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.