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.