That'll do. Fri Jul 30

The month is ending on a sloppy note with exhausted bulls losing patience this morning so that after an hour we're down 36 points. The US had another slightly weak session as they await tonight's GDP figures.
My patience with Fortescue has run out and I've sold out the last of it at 429. I think it has the chance to be quite positive but we could retrace some more of the gains from the recent swing low at 401 first.

Otherwise, it's the same Catch-22 for me as it's been all week. I think the Xjo looks pretty good and I'm prepared to sit out a pullback if it holds above 4436. My long positions are generally hanging in there, although I chose the worst moment to go long Mbn. Even if there's further weakness today, I'm inclined to hold on to most things because it's a good day for weak hands to fold.
At a pinch, there are a couple of stocks that might be worth buying later in the day, but again, I'm probably long enough already.

12.40 Murchison's quarterly activities report came out about an hour ago. One thing they mentioned was that volume demand for iron ore remains robust. It might have helped Fmg because they started to bounce and I decided I'd been hasty, jumping back in at 432. I'm going to use (just below) the bottom of this week's congestion, 422, as a stop. 

European and US indices are at or just past their June highs and I do have some concern that they are ripe for retracement. The Xjo is still short of that, of course, which is one reason for my bullishness. So, I'm concerned but also reluctant to chop in and out of stocks. I've already done it once to my cost today.

3.41 Still chopping around and down 27 points.

I'm one of those weak hands now, as I've sold out of Mmx at 182.5. In the end, the rally could never gather steam and rises have been grudging recently while sell offs have more oomph. 

 

4.04 A tedious few days is drawing to an end as we await US GDP figures overnight. I've basically cleared the decks. Changed my mind on Fmg again and sold out of half of the Mbn as well at 213. Shocking trade, that. I'm just long Lnc now and a few Mbn. Quite a good month though, profit wise.

I'm leaving slightly early so let's hope Monday offers some direction.

A trickle of results. Thu Jul 29

In the short term, the index is back into the congestion that we briefly rose above yesterday afternoon. The market is down a cautious 15 points after half an hour and the smaller resources continue to be under mild pressure although I notice that Bhp and Rio are firmer.
The reporting season has started but with only a few companies having reported, it doesn't seem as if any conclusions have been drawn. I keep reading that FY10 and FY11 forecast are too high, so if that's the prevailing opinion, then some slack may be given to companies which miss targets or talk down prospects.
Along with soothing words from China which helped the Shanghai market, the local CPI numbers were benign yesterday so notwithstanding the muddling recovery in Europe and the US, prospects look reasonably good to me.
I'm still repenting at leisure after having acted in haste earlier in the week. It means that I'm holding on to my longs but not game to add any new ones. And with a decent uptrend in place, I'm not fussed about putting on short positions for the time being.

1.15 I recently read a very good, non-fiction book by Tim Parks. He's a new author to me, but actually, a well regarded literary figure who has appeared on the Booker prize shortlist. The book, "Teach us to sit still", explores his attempts to heal an intractable and painful health problem. He eventually discovers that his driven personality - he's a prolific author - is at the root of his illness.
There's an edgy nervous tension which is common to many traders, myself included, and the book resonated strongly because of that. Sometimes I think it's why trading is attractive and this tendency to heated mental activity is often an asset but it also imparts a tendency to overtrade. As time has passed, I've wanted to change gear in a work sense, to slow down, because I became aware that my more profitable trades were the patient ones and that I could have time for other things and yet, trade more effectively. And also, just because I wanted to. I wanted to change my life and myself.
Unlike Tim Parks, I'm not a sceptic - which in his case, seems to mean scepticism about the metaphysical and unquestioning acceptance of the material - but like him, I'm learning how to sit still.
I've been trying to relax more for years actually, but I realise now that I hadn't taken it seriously enough. This despite a chronic health condition of my own which has also driven my exploration. Slowly but surely, my health is improving but it has been a slow process of recognition.
This is an interesting insight - itself a quote from a Dr Wise - which appears in the book
"Many of our patients are simply too busy to dedicate themselves to our treatment. These people, men and women, were not yet suffering enough. They still saw their pains as an irritating waste of time, a distraction to put behind them as quickly as possible. Hence they were drawn to accounts of their illness that saw a rapid solution in drugs or a surgical operation. No personal energies need to be expended. It could be paid for, hopefully by the State. We strongly advise these patients to accept these pains as the main curriculum of their lives."
The obvious parallel here with trading is the magic bullet of a new system or market or broker to provide a quick fix. It rarely works though and eventually you have to do the hard work of self examination.
I think, it's starting to pay off. I'm less active and more thoughtful with my trading and results seem fine, if not better than usual. Meanwhile, I'm using the time to meditate and to release some of that mental and physical tension with some quite hopeful progress.

3 pm Still no new trades, but there is underlying strength in the market and the loss is down to just 5 points. The Shanghai index is up again with the Hang Seng and Kospi only fractionally weaker too so we're in good company.
Western Areas has had a fantastic run lately and has pulled back over the last few days. The chart is explosive and will probably make another new high above 515 once the correction is complete. I almost nibbled at some at around 468 this morning. I wish I had because it's back at 484. Nevertheless, if the correction has another leg down, I'll be willing to buy some in the 450 to 460 range. When a stock is moving explosively like this, it's unlikely that a swing low will overlap the previous swing high, so a stop at 440 would be reasonable. Here's the daily.

4.13 There was a brief glimpse of positive territory before the match out dragged the index back to a loss of 6 points. My overall positions were virtually unchanged and I did almost nothing, just bought a few Mbn at 215 and sold them out at 217 while leaving my core holding unchanged. Mbn closed down a cent at 218.

Finely poised. Wed Jul 28

Like Oliver Twist's Fagin, the market is reviewing the situation and has yet to make a decision. On the 30 minute chart of the ASX 200 index, below, it's clear that swing lows are starting to overlap previous highs, so momentum is fading. The late afternoon rally has eked out a few more points this morning, but while we sit below yesterday's early high of 4520, we run the risk of having an extended pullback as we did on, say, July 15th through to the 19th.

2.08 The Mexican standoff continues with the index having traced a leg down to support and another up to resistance so that we still have a rise of 14 points.

I'm not doing anything until the dust settles. Mbn has gone back into the congestion it broke out of, so I'm concerned about that but not willing to make a pre-emptive cut because the action is unconvincing.

4.10 The market kicked on to a new high just after 3 pm as it went through 4520, helped by more strength in the Shanghi index, I assume.

My long positions didn't rebound appreciably though but with the index closing at 4530, up 33 points, I'm reasonably confident now that we can push up for a day or two more.

Caution ahead of earnings season. Tue Jul 27

Following another bullish lead from Europe and the USA, the Australian market is up but underperforming relatively. The quarterly production reports from the miners are petering out but the twice yearly reporting season is just starting.
There's some levelling out, with banks, industrials and retailers leading the charge today so that my resource centric group of long positions is doing very little.
Mmx is up 3 to 190 but I noticed last night when scanning through the company announcements, that a large investor Harbinger has been reducing its holding quite dramatically. This is balanced somewhat by an increase in the holding of Posco, the Korean steel company, but I suspect that hedge fund Harbinger is an aggressive seller so I reduced my holding a little at 191.
I bought some Mirabela Nickel though, at 228. This is a stock that I don't usually trade, but I've got some in a longer term account and have been following it. It's a slightly unusual trade for me lately, because I'm chasing a breakout, but it looks as if it could really accelerate. There was a muted early reaction to its quarterly production report, which looked ok but slightly disappointing. However, the stock didn't sell off, so I think that buyers might have to chase it. Here's the chart and I guess my stop is at about 210, although I'd be pretty concerned if it slipped back into the small congestion between 211 and 219.

1.53 The tepid enthusiasm for stocks continues and we're only up 16 points now. The Xjo chart looks tired in the very short term with this being (potentially) the third day in a row where we've sold off early highs, but structurally, we broke out last Friday and the market doesn't have the look of a 5th wave top. I'm working with the scenario that a sell off will be quite limited and the most likely outcome is a test of the June high at 4620.

4.06 A lacklustre day once again and my resource longs have been subject to profit taking today. Mbn is costing already and I'm regretting not trying to buy on a pullback. It's more concern about tactics rather than direction though. With the turnaround in the Shanghai index, the Baltic dry freight and base metals generally along with better (or less bad) than expected industrial production and housing numbers out of Europe and the US, it seems to me that the risk is to the upside.

We're just about to match out for the day.

And there it is, a rise of 11 points. Japanese, Korean and Hong Kong markets are flat while Shanghai is having a small pullback so the caution is widespread.

Asian steel market turns. Mon Jul 26

Some interesting notes from local broker BBY have helped to clarify my view that the selling in steel and iron ore stocks might be over. They suggest that the shorters of HRC (hot rolled coil) steel at the Asian list price are, suddenly, no longer able to cover by approaching steel producers for a discount and it should mark a bottom in the steel price. They also believe that the Baltic Freight price is due to rebound and that by the fourth quarter spot iron ore price should follow this lead.
It helps to clarify what the charts are indicating and with Fortescue having continued its bounce this morning, I've added another long iron ore position in Murchison at 189. Mmx is lagging Fmg and Mgx and has confirmed a minor buy signal this morning. As with Fmg, there's enough potential for a re-rating to justify this trade, especially with a stop in the high 170s. The picture is clouded though by a June quarter production report which is due on Friday.

Overall, the market has followed strength in the US and risen 1% with commodity stocks leading the charge. I'm out of Ipl, the last bought on the open at 320, and I've also sold out of Mre at 83. Linc is up 13 cents as their quarterly activities and cash flow report confirms that they have received written offers for all three coal assets they are planning to sell.

2.16 It's been a steady sell off from the late morning highs. We're up just 19 points now. Most of my positions have edged down. I sold out the last of my Ost at 307 and some Awc at 158.

4.14 A rangy afternoon session chopped around until closing with a gain of 0.6% on the Xjo index.

Mmx didn't perform today, finishing at 187, but Fmg, Lnc and Pna all did well, as did Awc which I sold out of at 159.

I'm still quite bullish Awc and Ost but my overall exposure is on the high side.

Clearing up. Fri Jul 23

The picture is clearing after strength in European and North American markets overnight. The European PMI number was better than expected while US figures were less bad. Combined with more good profit reports it lifted markets across the board.
Most indices have got approximately the same chart pattern at the moment and with the FTSE having pushed on to new recent highs, I expect us to follow. Here's the updated Xjo daily chart.

I'm still favouring resource stocks as most leveraged to a change of sentiment about a double dip recession and I've added to existing positions in Awc and Pna this morning, while selling odds and ends in Mre and Ost.
The sector which I've found the most difficult to assess recently is iron ore. I felt that most of the iron ore stocks would slide lower after completing a bounce from mid May to mid June. They did retrace, but unlike the steel stocks they've held higher levels.
I've gone long Fmg this morning at 416 because although I'm still confused about the chart, it could surprise to the upside and pop up to 450 quite easily while my stop is at 400.

Four days ago, I was pretty confident that Mgx, another iron ore stock that my assistant covers, was heading back down towards the May lows and that any rally could be shorted. Fortunately, we did nothing there, because the stock went through the pivot point at 150, which I thought would be decent resistance, and has shot straight through the earlier consolidation high of 160.5.

It indicates to me that the correction in the sector could be over. Of course, it could be stock specific but the market is forward looking and a renewed confidence in world economic growth may be more significant than a softening ore price.

3.30 Unlike most Fridays, the rally has held and gone again. We're up 2% and only just starting to pullback a jot now. The Xjo has passed the high set on July 15th and with the Dow looking good for some further strength tonight, it's probably why there hasn't been a sell down from early highs. If anything, it looks likely that stocks that have been shorted, will outperform through to the close. Aristocrat, Awe and Fmg are a few examples from my watchlist of beaten down stocks which are up 4% or more today.

Ipl has pretty much squeezed me out. I bought back a third on the open at 312 and another third at 317. If it pushes to 320 then I'll buy back the balance. Otherwise, the only other fly in the ointment is Linc, which has dropped back a couple of cents. Presumably, some short term bulls getting out ahead of the weekend while we're in this interim period as we wait to see if the Adani deal goes through.

4.12 A slight sell off left us with a gain of 1.9%. Fortescue held though, finishing at 421.

Braveheart. Thu Jul 22

It's only a half hour into the trading day, but the local market is shrugging off overnight weakness and seems to be gaining confidence that there are bargains to be had in the resources sector.
Ozl is an example of that. I sold out too early and in the event of a reasonable pullback I'll be interested in getting long. In Ozl's case, it's being touted as a takeover target while in general, I think there's been a recognition that copper/gold stocks are cheap and possibly, with the iron ore price slipping, active traders are looking for the next movers.

With that in mind, I've bought a mini version of Ozl, Pna, who mine copper and gold in Laos. They're a liquid trading stock and the price earnings ratio is low. Mine life has been extended and the company suggests that there's the potential for further resource growth.
I sat on the bid for most of the day yesterday but couldn't get any at 52, so late on I paid 52.5. I've added more at 53 today. The stock price might accelerate if it can get through 55.

1.34 The hearty confidence was short lived and the market is down 0.6%. Nevertheless, the longs I'm holding, Awc, Lnc, Mre, Ost and Pna, are mostly steady to up and they're all in the resource area. My short in Ipl is a tad firmer too and I added another short today in Stockland Group at 386, which is at least following the market down.

Ost is the most precarious looking of the long charts but it's hanging in there, so I am too.

4.14 The downward drift continued to leave us down 38 points but resources held up at the expense of financial and industrials.

Second wind. Wed Jul 21

As is often the case, the morning report on FNArena sums up the action over the last 24 hours beautifully. It was quite a gamble for us to rally yesterday on the back of Chinese strength and it wasn't looking too good early on in the overnight session when the US was down over 1%. However, it reversed to finish up and now it seems that the narrative is changing, with the initial rally leaders slipping and confidence returning to the miners.
I've taken the opportunity to put on a short position in Incitec Pivot, one of the stocks that has bounced nicely off the early July lows. It was looking stretched after a strong V bottom and just managed to pop up to minor new highs over the last two days. It's still short of, but quite close to, three swing highs formed over the last six weeks at levels between 314 and 320. So my stop is at around 320 and the short position was placed at 307. I'm hoping for a retracement, perhaps filling a small gap, down to the low 280s.

2.58 Best news of the day for me is a good rise in Lnc. A story came across the news wires mid morning about Adani - the proposed buyer of the Galilee coal tenement - going to market to raise USD $850 m in a new share issue. Lnc is up 22 at 152.5. Even at the level, the market cap is under $750m so with a mooted sale price of $1bn, and other coal assets on the books, it looks like there could be more upside yet. Here's the daily.

4.10 A consolidation day has ended with a small gain of 7 points.

The Xjo index could go either way; a new high or another leg down which I think would complete a correction of the recent run up. Given that equivocal view, I'm happy to have a short position on now.

Dipping a toe. Tue Jul 20

I'm still pretty much sidelined but starting to dip my toe in the water. Overnight, there was a tepid rally in the US and post market some weakness, so I wasn't expecting too much buying today. However, with more than an hour gone, we're up 7 points. I'm paying attention to the chat this morning on CNBC about the Chinese government's loosening of financial regulation, particularly around the Remnimbi. I won't pretend to be on top of the details or the implications but the pundits are pretty positive. From my fairly simplistic charting point of view, I'm interested in the Shanghai index and whether it can rally again today.
Overall, I'm still bearish in the short term, but only mildly so, and can't see a lot of value in any short positions. I've also bitten the bullet and reinstated a long position in Alumina. I cut at the first possible point yesterday, 146.5, only for the stock to hold the next level down as it bounced off 145. It's got the potential to be a double bottom and there's not really a lot of selling momentum, more like some chopping around near the bottom of the range. The upshot is that I've paid 149.5 with a stop below that 145 level.

1.04 pm Chinese markets are firm again with the Shanghai index through 2500 and the Hang Seng up over 1% as well. The Aussie market has joined in the fun and is up by 34 points with most sectors moving.

One Steel has been testing my patience and it's one of the laggards today, but it's beginning to look as though it will hold the recent low at 276. I bought a fraction more at 282.

2.12 It's turned into a strong day, up 54 points or 1.2%. RBA suggestions that rates are on hold for as long as possible has helped things along. The action today has also raised the possibility that yesterday's fall is as much of a pullback as we're going to get. I'm still undecided but am reasonably well placed for the time being.

4.12 We finished up around 1% with the Shanghai market up well over 1% now and the Hang Seng following suit. There's optimism that the domestic economy will be allowed to substitute if export markets slow too much.

Chasing my tail. Mon Jul 19

A big fall in the US indices on the back of the first set of disappointing results from GE and Google has precipitated a 1.5% early drop this morning in the Xjo. Here's the daily chart.

My main scenario is that this is an abc rally with wave a just completed. I was trying to be clever when I got hung up on the idea of a large V bottom rally which is pretty unusual. As it was, it was a decent enough first bounce off the lows and I don't expect a rush back there soon.

I'm out of Awc at 146.5 which is not too much damage and meanwhile, I don't want to rush into shorts as I've missed the boat. That is, if I'm only looking for a little b wave retracement over the next few days, then I had to be pre-emptive in putting on shorts and as I discussed late last week, the best opportunities were in the iron ore sector. Actually, gold stocks were also good potential shorts, but I missed them too - although with good reason, there's not enough to trade with the Lgl/Ncm merger coming up soon and the others quite whippy. Probably I should just keep trading Lgl through August as the merger is not due till September.

Good news for today is that Linc might have had it's pullback after Wednesday's spurt on asset sale news. There were a few sales around 118 but the stock has quickly reversed on decent volume to be up a cent or two at 126.5. I've bought more in the low 120s.

1.47 The index is holding reasonably well as Chinese and Korean markets outperform. With the exception of Linc this morning, I don't see that stocks have fallen far enough to tempt me to buy more and on the short side, although I've got Qan, Tls and Tse on a list of potentials, the risk/reward doesn't seem good enough. So I'm sitting on my hands really with only two positions, both long, in Lnc and Ost.

4.37 No further action. The interesting performance today was the Shanghai market, up 2% and showing signs of quite a good buy signal after a long period of weakness. If it can push through resistance (and previous support) at around 2500, then it should have a decent little rally. It would also be a pretty good buy indicator for Aussie resource stocks.

Still confused by iron ore. Fri Jul 16

Fortescue was hit hard yesterday after a good quarterly production report by volume but with average cost a concern for some. They sold down to 407 early on today, confirming that they're not making clean bullish patterns at the moment. I've been double bluffing myself with the iron ore stocks. The spot price is sinking fast, but the companies themselves are still raking it in after massive earlier price rises, so it's tricky to gauge what sentiment might be. In retrospect, this was pretty straightforward. An abc rally to 464 followed by a failed new high which could have given a nice shorting opportunity. I did actually spot it yesterday but then lost connectivity after getting permission to short Fmg and Mmx and missed the opportunity. However, if I'd been sharper I could have been short a few days before.

Mmx is a similar story except that it's more obviously weak and, after suggesting I might short it on a rebound on Wednesday, I didn't bite the bullet there either.
I suppose my overriding concern is that the V type rally we're having tends to grind up for longer than you'd expect and squeeze shorts pretty hard so I don't want to get into that mindset too early.
With that in mind, I've gone long Awc. This ran up into the Alcoa result and slipped back again. I've got a stop close by and a good deal of support in the 140s. It's possible that this can rally up to the high 160s. Long at 151.5.

1.23 At lunch yesterday I caught up with friends who are more in touch with market gossip than me. They're complaining about light volume and it certainly seems pretty flat to me. A few of them are worried about broker layoffs but then again, they're notoriously short term. It's the school holidays, the start of the financial year and there's still a lot of indecision about where the world economy might be going so plenty of reason for investors to be cautious until the air clears.

The market is easing back. Lnc is down to 127, I sold out a third of my position at 137 on Wednesday and Thursday and it's obviously going to slip until something is announced. If no deal is done, it might drift back to 110ish but unless they're completely misleading the market, it's hard to believe that there's not substance to the reports of an imminent deal.

If I'd missed the breakout the other day, I'd be looking to start buying a few on the backfoot. The takeover bid for Centennial coal was incredibly well telegraphed in retrospect and I'm using it as a guide. Once the buyers bought the second large tranche, it was clear it was no longer a blocking stake and it only took a couple of weeks before the bid came through. The acquirers, Banpu, even sent a letter on June 18th confirming that it was not a passive stake. Despite that, very few people (including myself) did the obvious and bought stock in expectation of the bid which came along on July 5th at 620.

4.06 It's been another quiet day for me and all I've done is sell out the balance of Wsa at 435. I'm continuing my less-is-more approach and not trying to force any trades. I'd like to have put on a short in Fmg or Mmx but the chance was yesterday and there wasn't any sort of rally today that I could fade.

Awc was hit with the rest of the market and looks like closing at 148, so not a good start there, but it's been a typical profit taking Friday and I can afford to give it more time.

Market is down about 0.5% just ahead of the closing match.

Late, late show. Thu Jul 15

A late, late blog entry for me, having been down for an hour or two today with a switchover to a new ISP and then a farewell lunch for an old work colleague.
The Chinese figures came through at midday showing a mild but expected slowdown and the market rallied back to square after opening down 0.5%. It then dropped back to the lows, so just a pullback after yesterday's big rally.
I've done very little. Wsa rallied on a good quarterly activities report so I've sold half of my balance out in the mid 430s.
Otherwise, the other significant position is Lnc which has held most of yesterday's gains while waiting for further news. It's their Galilee coal field that's for sale for around $1bn and the prospective acquirer, Adani, is a company that gets things done and is hiring banks with regards to a share issue of $600 mn (according to broker research from BBY).

Linc at last? Tue Jul 14

Happy Bastille Day, Jean Jean.
The Aussie market may not have managed to make a V bottom after yesterday's weakness but European and North American indices certainly have. US was strong again last night on a good start to the earnings season. Here's a daily chart of the Dow.

Anyway, I got sucked in to selling out of Ipl and Mmx yesterday which was a mistake because they've bounced back pretty well already - it's 10.22 am. Also, my plan in Fmg was just a little bit too cunning; they finished at 426 yesterday which is just about in my buy zone, but they've shot up to 439. Nevertheless, I'm still long Lynas and Western Areas which are both up nicely.
The reason for the early post is that there may finally be something happening in Linc Energy. I've had these in my super fund for a year or two and have taken some pretty heavy losses but, stubbornly, held on. They're a coal seam gas junior and have a lot of coal leases. Their process specialises in transforming previously "stranded" coal into liquid fuel so they are able to sell the standard coal mining portions of their leases - at least, I think that's how it works! Early on in the GFC they were all set to sell some of their coal fields to the Chinese for $1.5 bn but the buyers went missing as economies were trashed. They're still trying to sell them and last night there was news of an Indian buyer about to pay $1 bn. The first I've heard of it was a company announcement just before the start of trading saying that nothing has been concluded and they remain in talks with a number of parties. Anyway, the market cap is under $600 m so there's plenty of upside and the chart has a nice bottoming pattern with mildly higher lows and the chance to move into an acceleration mode. I bought some on the open at 113, cautiously, because there have been so many false starts in this stock. I've added more now, with the average entry price up to 116.

Thinking about Linc, they're kind of like a property developer whose developments haven't quite got off the ground, but with a huge landbank which is suddenly very valuable. I'm quite interested in the whole clean energy thing, so I hope that they can sell this mine and use the cash to ramp up their production from a test system to full scale.

12.26 Linc went really well this morning, a spike as high as 141.5, and now a consolidation around 132.

2.45 Back from lunch and a few errands to find that Lnc is softer at 130.5 but holding ok. I sold a handful at 136 before leaving the office.

Ipl is strong today but Mmx, like most iron ore stocks, is still hesitant so the opportunity cost hasn't been too painful today. In the steel sector, Bsl is firmer but Ost is only up a touch. I've taken the opportunity to buy that at 291. The year's low was made 6 bars ago and I'm looking for a least a 3 wave rally so 275 is the stop and maybe it can run up to 325, 330.

4.18 A high close for the index, up 1.9%.

Out of a few more Lnc at 138 and some Wsa at 416. Sold the Lyc earlier at 67.5 but they closed at 69.5.

Sleepy hollow. Tue Jul 13

I'm feeling fresh but the market is even more sleepy than yesterday, despite the Alcoa result beating expectations and rising 3.5% in the after market. Alumina is up in sympathy but only a couple of cents and the general tone is for resources to return to their sluggish rally and oversold industrials to take up the slack. So in my watch list of stocks, for example, it's David Jones, Fairfax and Stockland Group which are rising - department stores, newspapers, property - while resource stocks are a tad weaker.
My positions are small and I've neither bought nor sold anything. I think we're in squeeze mode where the market is not especially bullish but keeps edging higher. The only stock that is tempting me is Fortescue, which is 3% lower this morning but still looks to be charting well. Realistically though, I could be a chance of picking some up around 420, so at 433 it's still too pricey.















You can see from the chart above that it's chopping around but has rallied further than you might have thought thanks to the resources tax back down. In the last week or so, it has made a little buy signal followed by a 3rd wave type rally. I'm just waiting for a tradeable pullback so I can try to capture a move which I think could take it back towards the top of the range at 455-460. For example, it's possible that I could get long at 420ish and pick up 30 cents or so. A break below the little 1st wave high of 416 would be an amber light and I might be able to keep the risk down to around 10 cents.

2.13 pm It looks like the V bottom scenario in the Xjo index is reverting to a more common pattern because we're now down 0.5% based on weakness in greater China markets - significant for us ahead of Chinese economic figures due out on Thursday. I've sold out my last Ipl at 281 and otherwise, I'm just waiting; either to cut longs or find a couple of new positions. At the moment, no new short positions on the horizon.

3.26 I'm not overly convinced about Mmx and along with most iron ore stocks, it's down today. I've stopped out a tick above my entry price at 198.5. I was influenced by the Fmg chart but it hasn't really jumped like that; in fact it still looks like a little abc rally before a new low. Better safe than sorry then.

4.26 A fairly weak close and I'm glad I sold out of Mmx which continued to slip as did Ago, Fmg and Mgx. Steel stocks were weak too, so there's obviously concern about demand.

I'm now thinking I'd like to short Mmx so if there's some early strength, that could be a new position for tomorrow.

V bottoms, baby we got 'em. Mon Jul 12

Another day of rally as we trace out our nervous bounce in a week which features the start of the US reporting season, led by Alcoa, and monthly Chinese figures on Thursday.
The chart of the Asx 200 index has the look of a V bottom about it, always hard to trade as the change in sentiment seems so abrupt.

The resource stocks are coming to the party today after sitting on the sidelines last week. I'm still pretty cautious and I've sold a few of my Ipl out at 279, Tse at 328 and a couple of other leftover positions.
I've added a few more Mmx though, at 201 and put on a new position in cheapie Lynas, a rare earths producer, which is running on news that China is restricting exports of their own rare earths in anticipation of increased demand. I went long on the open at 61 and I'm jumping on a moving stock rather than waiting for it to come to me, which I prefer to do. However, so far it has rallied further to 63 and there's a chance that the stock can accelerate into a larger scale pattern rather than tracing out a 5th wave high here.

As is ever the case with these momentum plays, I'll need to be quick to jump off if it starts to reverse.

2.50 pm The market has been steady for most of the day with a rise of of around 15 points. The resources stocks are continuing to have their day and I've sold out the extra Mmx for 205 and half of the Lyc at 64. I've still got much the same exposure I had this morning in Mmx and Wsa, which I'm reasonably confident about, but I've lightened the load elsewhere since the Alcoa result overnight has the potential to be a negative or a positive catalyst.

4.25 Not much change by the close, up nearly 14 points and my longs held near their highs. The opening of the US reporting season will be the acid test today.

Don't stop me now. Fri Jul 9

It was the first 3 day rally in the US since April with a 1% plus rise overnight but the Aussie market is reluctant to join in the fun. I'd like to see the rally continue but it's definitely in the balance in the short term. The 60 minute chart for the Xjo index has traced out a sharp 5 wave rally but it hasn't definitely completed.

I got out of Ozl at 106.5 and some Tse at 328. The Ozl because I've not been completely comfortable with this trade, my entry at 102 just seemed too late in the piece for a retracement rally. With Tse, 330ish is my target - it did trade up to 331 briefly but has slipped back to 323. I probably should have sold the lot and might just tip them out if it edges back to 326, say.

1 pm So far, yesterday's pattern of relative strength in banks and industrials is continuing. Despite that I've put on a long position in iron ore stock, Murchison, at 198. I'm looking for either a run up to the highs around 235 or just a little retracement rally to 210. Stop is at 185.

I normally wouldn't favour this trade because it looks like the rally has already happened in late May and June, but the chart of Fmg - another iron ore miner - implies that the rally could be tradeable. It seems to be a few days ahead of Mmx but pretty similar overall. A bit stronger, perhaps, as the June rally went relatively harder.

3.43 pm The market tried to sell off early but the tide has turned and we're now up 39 points. Any strength in resources is still patchy and tentative but I've placed my bets with longs in Mmx and Wsa. I'm out of Bsl at 218 and still sticking with Ipl which has disappointed slightly by only rising 1% when US potash stocks (not an exact proxy, but a good guide) were up 4%.

If the market continues this rally early next week then I expect resource stocks to catch up. The rally will only be sustainable if there's a view that the world economy is stronger than the recent fears and in that case, cyclicals would be bought.

4.10 We're closing up near the market highs. I'm heading off to yoga and will be thinking positive thoughts for a Spain win over Holland in the World Cup final.

Keeping it real. Thu Jul 8

A great lead overnight if you're bullish, with the US indices rising 3% on renewed optimism about bank profits and breaking back through the keenly watched 1040 level on the S&P 500 index. The Aussie market is not getting carried away with wild enthusiasm and despite a rise of just under 2%, the smaller resource stocks, which often lead the charge, are generally performing in line. It's the banks, reasonably enough, which are outperforming.
My only finance long was in Challenger and I sold out of that at 372 as the stock ran 5% early on.
I've got another new long in Incitec Pivot. I misread this one a couple of weeks ago but I'm having another go, using yesterday's low as a stop. The last drive down looks like it formed into 5 small waves and the reversal could jump up to 280 something quite quickly. Long at 264.

3.07 As noted earlier, it's not a crazy day in the smaller caps but the index has done quite well, holding a very tight range which should be supportive of further strength. The tone of the day is summed up by Anz being up 4% and Bhp 2%.

Just sold a few Bsl at 217. It's not a huge gain - long at 211 - but after rushing in and then being close to stopping out below 203, I'm quite happy to lose a few at this price.

Late, late show

Just back in the office, at 3.10 pm, after a few errands, and the market has had a retracement day, thanks to the US failing to hold onto early gains. The Xjo index is down 31 points now although for the moment I'd still say it looks bullish in the short term. Here's a 60 minute chart of the Xjo.

There's a reasonably good chance of another leg up, even if it's just for a day or two.

I did buy a few Ozl on the close yesterday at 102 and they've firmed up slightly to be trading at 104.
A new long is in Transfield at 311. The stock has been grinding down, but now the rallies are overlapping previous lows so negative momentum is much reduced. There's been a higher low at 301, but a short term turnaround is not yet confirmed. That would need a trade above 317. Stop is a cent or two below 300.

4.11 Tse traded through to 318 and closed at 317 so I'm hopeful that this will run up to the 330s.

Overall, there was a loss of 21 points in the top 200 index.

The eye of the beholder. Tue Jul 6

It's not looking so beautiful to me because I'm long a couple of stocks having got drawn in to picking turning points. The market is still grinding down on light volume and I'm close to stopping out of Bsl.
I can see that the market drop might be incomplete but in the short term, there's probably not too far to go.
There's not a lot else to add, we're responding to weakness in Japan and Korea this morning while the US overnight futures have slipped close to 1%. I find it hard to take the US futures seriously as the volume is probably tragically light.

Of interest yesterday were two takeover bids for CSR's Sucrogen business and, relevant to me, a takeover bid of 620 for Centennial coal. I was long Cey for a day or two last week but although the possibility of a bid had arisen recently, the speed at which it came was surprising. The point to draw from this, when there's much negativity about a double dip recession, is that Australian resource stocks are still in demand.

2.02 There's been a decent turnaround from early lows and the Xjo index is up 15 points. The market is waiting for a rate decision from the RBA and there are faint hopes of a cut, an acknowledgement that the May rise of 25bp was misjudged.
Real estate has stalled locally, metals prices have softened, retail sales are weak and corporate confidence is declining so there are a few reasons to ease. It probably depends on how willing the RBA is to eat humble pie. They're not terribly doctrinaire and don't seem to sit on their dignity too much, so a cut must be close, even if we have to wait until June.
It seems unfair to be selling off so hard on recession fears without the comfort of reduced interest rates!

3.09 A cut was not forthcoming but an ackowledgement of the slowdown from the RBA has been enough to help the index rise as much as 1% before easing fractionally.
Bsl has recovered which is good for me, while Cgf has had a good day, up 17 to 357.
Ozl has given a buy signal on a push through 102 and I'm hoping for some weakness which might allow me to buy at 102 because I could have gone earlier on this one. If I do get long then I'm going to have to put my stop below Friday's low of 98 because I missed a chance to buy at around 99 or 100 earlier today. I was reasonably confident that we'd seen the low and didn't need to see the break through 102. Still, it's a more convincing signal now with the confirmation of strength.

4.13 Here's a chart of the Xjo. We had a 96 point rally from the early low to the close on the high. The Spi has had a 106 point reversal as of now. Quite bullish in the short term, I think.

New start. Mon Jul 5

Coming in to work today, the streets were quite clear of traffic because school holidays have started and a lot of families must have taken a holiday. The market has ignored a negative lead, on very light pre-holiday volume, and after an hour's trading we're up by 7 points.
On a daily basis, the Xjo index is trending down and has closed at new lows the last two days. On an intraday basis, there was a lower low on May 21st. My take on the chart is that it probably hasn't hit a low yet, but that the low will be quite close in price and time. Here's the daily.

Looking at the bigger picture of a weekly chart spanning 5 years, I notice that it's quite similar to the daily chart above. There is a solid rally off the lows which retraces about half of the fall and then renewed weakness. In the case of the daily chart, the renewed weakness has obviously taken the index back to the lows and I expect something similar in the bigger time frame.
So my road map for the rest of the year is for general weakness and a sell the rallies type of market.

In light of that overall view, it's with a little trepidation that I've bought some Bsl today at 211. I was short this recently because of it having a slow shallow rally which is typical of an a-b-c correction and although I didn't show enough patience with my own short position, the stock did slip down to a new low. Having made that minor new low, I'm expecting a quick bounce back into the 220's as the first attempt at a rally.

There's a recent low, providing an emergency stop, at 203. The risk reward on this trade is not much better than 50/50 because, having missed my entry at 209, I chased it up to 211. That being the case, I'll need to be conservative with this one.

Looking over this post reminds me of my new (trading) year's resolutions. One of them is to let the market come to me and to trust that it's going to unfold as my reading of the chart suggested - unless there are subsequently clear signs to the contrary, of course. Patience and trust.

In the end, trading becomes an exploration of self as you find yourself dealing with your own patterns of behaviour and beliefs about success and failure, self worth, work ethic etc.

As you strive to improve your trading, it's important to be gentle with yourself. Some of those patterns can be quite deep rooted and changing them may take longer than you think, but it definitely can be done.

4.10 Our market continues to underperform and today we've drifted off after the early rise. The Japanese market is firmer and the Hang Seng only mildly down so there's not an obvious catalyst for the sell off except the pre-existing momentum on a quiet, US holiday affected day. We finish the day with the Xjo lower by nearly 17 points at 4222.