while I can see the motivation for this trade I have slight regrets. Firstly, the breakout level was around 413 and I risked a big gap to go short at 397. Secondly, I had noticed the potential for a further leg up because it looks like a small 1 and 2 wave were followed by an extended 3rd wave (which was itself a 5 wave pattern) implying that after another correction there could be a new 5th wave high. As I said in reference to Cey last week, I don't really like to get too arcane about the wave patterns but it might have been enough to convince me to wait for a better opportunity.

I'm still short with a stop above the little 5 bar trading range.

2.47 Mirvac Group has been one of the few positive charts around. I think the gap is too big to take this reversal opportunity to buy here but if there's some easing back then I might get on board.

Stockland Group also looks ok but is a much more choppy chart.

There's also a reversal setting up in Aristocrat and this might be worth taking. The stock had its retracement in November followed by a drive down to a 5th wave low.

3.52 An amazing day today, we're within a point of erasing Friday's losses. I'm not near any stop losses though I bought a few Fxj on the open at 156 (v 166) and some Ozl at 120 (v 126) earlier. I'll probably buy a few Awc and Ipl soon, just on the basis that they've underperformed today - not that that's compelling logic, but I'm keen to reduce the short size a little.

4.17 Mgr was the standout trade today which I overlooked but perhaps I'll get another go at it. Otherwise, I just reduced position size some more on the close in a few stocks. Awc at 154 (v 165), Awe at 268 (v 271), Bsl at 271 (v 276) and Ipl at 285 (v 292.5). The gain by the close was 129 points leaving the Xjo in no mans land.

It's a striking reversal but I don't think you can take it as a buy signal until and unless it can get back above last week's highs. At this point, it looks like a rally back to the breakout.