Raw deal.

Macquarie bank got a hammering in the business pages today for supposedly abusing the Australian government's taxpayer funded AAA guarantee which has helped them to emerge from the GFC in great shape. You can read about it on the smh.com.au website in the business section but essentially they took advantage of this guarantee to borrow more than $16 bn and in an unintended consequence proceeded to buy up loan books trading at hefty discounts such as a $1 bn portfolio owned by Ford Credit Australia. Treasurer Wayne Swan is said to be furious about this but I can only imagine that this is a pose for public consumption. I'm no fan of Macquarie, our closest equivalent to the vampire squid, but they represent raw capitalism, red in tooth and claw and they have done EXACTLY what every economist and central banker has wanted done with our stimulus dollars. They've recycled them and if Ford's Australian dealerships survived the GFC because Macquarie would give their customers loans then it's hard to see what the crime is.

Macquarie was sold down on the open which wasn't great for me, having punted a few June 4500 calls on the close, but since it was above support I bought some stock at 4279 which I've tipped out at 4350 and paid for the mark down on the calls. Since it's lagging the other banks and holding above support, I've also bought a few more of the June 4500 calls at 114.

Here's the daily chart.

Otherwise, I'm out of Qan at 251. This could be premature but with the US and UK markets closed overnight then today is a suitable day for some end of month window dressing. I'm out of Ozl at 109 also but like most of my positions at present, I'm a good chance of buying back in on pullbacks.

4.10 That was a tedious day though not unexpected with a guaranteed quiet night tonight, on the markets at least. Window dressing just isn't a factor anymore which is a success for ASIC, I suppose, although I miss the fun and games. Although the market has outperformed relative to the drop in the US, we've actually fallen while the Tokyo and Hong Kong markets are flat and the Kospi is up. Mqg has drifted to 4333 and the options are worth about 100 now.

Clearing skies. Fri May 28

It's all looking fine again and despite having pre-empted some of the overnight move in yesterday's trading, the news was good enough to send us up another 71 points at 11.20 am.  We've pretty much got to where I thought a correction in an ongoing downtrend could get to and there's still plenty of momentum so I'm leaning towards the low having been made with quite a good chance of another 150 or so points of rally as the first target would be the last swing high on May 13th.
The featured trade is another bullish one, this time in Awe. I'm long this at 208 and it's another retracement trade with a similar pattern to everything else at the moment. It's just lagging slightly which is why I'm still able to put it on. There could be a reason for this; it's a prime candidate for tax loss selling, having been a big underperformer this tax year, but I do think it's a little early for that as our tax year ends on June 30th.

Here's the chart.

1.51 The market is gently easing back and I've been taking profits here and there. I'm out of Awc now as it has eased back and most of the Ozl, which is up to 109, along with a few Qan at 244. I've sold out of some other long positions as well although in most cases I'm looking to get back in on a pullback. Actually, after another hectic week, I'm kind of distracted and wishing that I'd organised a lunch.

4.02 Heading into the match out, the market is back to the top of the range. I'm still pretty long but have trimmed again - out of a few more Qan on a blip up on April passenger numbers. I just had a little option punt on Mqg, buying some June 4500 calls, they're lagging the other banks slightly.

White picket fences. Thu May 27

Maybe it's just the snapshot as we approach midday with the index flat but Japanese and Korea markets are also pretty much unchanged and although we have had some action this morning with a 30 point rise and retracement, it's generally settling down. The US sold off late yesterday but that doesn't seem to have affected things much. There was some early enthusiasm about a watering down of the resources rent tax and although it has been denied, the general assumption is that there's room for negotiation.

I haven't done much today, just sold a few Awc at 161 and Ozl at 108. I'm keeping a core position and trading around the swings in a few other stocks as well.

1.30 pm It's definitely a housekeeping sort of day. I'm still unsure whether we might have made a low or not. If anything, I think that once this little correction plays out we'll make a minor new low. As my positions are all long then I'm not adding any more and just managing them.

Here's a 60 minute chart of the Xjo index.

(I'm experimenting with larger charts - they used to stuff up the spacing but it's always changing).

If this turns out to be just a retracement before another low then there's still a bullish case to be made. Yesterday's closing level could be a higher low while today's action so far is supportive of another push up, perhaps to 4450ish. Whereas, if we've seen the low then the index could quite quickly bounce up to the top of the last correction at around 4600 to 4650.

By the way, it still does stuff up the spacing but I don't mind it so much now. It's nice to have a more readable chart without having to open it up in another window.

2.15 The market is firming and I've decided I can risk another long trade (I've trimmed my dollar exposure overall). This is a long in Qantas at 239. It's another retracement story with a fairly tight stop in the high 220s.

2.45 The market is really taking off now - up 49 points.
No, this doesn't work after all. I've just spent 15 minutes trying to work out how to put this text at the bottom of the Qan chart without just entering a whole bunch of spaces. Back to normal for chart size.

4.12 The futures ran into the 4.10 match out and helped the ASX 200 to close on its highs at 4370, a rise of 1.7%.

Keeping us guessing. Wed May 26

It turns out that Korea was the driver of the afternoon weakness yesterday. I noticed that they were particularly weak yesterday but didn't realise that the action had stepped up over there. The US indices reversed to close squareish last night, perhaps helped by reports that major troop movements were not taking place in South Korea as earlier reported.

At present, nearing 11 am, the market is pulling back from a very strong open but is still up 74 points or 1.9%. The Kospi has opened only cautiously stronger so I suppose that's the focus of attention and the reason why we're easing back apart from fatigue with all this short term volatility.

On a short term basis, the odds have swung back in favour of a rally even if it's just a second swing up before further weakness. I'm glad I did a spot of bargain hunting on the match out last night because there weren't many bargains on the open. I was working with a scenario that the US would open weaker then recover somewhat but the bounce was more than I imagined.

I did manage to pick up some Alumina at 156.5 and that's the featured trade for today. Even more so than yesterday's trade in Ozl, Awc is holding above February and early May lows. Rio is making bullish noises about Aluminium also, so maybe this could develop into a run up to 180ish rather than just a retracement rally. I probably wouldn't stay in for that long, but it would provide a road map where I might look to buy dips. Here's the daily chart.

3.20 pm The market was looking ominous around noon and the possibility of a big reversal down was presenting itself. The Kospi steadied though and is now up 1% plus after being down early and it has helped Asian markets and the Australian market to hold on to gains. We're still quite nervy even though the market is up 57 points.

It feels like a turning point to me in the sense that the market is still tentative while so much bad news is out there that it's hard to imagine much else having an impact. In the meantime though, any ill effects are potential or in the longer term and markets are starting to present quite good value.

4.15 Still a bit soft in the afternoon with the market ending higher by 42 points. The panic du jour in Korea seems to have eased with the Kospi up around 1.4%.

Overplaying my hand. Tue May 25

With the benefit of hindsight, I looked a gift horse in the mouth after the Australian market rallied 2% yesterday to add to the intraday 3% rally from Friday's low. The damage isn't too severe this morning although Cey is back below my entry level at 364. It was probably unrealistic to expect the Europeans to rally much and the US indices are still lagging most others so further weakness was unsurprising. It's still not a clear picture here and we've simply given back most of yesterday's gains. Looking at the Xjo chart, the reversal is quite impressive and maybe this will be a simple retracement before a second leg up.

1 pm The trade for the day is a long position in OZ minerals. This has possibly completed 5 waves down and found support at the February lows. There was a decent bounce back on Friday/Monday and I've bought stock at 103 as it pulls back from the 106 level. Stop is around 96. As always, click on the chart to enlarge it.

2 pm The market is starting to drive down and I've sold my Ost balance at 292. I didn't get the reversal here that I hoped for so I'll wait and see if it drives down to a new low. Here's the 60 minute chart.

Cey is shaping up in a similar fashion. I've been jobbing around in the stock all day and have made a few bucks on it. I also sold a small amount on the close yesterday at 383 so it hasn't been a complete washout. But it's starting to look as if it might fail here and drift down to 345, 350 so I'm wondering if I should also cut my core position and try again later.

3 pm I did cut my Cey position at 363 even though it has been holding up for the last hour or so. But if I look at my watchlist, it's clear that the iron ore stocks, for example, have come back hard after having a strong bounce so I'm a good chance of doing some bargain hunting elsewhere if another leg up looks possible. I'm still loathe to do any shorting as there isn't much around that's bounced to resistance or had a bearish congestion.

4.15 The market finished down 3% in line with Asian markets while US overnight futures are also soft. It seems more like an orderly sell off today with buyers stepping aside. I think the opportunities are on the upside in the short term but I'm happy to have stepped out of most of my longs although I did a little bargain hunting on the closing match. 

A few pitfalls. Mon May 24

Northern hemisphere markets had similar sessions to ours on Friday night, reversing from heavy early losses. There have been a few pitfalls this morning with no obvious market consensus on whether we've hit an interim bottom or not. I don't have a firm view on that either but I do think we could have another day or so of strength. My confidence was tested early because the Xjo retraced from early highs to be only marginally up. I'd been doing some bargain hunting and fortunately was buying in small installments because I kept getting better bargains until I thought I was digging a hole for myself. Things have turned around and at 12.18 pm the market is close to the day's highs at 4358 which is a rise of 1.2%.

The featured trade today is a long position in Centennial Coal. I'm in at an average price of 367 as the stock retraced some of Friday's afternoon gains before steadying up and firming to be square on the day at 379. This stock was in a trading range from mid August of 2009 to mid December and has sold off hard till it sits just above that congestion (I've only shown part of it from late October). There's no obvious buy signal yet and I'm really just looking at an oversold rally with my stop around the February low in the 340's.

Two factors encouraged me to stay with the buy theme this morning. The first is that the sort of reversal days we had on Friday nearly always have some sort of follow through although, admittedly, the second attempt to reverse is usually a lot more convincing. The second point is that I was disappointed at not having put on some longer term trades in my super fund on Friday in the teeth of the panic and, having missed that chance, I was grateful to get a second bite when a few stocks sold off early. Presumably a lot of other market participants must have been feeling and acting in the same way as me. One Steel, for example, may yet find its way down to 280 or 260 but having fallen rapidly from 415 in April, being close to decent support and rated highly by analysts then close enough is good enough in this situation.

4.15 The market kept driving on all afternoon and finished with a big rise of 90 points on the Xjo index or 2.1%. I was trying to take profits in Mmx amd Mre, for example, but still have been a small net buyer on the day. I'm not sure that the risk/reward is there now to be long the market but the individual stocks look solid enough. If it's a V bottom then I'm fine, if not I'll need to be nimble. I'll probably be on the sell tack tomorrow and hope that overseas markets follow our lead so that there'll be strength on the open.
The best bullish news today was real strength in the mainland Chinese markets.

Busy at home. Fri May 21

The US investment community used some weaker jobs figures as an excuse to whack their market last night and the DJIA chart shows signs of catching up to the rest of the world. Here's a weekly chart.

Here's the Xjo weekly. Our market (which looks like plenty of others) has moved well below the February lows so you could expect the Dow to show some more weakness.

Anyway, perhaps because there were fires to put out at home, it's the first day this week where there doesn't seem to be a wall of what I assume to be carry trade selling. After opening down over 3%, roughly in line with US falls, the dust has settled and with the sellers strangely quiet some bargain hunting has lifted us to a loss of only 2.1% at midday.

I've had a cut to make in Ost. It closed on support last night at 298 and traded as low as 281. I thought the open could be at least an interim low, so I held on and so far that's been a good decision as it has crept back up to 295. It's actually setting up for a bullish reversal so I'll hold off as long as I can and may keep some of this long.

In for a penny, in for a pound and having tried to buy the market intraday yesterday, I've been doing the same today but with much better results. Yesterday, I was inflexible as there was clearly plenty of stock around but today it was pretty clear that the big sellers had gone missing so I've been nibbling at the resource stocks that have been hardest hit like Fmg and Mmx.

1.45 Another wild ride as the market rallied to an intraday high of down around 1%. We're slipping back down again but there have been a lot of reversals today in individual stocks.

2.02 I've been thinking about iron ore stock Murchison, after trading in and out of it all day, and have decided to buy some at 176 to hold. It's a situation where there's been a potential 5th wave low formed with a rejection of that low - at least so far - and although I don't have any really close stops, I'm prepared to risk 20 cents on the trade.

3.55 Down a mere 15 points as the whole market has had a reversal day. I've been reading about the idea of an echo panic on a couple of blogs today; the idea is that markets are reacting based on the events of 2008 while the situation, though dire in terms of the potential dampening in long term growth, is not immediately apocalyptic as it was then. It suits me to go with that idea anyway, as I've held on to my Lgl and Ost longs and bought Mmx and a couple of other resource stocks to hold overnight. (Lgl long term calls have been crunched again as my thinking has been confused; I should either put them in a long term account or trade around them actively).
My gut feel is quite relaxed right now whereas yesterday I was kicking myself at this time and also spent most of the evening either compulsively checking the financial tv stations or forcing myself not to. I tend to only do that when I know that my positions are wrong but I've been too stubborn or frazzled to get out in market hours. I may have ended up having a good day but the overnight positions did not help one bit.

4.16 The drop was 11 points by the close.

Recall. Thu May 20

After a tentative early bounce the local market turned tail and fled, falling a rapid 60 points on the Spi as the Japanese market opened weaker. As far as I can tell (at 11.54 am), the Japanese fall is more to do with another Toyota recall and as other Asian markets are in better shape than the Japanese, the Aussie market has bounced off the lows to be down 14 points.
My bullishness is premature and although I've only had a couple of overnight longs, I could have done with holding my short positions for a bit longer. I've also not helped things by buying a couple of stocks early on which I then averaged into - which is a dangerous game - the rally has bailed me out but it's silly stuff.

1.06 I'm still in buy mode but trying to resist the urge. One Steel is just down a cent although it hit 306 earlier, while Lgl is harder hit having fallen 9 to 395. I've just got the long dated calls so I'm not too fussed about this although with hindsight I could have sold them in the high teens and been buying them back for about 11 or alternatively, just shorted some stock to hedge them.

2.53 We're back down again as early Chinese strength has faded and the resource sector is pretty hard hit. There's not a lot to do with most stocks too far gone to short while the odds and ends I've been buying are continuing to weaken.

4.13 It's easy to forget how insistent the overseas selling can be when a carry trade is being unwound. A day of lost opportunity for me as I failed to recognise some intraday shorting opportunities. The market lost 1.6% and is down 14% since the April 15 high. It's probably quite cheap but the local institutions are likely to step aside until they think the selling is over.

Round 2. Wed May 19

More weakness overnight and the Australian market is still suffering from the unwinding of AUD exposure as the USD strengthens. At 11.42 am, the Xjo index is down 1.5% which is a little off the lows. While there's no sign of a low, there is at least the possibility of a short term bearish completion with a new 5th wave low being made. Here's the updated Xjo chart.

I'm in an agressive day trading mood and have decided that's enough for the moment and bought back all my short positions. I've also gone long 3 or 4 stocks. Most of the positions are intraday but there's one which I'm happy to hold overnight and it has almost the exact set up as it did quite recently when I also went long One Steel. This time, like the Xjo index, it's got a slightly more completed 5th wave look, and as before I'm long at 317 with February supports around 300 as my stops.

4.13 Ost was probably about the worst intraday performer of my purchases today, closing at 313, so it's possibly fortunate I'm holding it overnight. The market didn't manage to rally and closed at the lows, down 1.9%. This is interesting as the major Asian markets rallied 1% or more off early lows of 2% down.

At the end of the day, I'm out of my shorts with a long in Ost and still holding the July calls in Lgl.

My son has recommended a good website to me, Paul Kedrosky's Infectious Greed, paul.kedrosky.com (I'll add a link). Today it features a speech from high profile economic historian Niall Ferguson about the consequences of unsustainable debt. It's quite long, but well worth a listen.

Growing pains. Tue May 18

Metals were sold down overnight, even after the US stock indices had started rallying back from early losses. The enthusiasm for growth has clearly waned and resource stocks are down again in the Aussie market. The ASX 200 futures were up early on the back of the US recovery to breakeven but that quickly faded. It did give me the opportunity to add a few extra to my shorts in resource stocks as they opened stronger but with a quick turnaround I've bought most of the extra stuff back.

I'm a bit wary now because the Xjo is closing in on the recent low and it may pause and have another attempt to rally. I'm nibbling at a few of my short positions which have fallen quite hard although I don't really want to go long anything yet. It seems like the carry trade unwind is still going strong so there's lots of negative momentum. Here's the Xjo chart.

12.41 I do have a new trade, another short position and it's in Ipl so it's almost a cut and reverse. When I stopped out yesterday it occurred to me that it would probably get close to the recent low at 285. I'm not super bearish - I think it could make a higher low - but some mild strength on the open allowed me to get short at 302 and I'll take half off around 290 if it gets there and give myself the opportunity to make a bit more on a new low. Stop is above 315. All in all, this is a bit marginal, it's just a quick momentum trade.

3.18 It's a tricky afternoon with the market holding above recent lows. I've decided that Ipl is just too marginal; there's some solid buying at 300 and I've closed out my short at 301. It's not really a day to force a trade, there are a lot of stocks making new lows but also looking extended. No obvious countertrend trades are showing up and at the same time I'd like a couple of up days before putting on new short positions.

4.25 The index held up to gain 3 points on the day. I covered a few more shorts so I have very little exposure for the time being. I'd like to see a minor rally from here.

Off the fence. Mon May 17

Renewed weakness in the Eurozone has made up my mind for me and taking the view that last week's corrective rally is complete, I've attempted to find shorts that weren't tonked on the open and sold the last of my speccy longs which was Minara.

The shorts I found were in Fortescue, Murchison and Oz Minerals and they're all the same thing - a stock that has rallied far enough so that there's a reasonable amount to be made if there's a marginal new low, and the risk can be capped at last week's high. Fortescue has already given me a good gain since the open so there's not a lot of point featuring that one. The best of the other two is probably Ozl.

I'm short at 106.5 with a stop around 111, 112 and I'm hoping for a quick move below the recent low of 98.

2.25 The selling accelerated into 1pm, since when the Xjo index has steadied. Still, we're off 2.6% and it's the same story in Japan, Korea and Hong Kong. US overnight futures are pretty weak too as we near the European open.

I've got a long in Lihir which is up slightly and the other one is Ipl, down 3% on the day but above my stop. Otherwise, it's a bunch of short positions which are performing quite well.

4.00 Out of Ipl now at 301 and 300 as the market continues to sink, down 3.1%.

No rash moves. Fri May 14

Despite a late sell off in the US, the Aussie response has been measured so far with the index down 1.1% at 11.26 am. Yes, we're down about the same as the US indices but given our strength yesterday, it's still a measured response. I was worried about some short term longs I'd held onto but they're not down by much and I suspect we're still oversold. There's increasing value in the local market and although earnings growth might have halted, it does make it hard to knock things down in the short term unless we get some more serious overseas weakness.
Gold stocks are still steady to firm despite the metal having stalled in the last couple of days - probably bullish to have held rather than pulled back after a big run.
I'm just sitting with what I've got at the moment and hoping to sell out my short term stuff this afternoon into any strength.
2.52 The market has firmed a little as Japan has improved and Hong Kong is only down about half a percent. I've got nothing new on today but have just cut a couple of trading longs - generally for square or slightly down. I've kept a couple of minor positions although essentially I'm looking to short a rally. I'd like to see some strength on Monday or Tuesday to sell into.

Tale of two cities. Thu May 13

Most of the major indices have the same broad pattern; a slowing top, a lower high followed by a plunge and a recovery, but the US and the German indices are definitely stronger than most others. Here's the DJIA.

Whereas here's the Xjo index chart.

The Xjo chart is obviously weaker, as are charts of the major Asian indices, the FTSE 100 and most of the other Euro countries. I suppose it reflects the sentiment that the US and Germany are in the early stages of economic recovery while Chinese growth might have peaked so that enthusiasm in this part of the world is limited. Equally, the European countries in deficit strife are also performing badly.

I can see how the US and German markets could spike up to marginal new highs but the structure of the charts is too weak to sustain those levels in my opinion. However, a short squeeze rally in those markets could easily push us up for a few days as we could rally another 150 points without negating the current downtrend.

With that in mind, I'm looking at some short term longs which could be quickly reversed if they rally up sufficiently. Generally the idea is for smaller mobile positions while we're in this fast move except for the gold sector which I'm more confident about. I've put on a few short term longs in Aio, Cey, Mre and Wsa.

But the feature trade today is a long position in Ipl which has a slightly stronger chart. I'm looking for a second leg up after the first recent bounce from 285 to 319. In the big picture, it looks like a slow, choppy 3 wave correction leaving open the possibility that the stock could have more than just a minor retracement rally. Long at 311 and realistically I'd be happy with a short term move to 330, 335.

4.06 Approaching the 4.10 match out, the market has held its early gains and is ticking higher now. Up 70 points with the prospect of a few more to come. I'm out of my Lgl at 314 but still long the options as the price rise has increased my exposure. My short term stuff hasn't really performed today but I'm holding most of it overnight.

Wrong page. Wed May 12

I'd been reading the market swings like a book but ended up on the wrong page towards the close yesterday as Northern Hemisphere markets held on to more of their gains than I was expecting. Fortunately my shorts are quite modest as we haven't had strong enough bounce backs to get set for much. The local market has regained a little more than the 50 odd points we lost yesterday as we pass the first hour of trading.
Having said all that, the moves overseas still look like retracement and I continue to expect further weakness.
Gold has been performing according to the textbook as reserve currencies, the Euro and the US dollar, continue to print money. The latest weekly from Tim Price at the Price of Everything (see the link) has a nice argument for gold and the weekly chart, below, seems to indicate that gold is moving into an acceleration phase. Greg Peel's morning report on FnArena (also linked, and report is free after 10 am) is another to make a good case for gold.

It's enough to have me scurrying around for gold exposure and I've gone long some Lihir gold at 399. The merger with Ncm is agreed and the Lgl shareholder vote is due in late July so essentially this is now a proxy for Ncm. It's a slightly odd scenario because I like the Lgl chart better than that of Ncm. Here's Lgl.

Here's the Newcrest chart. It's bouncing along the bottom but hasn't made much of a base. If it struggles to get close to or through the first resistance level at 3360 then I'll get out of the Lgl trade.

2.24 Back in the office after an appointment....before I went I bought Lihir May 400 calls at 12 and July 425 calls at 16 because I realised that my assumption on the link with Ncm was incomplete. The deal isn't done until July and up until June 8 there is the possibility of someone else bidding. It's unlikely apparently, but I guess if the gold price runs hard enough it could happen. Equally, if the gold price did surge then, with its ample reserves, Lgl could be a better stand alone option. Again, this is unlikely but it does mean that the link with the Ncm share price is not set in stone and there's an opportunity for Lgl to run its own race.

My logic could well be faulty but so far, at least, the stock is still rising and Lgl is up to 407.

4.15 The Xjo managed a gain of 25 points. Asian markets were a touch lower, not surprisingly when the Euro can't sustain a rally and Europe is a major export market. Overnight US futures are lower while gold stocks held their gains.

Same songsheet. Tue May 11

Massive reversal rallies overnight with the US particularly interesting as they jumped 4% early then traded in a narrow range all day. The Euro didn't bounce as much as hoped and the Aussie market has reacted in fairly typical fashion with some early strength which has petered out.
I sold out all of my longs early at reasonably good prices. I went too early in Qan, getting an average of 264 when it's 268 now. My targets are of lesser importance to me at the moment than the time that I hold the trades ie I don't want to be in long positions for more than a day or two while the trend is so strongly weak. It's now quite possible that we've had a V bottom with the dramatic reversals of the last day or two but I still favour the downside. Here's the latest Xjo daily chart.

My featured trade is a short position in Stockland Group. They're not the most exciting stock for short term trading but I've had some joy with them in a small way. I'm short on the retracement towards the breakdown at 396. So far, short at an average of 392 with my stop at around 400.

1.54 Lunchtime has brought another leg down in the market - down 27 points - as Asian markets, which didn't catch fire yesterday, have again failed to show any enthusiasm and are a tick above breakeven. Sgp has dropped to 385; I thought I might get a few away at 393, 394 but it's still a reasonable outcome. Awc is down today too, peaking early at 170.5 and now at 164.

4.15 Markets and US futures kept drifting lower. The Xjo closed down 52 points. This is textbook stuff and we could get smacked again tomorrow. Bought a couple of Awc back at 162.5 and some Sgp at 384 to placate the gods.

Circuit breaker. Mon May 10

The overnight markets were weak again but the US market, with broadly positive jobs numbers, was able to stabilise. All that has been superceded though with early news today that the EU has caved in and will go ahead with quantitative easing. Initial response is very positive with US overnight futures up more than 2%. The Japanese market is a little more muted but still up 1% or so as the Euro recovers against the Yen. The local Xjo index is up over 2% at 12.17 pm and I'm just grateful as I've been buying a few stocks as they come right down to support and was anticipating another tricky day.
My assessment is that it's an oversold bounce and I want to avoid getting carried away with my long positions. Here's the Xjo chart.

It looks like an expanding top, a volatile pattern with higher highs and lower lows which should settle into a downtrend once this leg is complete and we've had a proper retracement rally. If you look back to late October and early February, you can see that in both cases there was an oversold rally towards the end of the drop but it was still too early to buy for anything other than a quick turn. It may be that we've hit the lows last Friday but the situation in Europe is so fluid that I can see the optimism evaporating quickly.

12.50 Apropos of my concern about this being a fleeting rally, I've sold out a couple of things which I punted on the open and I've lightened the load with partial sales at 256 in Bsl, 106 in Ozl and 260 in Qan.

I'm also working my way into a short position in Awc. This was one where I got prematurely long but managed to get out for a minor gain. It fell further than I anticipated so that with some more strength today it's edging towards a reasonable retracement level. I've shorted a small amount at 164 but my stop is in the low 170s and I'd like to get the rest away a couple of cents higher.

3.13 I got my wish in Awc and sold more at 165 and 166 to get an average of 165. It's at 166.5 now and the market has kicked back up as despite caution in this time zone, the US futures are red hot. I've stepped back into a couple of short term resource longs so I'm banking on there being a little more bullish follow through tomorrow. I suspect that if Northern Hemisphere markets are able to rally strongly, it will still probably be a sell on open market tomorrow.

4.20 A strong finish took us up to a 4600 close which is a rise of 2.7%. I'm hoping for some follow through in the morning.

Panicking? That's so last night. Fri May 7

 It's been a buy the dip day with the overnight Spi indicating a drop of about 3.5% which was way too much. The US is about 8 trading days behind most other markets and they were having a catch up. It's 12.25 pm and our market is down 1.5% now amid lots of interesting political and financial events. I'm watching the UK election results come through as I write.
The selling in Cba continued although it looks like it might have hit a short term bottom about half an hour ago. The rest of the banks have been much the same as the bank carry trade unwinds. I've been buying the Spi and some of the hardest hit on my watchlist for short term trading and that's been pretty good so far.
The feature trade today is in One Steel and it's essentially the same story as for Bsl and Ozl this week. The opening was overdone and I bought at 317 with decent support just above and below 300. It's up to 330 now but probably still reasonable buying.

Actually, I've bought another of these patterns in Qantas just now, at 257 and 258, as it has made a marginal new low and reversed, raising the possibility of an island reversal. There's more support around this level from further back, last November and December.

2.18 Quite a day with the market not far from breakeven, down just 22 points recently, with the early lows having been down about 146 points. I'm pretty long but cautiously so with the Spi showing signs of stalling so that I'm getting out of shorter term intraday trades. 

3.20 An interesting theme: for the first half of the day resources outperformed, since when they've been steady while the rest of the market has taken the baton.

4.18 The bubble burst at around 2.30pm and although I got out of some speculative stuff, the fall was bigger than I expected so I gave back some profits. Still happy to be long a few beaten down stocks which are hovering around support but I'm also aware that I've got to be quick with these - either to take a quick turn or stop out.

Overall the index was down 92 points or 2% giving us the weakest close since last September.

Also....not panicking is so this morning.

Asset allocation. Thu May 6

3 pm A late blogging start for me today as I've been out of the office for a few hours. The market is down almost 2% and worse than might have been expected with the banks leading the retreat. There's more bullishness around for the US dollar lately and the AUD failed to breach 94 cents so it's possible that the trade of being long Aussie banks and gaining the double whammy of rising currency and rising stock price is now being unwound - and unwound rapidly as is the nature of these things.
I did alright with my Cba puts although I got out too early. Still, the average selling price, including a small amount yesterday, is 352 versus a purchase price of 152.

Generally, the resources sector is outperforming but still a little weaker. Awc is up though and I sold a few at 157.5 along with some Bsl at 252. I'm less enthusiastic about these stocks today because they're countertrend trades and time is as much a factor as price. I have nibbled at another trade of this type though, buying some Ozl at 102.5 because there's a close stop at around 96.

4.16 Got out of a few positions, both long and short, as I want to take stock of things. Sold out the last of the Awc at 159.5 and bought back Fxj and Cgf today. The market closed down 2.2%, still with lots of downside momentum but not far from February lows and the potential for a reversal day.

4.21 Yesterday I wrote that it wasn't a good day for shorting while at the same time suggesting there was still plenty of downside momentum. I meant that it wasn't a good day for me to short as I prefer to sell into retracements. What I did instead was to hold on to my existing shorts which were performing well. In those situations where my method is missing opportunities, I'll tend to look for day trades in stocks or the spi to compensate.

Knife juggling. Wed May 5

Momentum still favours the downside and even the US market responded last night as Europe capitulated. It's 1pm here and the market has been pretty steady for a while, down about 85 points or 1.8% with Asian markets much the same. We led the falls to an extent yesterday by ignoring a strong US lead and after the panic selling in resources, which carried through into the opening today, there has been relative strength in the sector.
It means I've half got away with a couple of undisciplined trades yesterday afternoon. I eventually averaged in to Awc yesterday at 154 and that fell early to 145, recovering now to 151, leaving me underwater but relatively unscathed. I gave it some room as I figured that the open would be the worst which turns out to have been right for resource stocks, at least. The reasoning is that the resources super tax is not law and faces 6 months of negotiations with miners and we're in an election year so one week drops of 30% were quite excessive.
I punted a few stocks early and made some good gains in the iron ore sector while, finally, the stuff I'm short, like Challenger and Commonwealth bank, is getting sold off. So, after a week or so of missing opportunities and breaking even, I seem to be back in sych.
I've put on a few small longs here and there with Bluescope being representative of the type of pattern.
It's simply based on a scenario where the February/March lows hold and the stock has a retracement rally. Essentially, it's a quick countertrend proposition - not great, but then today is not a day when there are short opportunities presenting themselves. Long at 248 with recent lows at 238. I'd be prepared to sit through a blip below support but not a serious breach of it so the stop would be somewhere in the mid 230s. A standard sort of retracement could get to 270-285 so that's what I'm angling for.

2.46 pm The resources rebound is still on. Bsl is up to 252 and Awc to 156 where I've just sold a few as my entry was premature. It does look like it's setting up for a rebound but having diced with danger, my inclination is to reduce the risk slightly, especially as I have managed to enter Bsl and a couple of others at better stages. Here's the updated Awc chart, as I type it's up to 157 and setting up for a key reversal day which would imply some follow through over the next couple of sessions.

4.12 pm Some outperformance compared to Northern Hemisphere markets by the close with the Xjo down 1.3%. Awc didn't manage a key reversal day as 157 was the top - it would have needed to trade above yesterday's high - but it closed at 156.5 and has made a nice reversal. I'm hoping for another day or so of relative strength in the miners.

Which way to turn? Tue May 4

The market doesn't quite know which way to turn. The increasingly volatile US market rallied strongly last night but I still think that the Australian market does not take it too seriously at present. It could have been an opportunity for buyers to step into the resource sector but the repercussions of the Henry review are worse than the worst case scenarios imagined leading into it; ie, all the sticks but none of the carrots. That leaves the non-resource sector but a, it's not looking especially cheap, b, there's a rate rise coming today or next month and c, the backlash could be so intense that the Henry recommendations are watered down in next week's budget and then the resource sector can rally and switching out of resources might have to be reversed.
The result is a market which is up a mere 3 points at 11.15 am after a 20 point rise early. I'm sitting on my hands but itchy to do some bargain hunting in resource stocks while grateful that I sold out some intraday resource longs yesterday. Fortescue, for example, was right on long term support at 439 last night but has crashed through that with barely any resistance to be trading at 421.

12.30 pm On the subject of bargain hunting, I've bought a few Alumina at 157, with the idea of buying a few more on the back foot. My stop is around 148, give or take a margin for error/whippy trade.

Unlike some of the other stocks where you might be catching a falling knife, Awc is at least showing signs of support above the late February low. It's not a momentum stock either so may not have the panic selling element.

The selling continues, by the way, and the market is down 22 points with early strength in the banks starting to fade.

3.18 Another 25bp rate rise takes the official rate to 4.5% and the market is down 40 points now as the capitulation continues in the resource stocks and the banks slip too.

Bought a few more Awc at 155 to average 156. They're down at 154 now.

O Henry. Mon May 3

The Henry Tax review had more of an impact on resources prices than I anticipated and I missed some shorting opportunities as I didn't realise it would be a catalyst to break uptrends and support levels. Oh well, I bought back my Cey short on the open as the weak US market and the prospect of a resources tax hike had it opening down 24 at 406. It seems like the selling this morning was a short term culmination after a few days of heavy selling late last week and a number of resource stocks have bounced from their opening lows.
I've gone long a couple of them on a fairly short term basis but the trade I'm most interested in today is a short position in Commonwealth bank via some May puts. It's not on my official watch list but I do keep an eye on the top 20 and this has been interesting me for a week or two. I was very tempted to try to pick the top (like everyone else in this stock) as it hit 60 on slowing momentum. The sell off overlapped a previous swing high and I thought about buying some puts this morning as Cba regained 5900. Unfortunately, I dilly dallied and the stock dropped right back to 5830. It's recovering now and I'll keep my eye on the May 5900 puts. If the stock makes a lower high and drops down it could comfortably reach 5600 and depending on how it looked then, I might sell them out or sell a lower strike to turn the position into a spread. If it keeps running then I'm risking most of the premium so it's something of an all-or-nothing bet.
Here's the chart.

1.41 pm Decided that the rally back in Cba might not go too much further so I've bought a handful of May 5900 puts at 152.

3.01 I jumped in too fast as Cba is closing in on 5900 again as the Henry review, which favours the non resource sector, is probably providing a nice lift.