Margin pressure. Wed Nov 10

Gold had a wild ride last night (check out the FnArena morning report) as the CME increased margins and sparked a stampede out of the metal. It fell from $1424 to 1389. It has steadied in the Asian session and is at 1394. Most of the gold stocks have followed suit although the trends still look solid. My small holding in Rsg is down to 143.5. Gold/copper stock Pna is only down a touch; it would have been unpleasant if it failed to participate in the rally only to join in the decline.
Other news of note is that Awe has succumbed to some profit taking and is down to 178 from 189. I was all set to sell some on the open at 190 but changed my mind after seeing some broker research. Shame. I've actually bought a handful more now at 178 as it looks reasonably well supported and the Xjo also seems to be in the mood to rally after recent underperformance.
Best news is that Lynas is up to 138.5 afte releasing a presentation to Hong Kong investors. It was an impressive document, full of practical information and short on hyperbole. It made the point about how many hundreds of thousands of man hours had already gone into the Mt Weld project and the Malaysian processing plant which are on track to start production in late 2011. I've read an article suggesting that the rare earths market is very small and that rare earths are actually a plentiful resource so that the situation could go from shortage to glut in no time. The Lynas presentation makes it clear that this is fanciful in the short term. Anyway, I'm sounding like a long term investor now.
The chart is interesting as it has just regained the level at which I should have stopped out in the first place. If it can push through 140-144 then it could surprise on the upside. It's a difficult chart so my strategy is just to watch carefully.

I haven't traded Aristocrat for 7 months but I've been getting more bullish lately. The stock found support in August and had a good rally in September only to grind back. It held at a higher low for the third time and has been working its way back up. I'm looking for something like the September rally with the potential to go back to the mid year highs just above 400.

I'm encouraged by valuations too. The stock is expensive on FY10 numbers but analysts are looking for a profit rebound the following year and the average of the prospective PEs is 8. Third quarter results and outlook suggest that the cycle might finally have bottomed. That's also an opinion I've heard expressed regarding US housing and private sector jobs so there could be some substance to it.

I'm long at 363, it's slipped back to 360, and my stop is below the recent swing low in late October which was at 348.

12.03 Arafura also presented in Hong Kong and their report was distributed yesterday. Apparently some of the bigger users like BASF and Siemens were present. They steadied up yesterday and although I have some placement stock, I've added a few more at 121 as it has pushed above yesterday's high and it looks like we can have a decent reversal rally. Stop for these ones is below yesterday's low.

The index is up 4 points and while it's a reluctant rally, it's still a good performance as the late sell off in gold came after the base metals markets had closed higher so there must be some caution around tonight's trading. The AUD is also lower by about a cent, sitting just above parity at 1.005.

12.20 Linc has lost a bit of momentum so I've sold another 2.5k at 250 to leave a balance of 10k.

1.44 The market is selling off again with the Asx 200 index now down 8 points. My positions have edged back but not a lot of change. I'm still bullish but it is, of course, testing my patience as this is the third day of retracement.

2.22 Still drifting off, down 18.
Just bought more Aax at 248, essentially completing my buying. I might be tempted to buy a handful more if it were to drift lower then make a buy signal on a 60 minute chart, but otherwise that's enough.

3.05 Stepped away from the screen for half an hour and the market has taken a tumble. It's now down 49 points at 4691 and more seriously testing support.

I'm beginning to bore myself but I think that the market should hold and I'm surprised it has been so weak. Yes, Chinese markets are softer today but they've been running very hard. Overnight US futures are down only slightly. Perhaps it's a carry trade unwind because the AUD is slipping back towards parity after its strong recent run.

4.12 The best reason I could find for the sharp sell off was fear over Chinese rate rises. It's a glass half empty view though, at other times the thought of rate rises is viewed as confirmation of strength in demand for commodities. My view is that it's exhaustion with holding longs while the market grinds back and liquidation by stale bulls. I'm not quite stale myself yet so I'm hanging in for now.
The index closed out at 4699.8 so there was a minor bounce but not a clear rejection of the selling.
I traded around in Aax and Awe and reduced the average price of the extra buying to 246 and 176.
Pna is the disappointment, it did fall after having failed to rally in the previous week. It's back at 74.5 and while I think that 70 is a more significant level, the top of wave 1 of the recent move, 73 is also pretty significant with the stock having bounced there twice in the past couple of weeks.

A quick check of CNBC tells me that US overnight futures are unchanged, Japan is up, Korea is up, Hong Kong is down just over a percent, Shanghai just under a percent and the Shenzehn market has reversed and is now up. Not apocalyptic stuff