Out of synch. Wed Jun 30

The financial year ends today in Australia. A year ago, the Xjo index closed at 3955 and in mid April it breached 5000. The last 10 weeks have sent us falling back to earth and with the index down nearly 2% at 4269, we're set for a humble 7 or 8% gain on the year.

I probably shouldn't have traded this month because of the World Cup - I've been tired and out of synch. One of my two scenarios for the index was for it to rally towards 4650 and then drop to new lows but I somehow managed to get bearish too early, then bullish too late and ended by missing a nice short side opportunity over the last week or two.

I've compounded the error yesterday because although I belatedly realised just how negative sentiment was as the day rolled on, I didn't re-short Fortescue, which I'd identified as my best downside opportunity and that's lower by 5%.
The longs were ok, Ipl was a reasonable risk/reward but has stopped me out today in the low 270s, while Sgp is actually up on the day. I've bought back my short in Asciano at 162.

The Hang Seng is just opening and so far, the losses are contained while mainland Chinese markets are down a respectable enough 1 or 2%. Meanwhile, US overnight futures are fractionally higher. It's meant that there's been a nervy intraday rally which could go either way. There's a big gap to be filled on the upside but it's obviously a strong downtrend.

I'm planning to have a couple of days off, so may not post tomorrow and Friday and am unlikely to put on any new trades today.

4.06 I'm still holding onto a couple of minor long positions in Challenger and Stockland and apart from some end of year admin tomorrow morning, that'll be it until Monday.

4.12 That's the end of another financial year and although it has been a grind, I've learnt a lot and it started to pay off quite well in the second half of the year.
My goal, and something I've started already, is to do fewer trades, especially intraday and to spend less time watching the market.
My reasoning is that my intraday trading is only mildly profitable but it takes up a lot of time, adds a lot of stress, and it probably costs me money overall because when I'm active intraday, I tend to miss my longer term opportunities.
The market did quite well to only finish down 1% and it closed the year at 4301.5, almost 9% higher.

PS. I forgot about dividends. When they're included, it takes the annualised gain up to a very respectable 15%.

Reversion to mean. Tue Jun 29

Another flat lead going into trading and after having underperformed for a few sessions, it looks like we're in for a catch up day.

I've bought back the last of my short position in Bsl at 219 and gone long 6 different stocks, mostly just for the day. The two positions I'm likely to hold for longer are in Ipl and Sgp.

Incitec Pivot lacks downside momentum. The last couple of rallies have tended to overlap and congest. The latest minor sell off has stalled above the May lows and I've gone long at 287 with a stop around 273.

It was up by the stairs and down by the elevator shaft for Stockland Group, aided by going ex dividend. It's not in an obvious downtrend, just back towards the bottom of the range, so I'm long at 368 with a stop around 350. Trading through yesterday's high of 372 might be enough to generate a snap back.

12.45 The early strength has evaporated with the Hang Seng dropping early on. It's a shame for my day trades which were going well for a while. Ipl and Sgp are holding up reasonably well, while my only short position is Asciano is down. Not the worst day then, but I'd like to see a higher low and another run up this afternoon.

2.01 The Hang Seng and Shanghai markets are dragging us down with falls of 1 to 2% although it really just tells you how negative sentiment is here in the short term, because their last 5 trading days have been mildly weaker compared to our sharp falls, ie their relative strength was not a mitigating factor last week, but their relative weakness is a big influence today.

4.12 The Xjo index just kept driving down as the mainland Chinese markets continued to fall. US overnight futures have followed that lead and are down close to 1%.

I took a hit on my intraday trades while Sgp is still up and Ipl is only slightly weaker.

Not with a bang. Mon Jun 28

The financial year is stumbling towards the finishing line with another weak performance so far. The news from the G20 appears to be that the US want to continue with stimulus measures but the Europeans are for austerity (not sure about everyone else) and the general view is of a country by country approach rather than a co-ordinated strategy.

The market is down 0.5% at 11.40 am and my performance has been dragged down by Mml which is defying strength in gold to sell off further. The chart looked shabby on Friday afternoon and I would have been better off to sell the lot rather than just under a half. The stock is quite whippy and I get the feeling that there's a big seller overhanging the market. My inclination is to hang on now because it's quite possible that the seller will disappear after June 30th and the stock will whip back, and if not, the stock is close enough to levels where natural buyers will step in.

I've sold out of Telstra for a minor profit. I timed my buying quite well, getting in after the sell off from the initial euphoric rise on a deal with the government. If there was any enthusiasm for the stock, it should have been driving up and it wasn't, so because it wasn't behaving as I'd hoped, I got out rather than waiting for a stop. I also sold out more Challenger on some early strength. It's back down with the broad market now but I'd like to rebuild my position if it shapes up again.

My trade for the day is a short in Asciano. I'm assuming that this has run its race having bounced solidly in 3 waves since a low in May. I'm short at 167.5 with a stop just above last week's high of 173.

1.43 The market has been making an attempt to bottom and I've bought back shorts in Fmg at 437 and Ost at 309.

3.32 I'm beginning to think we're making a short term low. Fortescue has held quite well and is now up 7 at 443. It's probably a good indicator for the smaller resource sector. I don't think there's anything to buy right now but I'm hopeful that tomorrow morning might offer an opportunity or two.

Bought back a few Bsl at 217.

4.12 No further action, but the market edged up. Mml got smashed though, down at 415 and missed my chance to cut early.

Not much of a honeymoon. Fri Jun 25

The honeymoon rally for Julia Gillard lasted about 2 hours before the selling resumed yesterday. Another double dip inspired fall overnight has left us down a further 1.1% after an hour. It's the fourth day down and the third big one, so it would often be a good day for some buying but on an intraday basis, the Spi looks as if it hasn't found a low yet.

I've bought back the last of my Stockland short at 371 and 373 for a tiny profit after having to cover an 11 c dividend and having gone too early with my position, I'm happy to have got something out of it.

I've got my obsessive compulsive World Cup watching under control. Last night I went to bed early, got a decent night's sleep at last and watched the recorded games this morning. Great result for Japan, beautiful football and excellent news, along with S Korea's progression, for the Asian Confederation of which Australia is now a part - and nice for the arguments with my European friends who always claim that their qualification groups are far superior than the Asian ones. 

Anyway, enough about South Africa 2010, the point is that I've got enough energy to focus on my work. Two new trades to feature today, one long and one short.

The long is in Challenger. The rejection of the low yesterday was impressive and there is nice overlap with the previous congestion zone, suggesting that short term selling momentum has dissipated. There have also been a string of upgrades overnight - the stock is on a forward PE of 7.5 - and it's a much cleaner company to analyse, no longer the dodgy boom time vehicle that it was considered to be. Long at 338 and it has already started to reverse quite strongly.

The other featured trade is a short position in Fmg. This might be a sell on fact situation after the driving force behind the company, Andrew Forrest, was heavily involved in the mining industry's campaign against the RSPT and indirectly, the deposal of Kevin Rudd. There's still going to be a deal on the tax, it's probably factored in, but the plan is certainly not going to be dropped. Short at 446 with a stop above yesterday's high at around 465. I'm half expecting a quick tumble here because it's a nice trading vehicle for hot money in the resources sector.

3 pm The market is just bouncing off recent lows and may have done enough for the day. The two featured trades are doing well so far, Cgf is at 359 and Fmg at 437.

Broadly, it's a switch out of resources into defensives sort of day, with gold being the exception as most of the golds in the Xjo are up. I suppose gold is often a defensive but sometimes it moves with the cyclicals. Seems like it's a win-win situation for gold stocks at the moment, although sadly not Mml which is stalled just below 450.

4.10 pm There was more slippage to leave the market down 1.5%. I'm out of a third of my Cgf position at 360 and a few Mml at 440 as they disappoint.

Ruddy hell! Thu Jun 24

Australia's PM, Kevin Rudd, has stood down after his popularity had plummeted over the last few months, not helped at all by the proposed resources super tax. His (former) deputy, Julia Gillard, is the new leader and although she is a much more down to earth character, she is also part of the inner circle which has been controlling policy so it's quite a gamble that the electorate was tired of Rudd for personal reasons only.
I'm tired for personal World Cup reasons as our brave Socceroos went down fighting with a victory not quite enough to see them through to the knockout stages.
There was a "thanks goodness for that" rally early on, despite a flat night, but at 12.42 pm the Xjo index is up just 12 points. The big gainers have been the miners, particularly the iron ore stocks, although the picture is muddied with end of year movements and bounces from oversold lows in stocks like Cgf and Tse.
I got out of my Cgf at 347, which was roughly a reversal of yesterdays 5% fall. I even managed to buy and sell a few extra on the way.
I've put on a new position, a short in Bluescope Steel, which has had a much less pronounced retracement over the last month, more typical of a correction before a resumption of a downtrend. I'm short at 228 with a stop around 242.

4.11 The Gillard surge faded and the Xjo finished down 6 points. Macquarie was sold down nearly 5% after announcing a cautious outlook. The double dip recession - globally at least - is still a strong possibility. I'm happy to have a pretty neutral book.

Rejection. Wed Jun 22

An earlier start than usual for me because I have a few visitors coming today which will leave me no time for comments. The US indices fell in the afternoon session again and there's some decent short term momentum in the sell off. Here's the DJIA daily chart.

The rally to 10600 was about 50% of the fall from the April high. The rally in the Xjo has been very whippy, so I'm not keen to chase any shorts, but I'd be inclined to sell any recoveries in the next few days. No point worrying about that now, the Spi is down 45 points so we'll open weak, at least. Base metals held up and so did gold, so there are a few bright spots.

The risk/reward of being long has changed with the Dow weakness and given that we've sold after after getting close to the 4650 level, it's likely that the short term upside is more limited now.

10.20 Out of a few longs which I'm less confident about, like Ozl at 104 and the last of my Mre at 68. I've pulled the trigger and bought some Telstra at 328 as it seems like the short term profit taking is over and with the resources having tired, it's possible that attention will turn to this one. It's easier to see the logic with a look at the 60 minute chart. Emergency stop is at around 312, just below the last swing low.

2.51 With June 30th approaching and a fairly small set of positions on board, I'm in end of term mood. My visitors today were social and I've been playing table tennis. Even managed to win a game against a friend who's a bit of a champion but I suspect that after winning about 8 straight, he might have taken pity on me.

One thing I've noticed about table tennis is that I go a lot better if I don't try to hit winners but concentrate on staying in the game. I mentioned this to my skillful friend and he agreed - he used to play with an elderly Chinese gentleman at Easts Leagues Club in Bondi Junction and was usually beaten by the patient style of the old master. There are obviously parallels to be drawn with trading; stay in the game, manage risk, don't worry about winners, they'll come without you trying and don't take on old, frail looking Chinese guys.

3.06 I sold out of half my Cgf yesterday at 350, thinking that they were outperforming in a soft market and they did indeed reverse back down. They're now at 328 and I need to stop out of the rest as they're through the recent low of 334. I'm hoping for a small rally to get a better price.

Telstra is up to 330 though and my short in Sgp is going well. The other two positions are gold related and although they're down, it's not by much and most of the stocks in the sector are firmer.

4.10 We've outperformed on the downside again, with the market closing on its lows with a loss of 1.6%. The Hang Seng is down by less than 0.5% and US overnight futures are mildly firmer.

I've held the last of the Cgf as 5% seems overdone and I'm already only carrying a half position size.

I'd like to do some bargain hunting but might try to pick up a cheapie early tomorrow if there's a bounce and one of my stocks gets left behind.

Quite resolute. Tue Jun 22

The early action is quite resolute, just a 0.5% fall despite the US selling off to close flat after strong early gains. I'm not too sure what to make of it as I'm dazed with fatigue after another night of World Cup action.

The Xjo is getting close to the swing high at 4653 in mid May before the last drive down. It's a reason to be cautious.

2.21 The rally petered out around 11.30 am and we've slipped to a 42 point loss. Mml is up though, which is encouraging because gold fell overnight.

Otherwise I'm not adding any new shorts because the rallies are far enough extended that I don't want to short without the suggestion of a lower high. Once a trend sets in, it can be quite stubborn so while I'm comfortable enough shorting a choppy overlapping correction, I need a bit more evidence of weakness now.

On the long side, I'm interested in Telstra which surged yesterday on a deal with the government but has quickly retraced much of that move. The move through 329 was quite significant and if 320 becomes support then I'd like to pick some up around there. Here's the daily.

4.10 An afternoon of water torture for the market as we edged ever lower to finish down 1.2%. Just about the worst in this time zone and perhaps, a little too gloomy given that we rallied much less than most Asian markets yesterday.

Loosening the yuan. Mon Jun 21

The Chinese currency leash is going to be loosened so that the yuan can strengthen against the USD in order to take the pressure off exporters everywhere else. This has helped US overnight futures to jump around 1.5% while Japanese and Korean markets lead the way with Australia following. Chinese mainland markets are less convinced though. So we're up to the new retracement high I was looking for but there doesn't seem to be a lot of reason to sell; it seems like the market could continue to grind up.

Gold was firm overnight so Mml has rallied 8 to 453 which makes me more confident about a rally because the stock has overlapped the last swing low which was on June 7th at 448. Here's the daily.

I've got a new long position in Cgf. I bailed out of a Challenger long last week because I became concerned about another new low to complete a short term pattern. This actually happened but the stock has rejected this low - so far - and I'm nibbling at a long position with an average entry price of 347. Stop is below Friday's spike low, while my expectations are for the stock to reverse up to 370ish in the short term.

The World Cup continues and my trading activity has slumped which is apparently a pattern that's being repeated globally. Energy levels are flagging too!

Most impressive teams so far are all South American: Chile, Argentina and Brazil.

4.04 Most impressive sector today is iron ore with Ago, Fmg, Mgx and Mmx all up 5% or more. Fortunately my assistant is long Ago and Mgx because I missed the other two, though I'm hoping that a couple of positions in Mre and Ozl (not iron ore stocks) with similar charts will have their day in the sun tomorrow.

We're approaching the end of day match out and the market is up 1.4%, which is a mild underperformance relative to Asian markets.

Some profit taking, especially in Telstra, which is up 11 at 334 but well off a 346 high, has left the Xjo with a 61 point gain.

Yes, no, maybe? Fri Jun 18

After the US market battled to a small gain overnight and the Europeans had slightly bigger rises of around 0.5%, the Aussie market has risen cautiously so far. Up 0.4% at 11.19 am. I'm still looking for further strength and I'm planning to sell a few longs out if the market can push up above Wednesday's high. At present, the Xjo chart is still favourable but there's precious little momentum with Japanese and Korean markets flat. Here's the updated Xjo 60 minute chart.

Gold is still strong and it's a shame I sold out of my Lgl options, although I understand why. The reason is that it can be quite difficult to trade two different time periods in the same portfolio. In my personal superannuation fund, which is longer term, I've been able to hold on to a long position in a gold stock but in my regular trading book the idea is to get in and out quickly. Sometimes I don't get a second chance to get back in.

Actually, I have found a substitute. I've put on a long position in Medusa Mining, a small Phillipines based gold miner. This has been lagging and is tracing out a pennant style correction, I'm guessing. I'm long at 438 with a tight stop around 427. I'm a bit concerned that it's lagging for a reason and looking at the 60 minute chart, there's a chance that it makes another minor low before the correction is over. However, the gold sector is strong and the stop is close so I'm prepared to buy this. Here is the daily chart.

3.12 Still undecided with the market up as high as 34 points (24 now) but not quite reaching the Wednesday highs. Mml hasn't moved much but a few of the other lagging gold miners are having a run, so I'm hopeful. I'm restricted to trading in the top 200 but Rsg, which is in the top 300, is an example.

I'm also long Pna at 50.5 which I bought two days ago. I didn't feature it because I chased the entry having missed 48-49 cents. Anyway, I've just sold a few at 52 so I've averaged down a fraction. Pna is a copper and gold producer and not a pure play so I was unsure what would happen today with copper down 3% and gold up 1.5%. The answer is that it's stronger but lagging the golds.

4.11 Not much change, up 24.6 points. I'm out of Awc at 161.5 and some Ozl at 105. Added a few Mml at 443 and they've finished at 445.

Famous last words. Thu Jun 17

"Famous last words" is what my assistant said yesterday as he glanced at the blog and noticed that I said we looked set fair for another firm day. It's past midday now and we've had the June Spi expiry with no major fireworks, only a slow descent of 19 points. In mitigation, I mean that the trend is up and looks incomplete, so that down sessions are more about gap filling at the moment. Here is a 60 minute chart of the Xjo index.

We drove up early yesterday and chopped around for the balance of the day. It looks like we're doing some more retracing today but I expect to see yesterday's high beaten before we get much of a pullback in the very short term and even then, the rally is probably incomplete.

Although I'm playing around with a couple of trades, they're generally short term things which I'm late into. So, no featured trade as yet.

3.11  I was altogether too sanguine about today and the market fall gathered steam so that we're down 44 points. I've cut my Ipl position at 306 which looks like a temporary peak and is still short of my target. But I wanted to take something off the table and I think there's a chance I could get another buying opportunity in Ipl. I can't find any interesting short positions yet, except for one I already have in Sgp.

4.12 A slight recovery for a close of down 32 points. Tomorrow will be the test.

Panic early. Wed Jun 16

My short in Cey backfired as the Thai holders, Banpu, lifted their stake to 19.9%, presumably as a prelude to a full bid. I'd been fairly relaxed about them because broker opinion suggested it was a passive stake with potential FIRB approval problems related to a takeover. So I panicked at the open and paid 460 which made it my worst trade for a while as my average short price was around 422. I'm glad I cut when I did, they spiked up to 473 and are sitting at 467.

Otherwise, most of my positions are long and performing ok. I've added a new long position in Awe. This is tricky because it's probably only a retracement rally but it's just made a 4th higher low in the the last few weeks - admittedly without substantially higher highs to go with it - so I think there's a good chance of a squeeze up. Long at 209.

2.08 I'm much less bearish in the short term since my idea of a higher low and a narrowing range for the Xjo index has been blown away. There was a higher low (which I missed) but the market is really extending as it seems like the various crises have eased apart from the Gulf oil spill. I'm pretty confident now of a rally to 4650 and maybe further. On the big picture, I'm still bearish for the year but maybe it doesn't swing down again for a couple of months. Here's the Xjo chart.

4.18 A reasonably strong close although I sold fractions of my long positions. It looks set fair for another firm day.

Polyphasic sleeping. Tue Jun 15

Back after a long weekend which allowed me to stay up and watch Australia's humiliation at the hands of a vibrant, young German team. Sleeping in 2 hours multiples is not that great though and last night I set the recorder, which was much smarter, enabling me to whizz through a couple of typically cagey opening games this morning.

The market is also cagey, with the two overnight US sessions cancelling each other out. Nevertheless, I've got a feature trade already. A long position in Oz Minerals at 102.5. I think that this might have made a higher low after the first leg of a bounce which started on May 21st and rallied from 97 to 110. This time the bounce could have started from 99.5, so my stop is a cent or so below that. I'm looking for something around 110 as a basic target, with the potential of pushing a few cents higher.

Base metals have been recovering well over the last few days and they were helped along on Friday by better than expected EU industrial production for April and upward revisions for March.

11.51 Getting cold feet about Cgf because the last leg down, since a slightly lower high at 380, looks like it might need to make a 5th wave low. Out at 348.

4.13 No further changes as the market finished unchanged. Resources were firmer though at the expense of everything else. 

Left at the starting gates. Fri Jun 11

A week of minor misjudgements has left me with the wrong book today. The US indices bounced strongly, once again following the lead from this time zone, but this time taking it further. We've peeled off earlier highs but the Xjo is still up 51 points just after midday. It seems about right because we had been leading the rally.

Resource stocks recovered again, while gold fell. I got out of my golds early, the options in Lgl and the stock in Sbm. My exit prices were ok although Lgl has slightly surprised me by holding up well with a gain of 2 or 3 cents. It's only a slight surprise, Ncm is the driver and it still looks good. I'd like to get long Lihir again but I want a better entry and I think I'll stick to stock rather than options because I'm less convinced now that we'll get an explosive move.

I've put on a new resource long in Alumina. There's a recent double bottom, close enough to provide a nice stop level. I think it's likely to be a trading range play with a move up to around 170 most likely. Long at 156.

3.02 I'm pretty evenly balanced now, with equal longs and shorts and no particular sectoral bias. It's been a choppy week and while the recovery has been strong, I'm not super bullish precisely because the market is so choppy. Here's the Xjo.

I haven't cut Sgp because it went through my stop and pulled back below. If anything, it looks a better bet since I want to fade the rally and it's got a pattern that's looks close to completion. I'm stretching the stop out to 406.

Skewed. Thu Jun 10

It's funny, I'm looking for a higher low in the market which we might have already had, but my book is skewed to the downside with long in the golds really more of a bet on a falling market.

It's nearly midday and the market has ignored a soft lead and continued yesterday's late, late rally to be up 43 points or 1%.

My general thought with the Xjo index was that it would retrace towards around 4440, where it fell from on Monday but I wasn't expecting it to get all the way there. Here is the 60 minute chart.

Looking at the chart, it's make or break for that idea.

Mainland markets in China were strong yesterday and I think that, and bouncing commodity markets, has been the driving force today. Strong Chinese exports for May are possibly helping the rally along although so far the Shanghai market is pulling back.

I do have a new long position in Incitec Pivot around 290. I'm looking at this having made a higher low, with my stop around 270. The last retracement was quite strong so I think there could be some reasonable buying again.

2.44 In a development absolutely typical of markets, the Xjo index has rallied just enough to push through what I thought might be resistance but not to convincingly smash it. At least the gold stocks are rallying which is keeping me out of trouble.

3.34 St Barbara is strong, I'm out of half now at 37. The market is still up 1%, sitting at 4430.

4.12 Funny old day, the index hung around the highs, closing up 50 points but just below minor resistance. Tomorrow could be weak, being Friday, but I'm feeling more bullish than bearish.

Tail wagging the dog. Wed Jun 9

It looks like we're running ahead of US markets having pre-empted their overnight reversal yesterday. Meanwhile, we've opened stronger this morning and quickly tailed off. It's 11.34 am with the Xjo index back up a couple of points and we're having a second attempt to push on.

My short positions are performing reasonably well, while gold stocks in general are firmer despite gold having peaked early and fallen away later as the US stock indices recovered from early losses. The chart of the DJIA is interesting with a minor new low after a 4th wave correction.

It implies that the Dow is near to a short term low and as the US indices have been lagging our market slightly, I think that we're still looking good to make a higher low on the Xjo.

My featured trade today is a long in Challenger Financial. It's actually a similar sort of chart to the DJIA with no higher low, but the general shape of a short term low. I'll use around 330 as my stop. I'm long at 344 and it has firmed since then to 350.

3.06 The second attempt to bounce was just a flirtation and the market has gently slid to be down 21 points with the Japanese indices, the Hang Seng and the Kospi all weaker as well, dragging the US overnight futures lower. My Cgf long has turned back down to 340 but with the golds still firm and the short positions performing pretty well, the overall book is quite healthy.

4.14 A late squeeze left us up 4 points.

Live and learn. Tue Jun 8

In a happy development, I might be showing signs of increasing patience as I get older. I don't know whether it's a healthy way to start the day but I set my radio alarm clock to go off just as the announcer is giving the overnight market run down. When I went to bed, markets were showing signs of strength which had evaporated by this morning so I consoled myself with the thought that Lgl is my only long (gold was up) and I had at least managed to put on a short position in Cey.

As it turns out, the Xjo has ignored the negative overnight lead and, by 11.40 am, had reached a peak of up nearly 60 points. So my patience was rewarded and I've been able to short some more Cey at a better price of 422, along with some more Sgp accompanied by new shorts in Bsl, Fmg and Ost as they retrace after gaps down yesterday. Of course, now I'm starting to worry that the retracement might be too strong and I'm shorting into the start of the bounce off a higher low. It's just the low level anxiety that I've yet to shake off and obviously I've put these trades on because the stops are manageable.

The story of the day is gold and with the AUD below US 82 c it means that the price in our currency is very strong indeed. It's increasingly likely that the takeover of Lgl by Ncm will go through as the deadline for other bidders is about to pass but I'm treating Lgl as a proxy for Ncm especially as it's trading at a 1 or 2% discount to the bid price. Ncm is charting very well. The first leg up in May was able to temporarily breach resistance at 3360 and after a higher low and a recent brief consolidation, it looks ready to surge up towards 3600. I've bought some more Lgl July calls, this time the 400 strike, and paid 24.5 for them, which was an implied volatility of about 31 or 32%. While I don't expect to make anything on an upward revaluation of volatility, the premium levels are reasonable enough and there are always sellers of options on the first good up day after a congestion. The main reason is to get some leverage. Here's the Ncm daily chart.

Actually, I bought a small gold stock as well, St Barbara Mines. It's got good reserves, increasing production, it's relatively low cost but mainly it's under new management having underperformed for years. The daily looks pretty good but I like the weekly chart. I'm long at 31.5.

2.22 It looks like we'll hold the gains this afternoon. The market has tracked sideways and is showing signs of pushing higher.

3.26 Talk about sellers in Lgl options. There's been a wall of them so that with the stock barely changed, the July 400 calls are down to 22. I'm aiming to buy a few more at that level. I'm not overly concerned, if there's going to be a surge, it'll be in the next day or so and the premium will be far less relevant in that situation once the options are deeper in the money.

4.16 It was a good close for the bulls, finishing up 55 points. It's setting up for early strength and lacklustre follow through tomorrow or at least, I hope so.

3% solution. Mon Jun 7

After an hour we're down 3% and it has been quite orderly with a 2.5% opening drop and a slow grind for the rest. Mmx was somewhat forgotten early and I got out at 191. I've actually bought a handful in the mid 180s to try and sell out later. Otherwise, I haven't bought back shorts, or put on new ones. I'm waiting for some sort of bounce to offer better opportunities.

There doesn't seem to be a lot of bearishness around but locals will probably think we're cheap to reasonably priced as a market. The issue is going to be carry trade sellers with resources and the AUD hard hit overnight. So, I'm hoping for an intraday bounce to supply an opportunity to put on a few short positions but not necessarily expecting one to come along.

12.14 Comparative strength - a drop of less than 3% - in the Hang Seng, along with milder falls of 1.5% in Shanghai, are helping the Australian market consolidate after it continued to grind lower into midday. We're still down 3% though.

I missed a chance to short Fmg on the first intraday rally when it recovered to 402 but I'm hoping that one or two stocks out of list of 6 potential shorts will rally enough to make a new short position worth while.

1.36 I'm left with a long option position in Lgl and a couple of modest shorts positions in Ipl and Sgp which are performing in line. I sold half of my Mqg June 45 calls on Friday for a reasonably good price but sold the rest this morning for 53, losing about half the premium. Unfortunately, I missed hedging these last few calls by not being agressive enough on the Friday afternoon match; it would have more than paid for the premium loss.
I'd like to put on a couple of new positions but most of them are too far gone. I'm not willing to chase so it's a quiet time for me as I wait for an opportunity to present itself. Tomorrow or Wednesday are looking more likely than today.
Cey is probably the closest thing. Here's the daily chart.

It had a very sharp rally which looks like it was 5 waves, implying short term completion. It could slip back down towards the 355 lows and it's not far away from the high of 440 recorded last Thursday. I'm waiting on this because the market has had one intraday bounce now and pulled back. I think there's a good chance of a second bounce which may give me a better entry. It's trading at 417.

3.26 I've put on the short in Cey at 413. The futures rallied but most of my stocks didn't perform and as this started to slip I had to chase it. It has quite quickly dropped to 409.

I'm glad to get something on but I'll be happy to see this rally tomorrow if the broad market pushes up because it would give me some opportunities elsewhere.

Up by the stairs. Sun Jun 6

A quick Sunday post. Disappointing US job numbers have knocked the US indices down over 3% and I'm regretting that I was keener on scenario B than scenario A. To recap, I was working with two main possibilities both of which hypothesised that we were having a retracement rally. Scenario B had the rally grinding up close to 4650 while the target for scenario A was pretty much spot on with a forecast of 4450-4500.

The 60 minute chart above shows how it unfolded in quite a textbook manner as an a-b-c correction with the c wave subdividing into 5. It sounds arcane but it's a pretty standard elliott wave interpretation of a common enough event. What I'm kicking myself about is that I was holding a few longs still in the event that this might unfold into a bigger rally. It certainly could have but the risk/reward had shrunk to the point where I was taking the wrong side of the bet.

I had seen something similar in Fmg, for example, but not taken the signal and also seen a slighly different retracement pattern in stocks like Ipl and Sgp which I did take but only in a modest way because I hadn't really accepted the implication of the patterns cropping up. I know why too - I'd been pretty much maximum long for the last couple of weeks and had got into the habit of being bullish so that I was looking at the market with rose coloured glasses.

It's quite easy to lose mental flexibility and I usually try to have a couple of positions on board at any one time which are opposite to the general thrust of my book. Not so much because I expect to make a lot out of them but because they help to keep me balanced.

The next question is whether the market will go straight to new lows or make a higher low. I think it's most likely to make a higher low and then trace out a retracement quite like the very recent one, but perhaps with a smaller range. The reason I think this is because the highs of this rally clearly overlapped the swing low on May 7 so that the close on June 3 was higher than that May 7 close. This ability to trade through previous lows, even if only temporarily, implies that the fast, exploratory part of the fall is over for the time being.

So, we get a higher low and another, more tepid rally. If that happens, then we can get another downtrend to new lows. The chart, below, is a daily of the Xjo back in late 2008, early 2009 and there was something similar to what I'm imagining. A rally through late November to early January which slightly overlaps the October 08 swing low. This rally retraces through to late January then has a second, very weak attempt which has failed by mid February, clearing the way for a drive down to new lows. It's not a perfect match, it unfolds much slower than the recent move, but the salient points could turn out to be similar.

I'm getting a road map which might turn out to be useful but it doesn't answer my most pressing problem which is when to cut my longs and whether the market will have gapped too much for me to put on any short positions. Usually in these situations, the open is the worst time to sell or put on shorts but it's definitely a stock by stock proposition. Smaller stocks can be forgotten or defy gravity for an hour or two and provide opportunities to get out or get short.
I'll have to wait and see. More tomorrow.

Rangy. Fri Jun 4

One week to go till the football world cup in SA and about 12 hours to go until the US jobs number. The big picture website has an article explaining how there is no clear consensus for this month's numbers, in fact there's a huge range from the highest to the lowest of the estimates.
This has engendered some caution today after a nice bounce yesterday and I guess I share that caution. I'm happy to have a pretty small book at the moment. It's still long but I have added another short today in Ipl.

It's similar to Sgp (which is close to stopping me out) in that there's a retracement which might have traced out 5 waves and a couple of recent swing highs which provide low risk stop levels. If it's the first part of a larger retracement - ie, an "a" wave of an abc move - then it will probably fall most of the way towards the recent low of 275.

12.13 The market is down 50 points or 1.1% now and it's starting to look overdone in the context of Asian markets where the Topix and Kospi are flat and the Hang Seng is down about 0.6%. With the potential for a big surprise tonight in either direction the probability is that we'll recover a little from here.

2.22 We haven't had much of a bounce and it's faded away so that the market is down 47 points again. I'm hoping for some strength from here on in because I only sold half of my Ipl at 314 and it has drifted down to 308. I'd like to get the rest of the short position in place at 312 or better.

4.17 Well, a rally of sorts came along to leave the index down 37 points while the Spi continues to bounce now that the physical is closed. I was able to sell a smidgin more Ipl at 310 on the match out.

Disaster fatigue. Thu Jun 3

It looks like the market is tired of bad news and last night saw a nice bounce in the US indices. Nice because my positions are predominantly long and my one short position in Sgp hasn't gone anywhere so far. It's 11.23 am and the Xjo index is up 2% and is on the day's highs.

My featured trade is a long position in Murchison Metals, an iron ore stock. After the big sell off this has been in a fairly tight range for the previous 8 trading days and with a stop around 180, I'm looking for a move towards 240. I had a few on board anyway but went long some more today at 201.

In the short term, I've been working with the scenario that the last few days of pull back hadn't overlapped the congestion on May 26 and 27 so that there was a strong chance of a 5th wave move to a new high. We're almost there now so I need to be careful and take some positions off, if necessary, because there may not be much left in this rally.
To be clearer, I'm still working with two main possibilities: the one where the rally reaches about 4450 to 4500 and a more bullish case where it swings up towards 4650. Under both scenarios, I felt that there was more upside but now it's trickier because this is where the potential outcomes diverge.
When I look at individual stocks, I can see room for more gains so I'm leaning towards the bullish case.

11.49 It's still a fast moving market so that my stops and targets are generally diverging away from where I actually get out of and into trades. I'm persisting with setting these levels though because when things settle down it becomes easier and wiser to stick to them. At the moment, time spent on any swing is more important than usual; it's always a key factor but in a fast market even more so.

3.28 The market is up over a hundred points with pretty much everything higher. I've just had a look at the top 100, only 4 stocks down (small amounts), 2 unchanged and the rest up. It bodes well for another up day.