Imprinting. Mon Jan 31

It could have been one of the interviewees in Market Wizards, but I remember reading about imprinting years ago. It borrowed from the idea that a baby bird will follow the first thing it sees, hears or touches which is generally its mother but could be a wind up toy, a dog, etc etc. The idea is that traders can become fixated with one idea and fail to spot the obvious. As a former options market maker, I had a lot of good times in falling markets and was equally happy to be short or long but recently I've become biased to the bullish point of view.
My analysis was pretty good last week which was that I should short into a two day rally. As the rally played out, I persuaded myself to buy instead and although I had the sense to cut most of the long positions, it was a missed opportunity.
Just over an hour into the trading day and the index is down 41 points as it recovers from an initial 58 point sell off. I stopped out of the last Awc at 238 as it broke 239 support.

I sold a few Awe on the opening match at 180 as it bucked the trend to rise by a couple of cents. It's back at 176.5 having reported quarterly production. The two steel longs are resilient enough, unchanged and down 3, while the short in Aristocrat is performing as the stock has dropped 2% and confirmed a sell signal.

It's the last day of January and reporting season begins in February with resource stocks expected to release strong results. The easy trade was probably the rejection of the top of the trading range with caution the most likely situation now.
It's possible that the rally is over in Europe and North America with the middle Eastern flare up the excuse to change tack so the Xjo could stay in the range for some time yet.

1.05 Asian market response to the overnight falls is reasonable with drops of 1 to 1.5% about the average. The Asx 200 is down 0.9% but the index fell pre-emptively on Friday. Gold is the safe haven today and after a week or two of heavy selling it has been pretty easy for them to bounce back intraday. Oil also rose on the threat to oil supplies but the energy stocks are mixed.

1.13 Given the sell signal in the Xjo index this morning, my strategy is to sell into rallies, ie to do what I should have done last week. In the meantime, the market might recover some more this afternoon.

3.39 Just back from the dentist to find that the rally has continued, leaving the Xjo down 27 points.

Potential shorts are too far gone in the short term so I suppose that it was inevitable that another long opportunity would pop up. I've bought some Aru at 129.5 because I think there's a good chance that it's an incomplete bullish pattern and the stop is close. My take is that the breakout just after Christmas has been retracing. The breakout level was 125.5 so my stop is only about 5 cents away with the potential of a move to 180. I'm not looking for a quick move to new highs but if the scenario is correct then it might recover to the mid 140s quite speedily.

4.18 The recovery continued as tensions ease in Egypt, at least temporarily. The Asx 200 fell 21 points to finish the month at 4754. It finished last month at 4745.

Take it easy. Fri Jan 29

Another morning with no overseas catalyst to help things along as overnight markets were flat. Gold was the exception with another decent fall and I'm glad I got cold feet with Intrepid. All of the long positions that I cut have gone lower so I'm reasonably happy but there's no excitement with my existing positions which are little changed.
The market has a chance to rally today despite the early lack of interest but I think it's more likely that participants will sit on the sidelines until next week and go out to lunch en masse.
The first half of the month was pretty good for me but I was punting that we'd get some follow through once a new high was reached and there wasn't even one day of positive action. That's meant that the last two weeks have been a succession of stop outs, exploratory attempts to buy pullbacks and then further stops. It doesn't look like the last two trading days of the month will offer many opportunities so rather than try to make a silk purse out of a sow's ear, I'm going to relax and wait for something obvious to present itself.

11.03 Funnily enough, I was thinking we'd rally to a lower high earlier in the week but second guessed myself. Unfortunately, I find it hard to see the market falling very far which is probably why I keep looking for long positions. Here's the daily Xjo chart showing a potential lower high and raising the prospect of a second leg down, perhaps below 4740.

The Asx 200 is down 13 points. I sold out half of my Awc long, soon after the open, at 247.5 average. Also added a few more to the short in Aristocrat, at 310. 

1.19 The index is now at the lows, down 28. Aristocrat and One Steel are going my way while Awe, Awc and Bsl are costing. None of it is adding up to much. I added a few Awe at 178.

Other markets in the time zone are down too.

3.27 It's a capitulation day as disappointed longs dump their stock following the failure to push higher. The Xjo index has been down 50 points and remains down by 43. I don't know how significant it is because European and North American indices may look toppy but are generally making higher highs.

For example, here's the S&P 500 daily chart.

3.48 I was just talking to my brother who runs a restaurant in the Gold Coast, in South East Queensland. He's been there for 30 years and has been hearing stories from all sorts of people about how their local economy is as weak as most people can remember. When I also hear that the retailers are talking about a new frugality on the part of shoppers, it occurs to me that the flood relief work could be a very timely boost to a rapidly slowing economy.

Australia may not have had a sub-prime problem but there was a lot of borrowing going on in the broad economy. Superannuation funds were able to recapitalise most of the troubled companies that were worth saving after the GFC and they continue to receive their regular inflow of cash but the swing factors, private and overseas investors, seem to be starved of funds.

After a long period in which I've been unable to come to terms with the lack of enthusiasm for the market, it's a point to keep in mind. For the last 4 or 5 months I've only been taking bullish trades and have clearly missed opportunities but if we're in a cash strapped environment then the chances of big moves across the whole market are quite slim.

4.14 There was a reasonable late recovery to reduce the deficit to 31 points.

Thanks! Thu Jan 27

I notice that there are some new readers from round the world, especially North America and Europe. Thanks very much for dipping into my blog. I try to write as honestly as I can about my experience of the highs and lows of trading. I've been trading for a long time but I'm always trying to improve and there's a lot of room for improvement.
I've read some great trading books and they've been more influential in my work as a screen trader than experience I've gathered from trading floors or dealing rooms. The best of the trading books will acknowledge the mental and emotional side of trading and give you techniques for working through problems but there's an underlying assumption that the road ahead is straightforward.
I'm sure that's true for many people but I'm a roundabout sort of person and I can find myself repeating errors for a long time before I can develop my own solution! Despite that tendency, I'm still a reasonably successful trader but I want to become a very profitable one.
I hope this blog shows that you can competently trade without being a superstar with iron will, nerves of steel and rock solid abs. I hope it also shows that you can keep exploring your trading and working towards a real professionalism.

10.48 It's an indecisive start to the day with two days of trading to factor in after our public holiday yesterday. The two days pretty much cancelled each other out so it's not surprising that we haven't moved much.
Merrills initiated coverage of Lynas with a sell recommendation and it possibly explains the wall of selling that the stock ran into on Tuesday. I've got out at 196, I don't think the selling is going away quickly and it's liquid enough to try again if and when it stabilises. Aru doesn't have much support either so I've lopped that one for 140 (v 141 entry price). The other portfolio reduction has been in Karoon. It's still recovering from the sell off the other day and I no longer have a clear view. Out on some initial strength at 780 (v 735).
I've added a new long position in gold stock Intrepid. The spot gold chart is weak but this has been quite resilient. There's a close stop at 175 and a good chance of a pop up to the recent high around 212. Long at 183.5.

1.49 I'm getting cold feet about the Intrepid trade already. I'm assuming that the bull run is over so this was an attempt to grab a few dollars out of a retracement. The stock is very much in its development stage and has had a huge run so there's plenty of downside if it can't hold.

The context of the overall market is that the index is struggling to break out of the range and major indices world wide look very stretched. Given that background, I should be avoiding marginal trades so I've stopped out at 181 (v 183.5). I only put on a small position but it's slightly galling to have been so trigger happy.

2.08 Ausenco has slipped 7 to 341. Got out of most of my balance at 345 and 344 as it dropped below the lows of the last 2 days.

 Murchison has released a quarterly activities report which confirms that they are drawing down on their ore reserves and cash holdings while they work on development of their new projects. The stock has slipped 3 cents on the news but it's not a great surprise and so far the reaction has been restrained. I've got a half position here and will hold for the time being.

On a brighter note, I've re-entered One Steel as the sector is strong and the pullback was short. I'm long at 278 and 279. If it runs up but can't get through 290 then I'll assume the correction is going to be more elaborate and exit.

3.21 Out of Mmx at 131.5 as the selling builds up.

Awe has held today and I've bought back in at 179 and 180. I've been culling the marginal ones but this is a clearly bullish chart. That doesn't mean I can't get chopped out (as with Lynas, which I still like) but there's good upside potential if the correction of the December move is over and the next phase is to push beyond the November high.

4.10 Once again, the top twenty is stronger than the mid caps that I trade. The Asx 200 fell 2 points while the top 20 rose by 0.2% with 13 gainers. My list of 27 has 8 gainers.

Out of Aax, the rest went at 344.5. Aristocrat, my only short position, is down 6 at 307. Awe finished strongly at 181.5 with Awc and Ost up on the day. I've got one more position, which is a long in Bsl. I got back in on Tuesday at 213 and bought a few extra today at 217.

It was an option expiry day today.

Waiting for the CPI. Tue Jan 25

The market is cautiously up - 14 points - at 10.34 am with the market waiting on CPI figures which come out at 11.30 am. Yesterday's PPI was low and for once, I think that the PPI might be the more significant figure anyway since the CPI could start to show the effects of the Queensland rains at the end of 2010 which built up into the floods of 2011. The Reserve bank has said that it will try to look through any temporary inflation when setting rates.
US indices are extremely resilient and European bourses are not far behind so despite cracks appearing with our latest failure to break out of the range, my assumption is that we're still trending gently higher.
I've added some more to the Aristocrat short at 308 this morning and I've added a long in Alumina at 245 with a stop about 8 cents lower.
If the retracement is complete then I'm looking for Awc to have made a higher low with the likelihood of new highs to come. If there's more of a retracement to come then I'll be stopped out or just take off the trade for about square if the stock pushes along in a range.
Alcoa was up 4% overnight so that provides a guide to sentiment in the sector.

11.01 Karoon is recovering slowly, up 16 to 766. I haven't seen much broker comment but UBS have reiterated their buy signal.

11.28 A friend has just pointed out that the RBA is potentially more worried about wage inflation stemming from rebuilding work in Queensland rather than food price inflation so maybe this CPI number will be quite influential. Mind you, it may still be too early to see the effects.

11.32 The inflation numbers are benign so there's no instant sell off although no rally either.

I notice that National Aust Bank is tipping that this is the year when house prices finally fall significantly. The top end of the market has been under pressure for some time in Sydney. By contrast, Anz Bank's view is only mildly bearish in the short term.

11.48 Lynas continues to chart well and may be coming good after a pennant correction. I bought more stock at 201 and my stop is at 190.

I'm still a fan of Arafura, also in the rare earths sector, because the early January peak looks like a 3rd wave high and the correction is well clear of the breakout from 125.5 in late December. However, the Lynas chart is better because the correction has been so restrained. Nevertheless, I have bought back into this at 141. A stop just below that breakout of 125.5 is too far away so I'll use yesterday's low as the basis for a stop.

After a short delay, the index has responded bullishly to the CPI. The Asx 200 is back through the previous 4816 high, at 4818. It's a stomach churning ride lately; Aussie traders I speak to are looking enviously at clean trending overseas markets. 

12.46 The CPI might allow us to finally break out and rally but I'm not holding my breath after numerous failures. I've now gone back to quite a bullish set of positions and I can't say I'm too comfortable but the signals are good and I'm biting the bullet.

1.08 Once again, I'm long Murchison, at 137, having stopped out at 135.5 a few days ago. It can be difficult to jump back into a position but it's the nature of a choppy market. Essentially, the stocks that I like in the short to medium term are much the same. Even Awe is looking good again but that's too far gone for me to buy.

Here's the Mmx chart. The correction has gone on for longer after I thought it was probably over but the stock is holding clearly above breakout levels.

2.06 The market is holding on to a 30 point gain. There's a reasonable chance that the economy is slowing - perhaps on the back of a deteriorating housing market - so that the rebuilding work in Queensland may not be as inflationary as feared. Temporary food price inflation will come through but the authorities are not so concerned about that.

Asian markets are broadly stronger although Shanghai has dropped.

19 of the top 20 stocks (by market cap) are up whereas my watchlist of 27 has 16 gainers, 8 losers and 3 unchanged.

3.11 Just back from a swim and feeling a bit calmer about the market. I was getting stressed because two days ago I was anticipating being able to put on some short positions after a retracement and instead I've bought back my old favourites.

My justification is that I was expecting a very grudging rally if the market was going to be weak for a spell and instead there has been some decent buying. On top of that, the CPI figure gives us a breather, overseas markets continue to be strong and the charts are solid.

Having said all that, the index is tailing off with a public holiday tomorrow and my stocks aren't going anywhere. Lynas had a brief pop up to 205 earlier but hit a wall of selling and is back at 198. It's my biggest position - I think it has the best of the charts right now - and I would love to have seen it follow the North American lead where Molycorp ran 9%.

Here's the 60 minute chart of the Xjo. It could be a lower high forming but for the reasons given above, I'm leaning to the view that there'll be further strength.

4.10 Just sold out quarter of a long position in Ausenco. I've had this for over a month which is quite long term for me. It has been running nicely but has paused for two days so the sale is precautionary.

I also sold out a portion of my Karoon long at 764 in case that's all we're going to see for the dead cat bounce. I got long this at 735 and it quickly ran a dollar as the company announced a successful South American oil well but soon after it was suspended from trading on regulatory delays following which it fell back to earth. Shame, it coulda been a contender.

The index finished 21 points higher. It's Australia day tomorrow and most of the country will be at the beach.
More on Thursday.

Remission. Mon Jan 24

There was a decent bounce in Europe but a muted one in the States with the major indices mixed. The upshot is that the first hour and twenty minutes of trading has been choppy with the Asx 200 sitting 4 points higher.
I can't see many opportunities yet. I'm focussing on potential short positions but I'd like to see a few days of grinding rally in the market.
One stock has popped up on the radar and that's Aristocrat which has been having a grinding rally for some weeks, following a profit warning, and looks as if it is running out of steam. I've only just got clearance to short it and I'm reluctant to do too many here as the stock is down 9 in thin trading.

Otherwise Karoon has reopened after announcing potential delays in their WA offshore drilling programme due to environmental clearances being more onerous than expected. It opened down 75 at 741 and has bounced to 760. It's roughly where I expected it to open based on the orders that had been sitting in the Asx system but the picture is muddied now and I'll probably try to ease out of my position on rallies.

2.23 The recovery has gained some impetus with the index at 4783, up 28. No significant changes to my few positions though, Aax down 1, Lyc up 1 and Karoon off 65 at 751.

I've sold short a few All into a recovery as it has tracked back to 305.

I had earmarked a possible long in Wsa last Friday but that was the time to buy. The stock rallied from the open this morning.

3.19 The banks are driving the market higher as the big four have risen between 1.3 and 1.6%. My watchlist, which is dominated by smaller resource stocks, is unloved.

4.10 I'm working my way through a wave of admin that's hit me in the last couple of weeks and really haven't paid much attention to the market today. The round up on CNBC has just informed me that the PPI figure came out this morning. It was better than expected (with CPI due tomorrow) and was one of the reasons for the banks' rise along with a Fitch report confirming their exposure to a property crash is limited.

The PPI figure kept a lid on the Aussie dollar too and it's trading at .988 to the USD which is also broadly good for the local market.

The index finished up 30 points and a couple of my longs got a belated boost.

Lightening up. Fri Jan 21

It definitely feels better to have got out of all the stale positions. The FTSE was smashed with commodity stocks hard hit and that was the case for US resource stocks too although the S&P500 index was only down 2 points overall. Base metals and gold fell in London and slightly less severely in the US as worries over Chinese growth dominated.
There hasn't been much follow through so far. Opened a few points lower, rallied back and testing those lows again as we near the end of the first hour.
I'm waiting to see which way the cookie crumbles. Whether we see another failure to maintain a new high or not. If Monday's swing low at 4755 can hold, the index may be able to climb back above 4800.
There are no new positions for me and a couple more stop outs are looking likely with Aru and Mmx drifting back towards recent lows. Here's Mmx.

I had high hopes for this one but if it drifts to 135 I'll stop out. The selling seems quite perfunctory in a few of these stocks as if nobody is particularly bearish but overseas markets are tipping hands.
As I write this, the early support has faded and the market is down 20 in a flash.

11.20 That didn't take long. The index is below 4755 already, at 4752, having been down at 4749. It seems like it will be a sell on rallies situation for now.

12.14 Out of Mmx at 135.5 as it traded down at 135, below the recent swing low.
I'm still in Arafura which held at the recent low but I'm unconvinced so I plan to stop out on a rally.
Karoon is still suspended while Aax is a ray of light, up 3% at 354.
Here's the Aax chart.

1.24 Small recoveries in Shanghai and Hong Kong have helped to stem the bleeding but the index is still 38 points lower.

I'm out of Aru for 139.5 and 140 so just long Aax and Kar.

I don't expect to do anything new today. The sort of thing I'll be looking for next week is shorting opportunities on retracements. For example, Ozl may have made a lower high with this week's peak of 178. I don't want to short it after two panicky days but I'd be interested in the low 170s.

There may be a couple of buying opportunities too. In the case of Western Areas, there's a good chance that the stock can hold above 630, in which case it can rally above the recent high of 690. It would probably look complete if it did that.

2.35 The Shanghai market has had a 1.85% rebound so far and the HSI is up a bit so our market has drawn comfort and rallied to be down 22.

I decided to take a low risk bet on a retracement rally. Lynas has held very well over the last two days and I'm long at 197.5 with a stop at around 190. If we get a retracement then this one, like Wsa, might actually push on to a new high.

4.11 There we go, another week gone by and you certainly couldn't say it was easy money at the moment. The Asx 200 closed down 28 at 4756.

Stoic. Thu Jan 20

The local market is keeping a stiff upper lip and the damage after an hour and a quarter is 28 points following a weak night overseas with resource stocks being hit. For me, there's a kicker of a large, after market placement of Fmg at 680 which has knocked the stock down to that level and pretty much wipes out some Jan 725 calls I'd bought. Singaporean fund Temasek were the seller as they exitted their 5% holding.
Otherwise, the positions are down moderately with Qan actually up 4 at 251.
The Asx 200 is holding above 4800 for now which is what you'd expect after it had provided solid resistance for so long.

No new trades as I've got a full book and it's a question of deciding whether anything has to go.

12.18 The index chopped around to an intraday low of 4800 and is back up to 4810. It could bounce a little more but I'm not expecting too much from it.
Few of my positions are moving. Copper stocks were hit overnight and Ozl has been affected with a 7 cent drop to 171 despite a good production report. I'd sold out of most of my long and bought some back at 173.

1.18 The market was waiting for Chinese data - inflation ok and GDP higher than expected. Chinese markets are lower and an initial bounce here has faded to leave us at 4800 just above the recent low of 4797.
I'm still just watching and waiting.

1.37 So much for our new found resilience. The Chinese markets are down around 1% and we're down about 1.1% at 4782. It looks like yet another new high and instant failure and I'm concerned about a dump like we had in November. The problem is that almost every other world market is extended so they're more than capable of having sharp retracements which would provide a headwind for our flimsy confidence.

3.10 Qantas is fairly disappointing and is unchanged after being firm early. It's looking like a pennant correction which will resolve to the downside. I'm on the offer at 248 but may have to tick lower.

3.31 I've decided to cut everything marginal because a reversal day after a new high is too much of a flashing warning light to be cavalier. It's a bad day profit wise but I'm just giving back what I made yesterday and the month is still a good one with 6 trading days to go.

Out of this morning's extra Ozl for square at 173 and sold the last of the old stock which I bought at 167, at 172. One Steel has been an excellent trade and sold the last few at 281. Bsl has suffered in comparison and I took a 7 cent loss to sell at 213. Sold Rsg at 149 v 151 because I'm punting an expansion into a bigger pattern which is too risky. Story is great and will look for another chance at this.

The positions I'm holding are:

Aax - still looks strong and up 1 today.

Aru - jobbed around to create an average sale price of 148 for a handful. Down at 145 and holding the rest because chart has good upside and stop is close. Has broken some nice 60 minute support though.

Kar - suspended all day. Chart is very good but will probably retrace somewhat on re-open.

Mmx - sold a few extras I'd bought at 141 (v 138.5). Still charting well, Fmg iron ore stock that has flooded the market could be a problem.

Almost out of Qan at 248 and last of Lyc at 202.

4.12 Thinking about it, it's not actually a reversal day. The market would have had to open higher before falling. But the new high and failure has been typical lately. It happened 3 times in October before the big drop in November. Down 51 to 4784.

Such a tease. Wed Jan 19

It's beginning to get silly, this failure of the index to move out of the range. There was a good overnight lead in to the trading day but we're still digesting yesterday's rally and the market is down 8 points after an hour or so.
A couple of brokers have upgraded their price targets for Fmg, pushing them up to 850. The stock itself opened a few cents higher but is down 13 at 714. I've bought a few at 712. Here's a 30 minute chart and I'm going to use that little consolidation in the high 690s as the basis for a stop.

11.28 I've bought some Lynas at 196. I'm not sure how committed I am to the trade as I suspect that the correction has further to run. I've got a tight stop at 190 or I can use a looser one at about 185. The logic to the trade is that it could be a higher low and a trade through yesterday's high of 199 would help.

11.47 Karoon has delivered on the chart promise it displayed yesterday. It has been running since announcing a successful well in a joint venture with major Petrobras. Up 40 at 820.

12.48 The index has recovered and is at new recent highs although still below April 2010. 

Mmx is also confirming that the pennant correction is complete.

2.24 That's more like it. Some conviction has hit the market and the Asx 200 is clearly through resistance to be trading up 34 at 4836.

Lynas is at 202 but I'm strangely unconvinced. Have sold a few and replaced them with Arafura at 148. I like the chart better, there's a more positive higher low and a good stop around 138.

Fortescue has recovered from the early profit taking and is back to 727. I've sold out my stock and replaced it with short dated calls, Jan 725s. I'm quite heavily long at the moment so it helps to reduce risk.

4.12 Most of the gains held and the Xjo finished up 33 at 4835.

Resolute recovered and has pushed back up 4.5 to 152.5.

I sold out bits and pieces today on the back foot in Awe, Mmx, Ost, Ozl and Qan. Mostly additional stock that I bought on the sell off in Monday.

Can that be right? Tue Jan 18

The US markets were closed overnight for Martin Luther King day so we've got a sleepy start with the index higher by 4 points after 45 minutes. European markets were flat to a shade down as were commodities.
I've gone long a gold stock, Resolute, on a breakout that's also confirmation of a range break. The trade has a reasonably tight stop but it's almost a value trade too. First the technicals. I'm chasing this but it has been very well bid (and well offered but the buyers have been stronger) for some time and has confirmed a breakout of previous highs from last Thursday. The stock has the chance to accelerate if this turns out to be an expanding pattern. Stop is under the swing low at 144.

The fundamentals are quite compelling. For the first time, it's covered on the FnArena database with Deutsche bank initiating coverage with a buy and a target of 190. Their optimism is based on the Syama project in Mali having solved production problems. The prospective P/E ratios are improbably good, just under 7 for this year and 2.5 for FY12. That would imply the company making almost $300 m next year and it has a market cap just above $700 m.
On top of that, the company has announced that they have upgraded reserves at their Australian Ravenswood operation allowing them a low cost expansion opportunity and the ability to use existing infrastructure for a 10 year, 140k ounces per annum project. There would be a spend of $72 m required to upgrade so I don't whether they'll need an equity raising. They had one recently to fund the closure of gold hedging.
Anyway, I bought at 151 and the stock hasn't accelerated as the usual steady selling has appeared. There's always good buying at the bid though as it looks like one large holder is filtering stock out to one or two large buyers.

11.16 Up 15 now with banks and financials the leaders. My stocks are underwhelming. Bsl and Qan are weaker and close to stops. Karoon was firmer early and I tipped out the extra stock, bought yesterday, at 769. Aax is the best, continuing the pattern of the last few days of steady rises.

1.21 The HSI has opened and is now up 0.4% while the Shanghai index which fell further yesterday to close at about 2700, has reversed back to that level after opening weaker again this morning. The local index is up 15 still but with the tone starting to improve.

I've misread the Bsl chart and I bought what proved to be a consolidation before another leg down. However, I'm confident that it's corrective and (stubbornly? rationally?) I've decided to hold on with a stop at 207. It means I'm risking more than I originally intended but there's a consolidation high at 209 from the run up which could provide support. If it doesn't then the stock is much weaker than I anticipated.

2.28 Fortescue has had a terrific 5% run today on the back of their quarterly production report which wasn't stellar but did underline the point that this is a company who are socking away $1bn in cash each quarter. 

Aax is not far behind with a 4.3% move on the day, up 14 at 337.

The Asx 200 is up 23 points and strengthening gradually but it has been slightly frustrating for me due to Bsl and Rsg which has reversed to be unchanged at 148. Normally I'd be concerned about having bought a temporary high on a bearish reversal day (and I still am a bit worried) but I've been watching this stock for about 6 months and buying will generally step into the breach.  

3.03 Aax is still going, up 20 now. Karoon looks excellent too.

Lifting it all is the Xjo which is now up 40 points with yesterday's sell off erased.

3.51 Fortescue is at 725 and the chart is interesting. My first thought after the initial surge was that it would chop around once it had passed 700 but the nature of the acceleration gives the impression there's more to come. I'm not going to chase it now but if, by some fluke, it retraces early tomorrow then I'll try to buy some.

Ago, Gbg and Mgx are smaller iron ore players and they're all up at least 3%. The one I cover, apart from Fmg, is Murchison. The problem with this stock is that the mine expansion has been delayed so it's missing out on the action. Nevertheless, although the stock is unchanged today, it's looking particular good, with a pennant correction looking close to completion.

4.18 The index closed at 4802 with the Nov and Dec highs being at 4815 and 4812. The intraday peak today was 4809. It would be nice to see us get through.

Bsl recovered to be down 2 at 218 while Resolute held on to 148. The rest of the positions were up with the market. I added a few more Awe at 174.

More traffic. Mon Jan 17

There's a little more traffic around as more and more people are returning from Xmas/Summer holidays and the market has hit some congestion too, dropping 15 points by 11.30 am, after being flat early.
The initial signs were stodgy so I got out of Arafura for 156 and 157 as the US rare earths stocks were down and also sold the last few Western Areas at 660 on a break of daily lows.

I read more bullish commentary on steel this morning to the effect that US demand would kick in for the first half of this year and strength in demand for the second half would depend on the sustainability of their recovery. One Steel is up at 275, although I did sell a few there, while Bsl might be the one that has a spurt over the next day or so. It's up 2 at 223.

Ausenco is still up (4 at 321) and running, albeit slowly but Qantas continues to disappoint as it grinds out a retracement - I hope. I'm using around 240 for my stop in Qan and I didn't actually buy so many last week at 250. I've added another 10k at 246 this morning.

1.35 Shanghai is approaching a 1.5% drop and the HSI has reversed to be lower by about 0.3% on inflation fears which has led to increases in reserve requirements for Chinese banks. The loss in Australia is 0.5% with resources bearing the brunt.

2 pm Karoon has retreated rapidly from last Thursday's burst. I got out of a quarter of my position in two trades at 781. I've bought that stock back at 751. The break level was 739 so my stop is at around 735 which is where I bought last week's tranche.

Here's the 60 minute chart.

3 pm The Asx 200 is down 38 points, about 7 better than the day's low.

I've re-entered Arafura at 148 with a small position. My stop is around 143. I'm assuming that this is a correction of the run up from the low 140s to 158 and I'm using 60 minute signals.

3.41 The bearish scenario for this year is that Chinese demand shrinks as credit is tightened. The Shanghai index reflect this as it fails to continue the tentative rally. I'm looking for the 2700 level to hold over there but it doesn't look brilliant today.

It's possible that the mainland index is too volatile to draw strong implications for Australia; certainly the Hang Seng index is much healthier.

4.11 As for the local index, the 60 minute chart is not displaying a buy signal but the sell off is around a 40, 45% retracement and the pattern looks incomplete so maybe some early weakness tomorrow and a reversal rally. The Xjo fell 38 to 4763.