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.
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