One for the road? Tue May 31

With the UK and the US markets closed for holidays, the early 35 point rise in the market is a surprise. The overnight SPI futures contract was indicating about a 14 point rise which was a reasonable guess, essentially a reversal of yesterday's drop. Maybe it's some end of month window dressing but I'm happy to see the rally. If the Asx 200 is going to halt at the top of the trend channel then this might be as good as it gets so I'm looking to sell out of anything that looks unconvincing.

First the bad news, I stuffed up my exit of the last few PDN. Selling on the open at 312 after twice trying and failing to sell at 322 on intraday retracements yesterday. Stock is 318 now. The good news is that 2 of my 3 main longs are doing well. The best is LNC which is continuing on after a few days consolidation. Up 9 at 312.

I was looking for coal companies with bullish charts yesterday as coal demand seems set to keep rising. I couldn't find anything and although LNC is, strictly speaking, a clean energy company, it's a nice coal play in the short term as it looks to sell its coal assets.

FMG is also firming, up 7 to 647, although the stock needs to hit around 660 before the breakout looks compelling.

The last of my larger long positions is in IPL and that's down 1 at 386 but still charting ok. My stop is below the 376 swing low and the obvious risk is that there's another leg down, although my view is that it would make a higher low.

I have a small long position in KAR. This has a similar chart to IPL (above) but is slightly more bullish having made a higher low in mid May. I sold a couple out at 655 (v 652) this morning.

I'm out of the AWE trade at 144 as it's stalling below resistance. This is a judgement call, the stock could still push on but with the overall market potentially stretched I want to stick to a few trades only.

My last position is in LYC and I intend to sell this today as it goes into the MSCI index. The stock might have been expected to run but it seems as if there are investors who are happy to sell into the index buying and the stock is up just 1 at 227. There's a big decision looming regarding the Malaysian refinery which is still under construction and news reports suggest that approval is not a sure thing. It might be wise to steer clear of the stock for a while and keep an eye on ARU which would be a beneficiary of delays at LYC.

12.12 The market is up 44 and stretching the downtrend channel. I'm getting tentatively hopeful that the rally might have more legs. Figures released at 11.30 showed Q1 exports lower, due to the floods presumably, and a generally softening picture vis a vis the consumer. No surprise again as the two speed economy is affecting most people.

1.41 LYC has begun to move as the weight of buying starts to tell. I bought some extras at 227 and they're in front with the stock at 230. I suspect I can afford to hold some of my position overnight (whether I want to will depend on how it closes) because there'll be more re-balancing activity tomorrow and I think the environmental approval process still has a week or two to go. Around the 230 level is obviously quite strong resistance; there were peaks in early January and early March and now the stock is once again bumping against this level. If there's a late pop today, there could be some technical buying and maybe some short covering.

2.47 The weekly chart of BHP has a buy signal, and they're often quite reliable on the weekly charts. The Asx 200 chart isn't quite there, held back by the banks.

I've bought some IPL June 400 calls at 6 cents each because if the market is able to make a sustainable recovery, it won't be much of a stretch for the stock to get to 420, 430. The chart is higher up the page.

4.03  I sold out the extra LYC at 233 average. The market overall is near the highs, up 46 points and is reflective of strength in the region with the HSI and the Nikkei both up strongly.

4.12 The Asx 200 closed 41 points higher at 4708. I sold out a few more LYC at 237 and have 10k left. I also sold 5k of LNC at 328, leaving a balance of 25k. The stock looks red hot but I wanted to take something off the table. Here's the daily. In Elliott wave terms, it looks like the 3rd of the 3rd. It closed at 328, up 25.

The month is over and it's been smack on budget thanks to two good days late in the month. A stock that's in a genuine bull market like LNC can really make all the difference. Mostly I'm chopping around in stocks that are going nowhere, making a few dollars here and there.

I've been missing one of the hot sectors in the market at the moment, which is biotech, but I'm starting to track a few stocks and might rotate a couple into my watchlist soon.

Wishy washy. Mon May 30

A mildly positive lead has meant little because it was pre-holiday trading and today is seeing a pullback after the good recovery on Thursday and Friday. Down 15 after an hour.

I've sold half of the AWE position at 141.5 (v 137) as it's an a-b-c bounce and remains in a downtrend. The stock looked ready to fade away but is perking up slightly. The drilling program is underway but is due to take 37 days so it's not a high conviction trade for me.

PDN is not dissimilar to the AWE chart and it has sold off after hitting intraday resistance at 328 following small rises overnight in the Toronto listed shares. I've only got a small position but missed my chance to stop out around 325, 326 because I wanted to give it a chance to break 328. Now it's at 319 so I'm thinking of tipping the balance out on a retracement.

I'm writing about these two unexciting trades because they're the sort of bread and butter trades that I've found to be worth taking while you're waiting for the great ones to come along. Usually they pan out to be simple c waves that offer a few cents profit if the entry and exits are right. Obviously, it's better to go with the primary trend and ignore these but I tend to take them when I think the trend might have turned. In those cases, the moves can be quite hard and fast as you benefit from the element of surprise...short squeezes, unexpected good news etc.

11.44 The market is falling slowly, down 22, as the selling/shorting of the major banks resumes. ANZ is the best performer with a fall of 1%. Resources are largely unscathed but I guess the general weakness in the futures contract must derive some arbitrage selling.

I still have 15k of LYC which are back to my entry level of 222. This is slightly surprising but unlike AWE and PDN, the stock is not in a major downtrend and I've ignored the potential tight stop at 225 (break of Friday's low) in favour of the last swing low at 213. One of the reasons for this is that the stock is to be added to MSCI global standard indices as of the close of business tomorrow.

1.51 A slight improvement had us close to square but it's back down 14 now. I'm not doing any new trades today because on recent performance, the bounce might be near the end. I'm long 5 or 6 stocks and plan to be reasonably quick to cut on renewed weakness.

2.49 The FMG June 650 calls are under some selling pressure so they're down to 13.5 despite the stock being unchanged. I have 500 of them (or 50 in the old money), roughly a layout of $7500 for the upside on 50,000 FMG above 650. If the stock breaks lower, I should be able to short some and get a bit back on the downside, but for the moment I think the chart shows some promise.

4.10 We've got another day of this dreary trading coming up tomorrow with the US public off work for Memorial day. It's a bit of a strange habit really since we no longer react to US movements so predictably now that China is such a big influence. But it is what it is and the final result is a loss of 17 points to 4667.

Little engine. Fri May 27

The market is the little engine that could this morning. The weight of yesterday's rise caused the wheels to slip early but the Asx 200 has gained some traction and chugged up into the black. 12 points higher at 4672 after the first hour. The overnight lead was also a tale of triumph over adversity as indices clawed back early losses to post small gains. Commodities were pretty flat and the AUD is a touch firmer.

FMG isn't there yet, a break of 659 would be an encouraging sign that a decent rally is in the offing. However, I was looking for a trade through 636 to at least imply some short term strength. The stock opened at 640 and fortunately there was some broker selling in the June 650 calls so I was able to get the balance at 16.5.

12.04 It's all pretty quiet now, the index is up a few more points but my stocks aren't doing much. LNC is retracing some of yesterday's strong gains to be down 5 at 303 and AWE is starting to move, up 4 at 141.5.

I have a small new long position in KAR at 653. I had planned to pay 649, was distracted for a few minutes and the stock had popped. So I paid up and now the stock is back at 649. I'm looking for another leg up with a stop below Wednesday's low. The big picture has an overlapping retracement which so far has held above the March low. Of 3 broker comments this month, one has reiterated a buy, one has upgraded to buy and one has initiated coverage with a speculative buy recommendation. The target for these 3 averages 1070. The other 2 analysts haven't commented since March when they had 855 and 796 targets respectively.

1.45 Still grinding up with support from Asian markets and higher US futures. Up 25 now but a mixed bag as far as my positions go.

Paladin had a good day yesterday and is pushing higher today. This is one where I bought a reversal after 5 choppy waves down. It was problematic for two reasons: a, it was quite a strong reversal day when I bought so the stop was 7% away from my entry (303 v 324) and b, given that (worst case) stop, I needed to actively stop out on the first sign of momentum failing. The next day after entry was a doji, which was not excellent but only a warning sign since it did add slightly to the previous day's gains. However, the following bar, last Friday, saw the stock open and move above 330 only to fail and finish very near to the day's low.

Anyway, I didn't cut and had to sit through 3 days of retracement before a much better buy signal yesterday. I was already long so didn't add but at least the stock made its way back to 325. The nice thing about this entry is that you have more of a sense of selling momentum having faded and there's an entry at 317 with a stop at 307. Here's the daily.

3.42 We're just limping to the finish line as the market ebbs away, still up 13 though.

I'm worried about PDN, the 60 minute chart has developed a lame sort of c wave in 5 that isn't going anywhere. So, I've sold half at 325.

FMG has also sold off since the early 652 high but the intraday chart looks ok for the moment. Still within a range but higher lows and no overlap yet from the mini breakout.

4.13 A nice finish though after the slow sell off, up 24 at 4684, and no need to stop out of anything else. Adios.

This time you've gone too far. Thu May 26

An oversold bounce has the Asx 200 back up 1.1% as the commodities rebound continued overnight. There's much talk about a copper shortage while coal and iron ore do better than expected.

My main computer had a video card problem this morning so it has been a scramble to fire up the old PC and get cracking. My long positions have bounced well with the market although I've got chopped in IPL as it bounces back through yesterday's high and I'm getting long again. I usually have a rule to wait for an a-b-c correction before anticipating a bounce, especially when the stock is not in an uptrend. For some reason, I totally forgot about that when I bought IPL the other day. Anyway, it's a better entry, although I haven't bought much as I want to see how the stock performs through the day.

AWE is a new long. The company has started drilling in its potentially huge onshore shale gas find in Western Australia. The chance is there for positive news flow. I'm buying on the break of yesterday's high. That bar could be a higher low and a conservative target might be 146 but good drilling news allows for plenty of upside since the stock has no premium for the story. Long at 137 with stop at 132.

 

11.50 On a more strategic note, I've been thinking about why April and May have been a wash out for me with reasonably good risk management being the only reason I'm breakeven for the period.

First of all, I'm biased towards a trading range with my strategy since that's what I anticipate in the bigger picture. The recent moves have been quite powerful although, ironically, they have been within a range. Secondly, I've been pre-empting without having at least some short term momentum to support the trade. Thirdly, when you get it right with these trades but there is no clear trend change, then you need to be very quick to take your profits. Sometimes I have but sometimes I haven't. Fourthly, I've only played it from one side. Therefore, in April, once I decided that the rally was overdone, I only looked for shorts rather than also taking continuation trades on the long side. In May, I've done the opposite.

Where does that leave me today? Well, I'm long and have my first positive indicator which is a break of yesterday's high after a strong downdraft. My opinion is that this should be the start of a reasonable recovery but that it will not go above the April highs and may fall a fair way short, say, 4800.

However, I have no proof of that and my strategy should be to cut my longs rapidly on a loss of momentum. Looking at the last swing up from last week as if this was a stock chart, I would have been cutting some of the long on the weak inside day last Friday and cutting the rest this Monday as Friday's low was breached. Considering that it was most definitely a downtrend, despite my thought that the 5th wave low would hold, I could have been putting on a short position on Monday on the basis that the bounce had (tentatively) made a lower high and the trend was intact. Today would be cut and reverse.

The basic principle of waiting for some sort of evidence that your scenario might be correct would also have kept me out of trouble on the short side in April since the first serious down day indicated the top and the most negative days were a few doji bars.

This is not earth shattering stuff but it comes out of examining my trades. Over the past 15 months I've found that intelligent anticipation can make the difference between breaking even and making a decent return. But after running through my trades, I found that it's still not worthwhile buying on a down day near support. It's better to pay a little more on an up day as it seems to provides a better quality stop and a higher probability entry.

For example, using the XJO chart above, I might have decided to buy on Monday's down day on the basis that the swing low would provide support. It's better to buy today, at much the same levels, but without the whole aspect of trying to catch a falling knife. It also makes trading easier since the market tells me what to do, rather than me having to pick a likely point.

12.25 Back to the market, LNC has burst through 300 to be up 20 at 306. Maybe there's a coal tenement sale brewing. Here's the chart. It's my biggest position so I hope there's some substance to the story.

1.33 Today is May expiration for exchange traded stock options. It tends to have a gravitational effect where the larger stocks will get sucked towards a round number and the overall effect is usually to limit intraday volatility. You can also get cheap options as the weight of numbers of investors rolling short positions means that the traders throw up their hands by the end of the day and wind their bid prices right back.

Which brings me to Fortescue. I think the stock could go either way at the moment, it's forming a sort of a pennant after it recovered but made a lower high in April. Despite the hint of a head and shoulders pattern, there's a definite possibility that the stock has had its correction and has also had wave 1 and 2 of the next move to a new high. In that case, the stock could burst through 700 to new highs. FMG June 650 calls offer a reasonable way to play this move. They're down 1.5 to 12.5 on the day, despite a 6 cent rise in the stock as option premium is offered lower. Expiry is in 4 weeks time on June 23rd so it's a fairly short cycle but since the stock has already consolidated for a couple of weeks (relative outperformance) there should be plenty of time.

2.41 Bought half of the FMG June 650 calls at 13.5 as the stock pushed up to 633. Looking at the 60 minute chart, if the stock pushes through 636, 637 then there'll be a short term break and I'll buy the rest. They'd probably cost a couple of cents more but the picture would be clearer.

3.03 Something to do with cutting back to my new PC after repairs but the news stories on LNC hadn't been appearing. Anyway, the sale process for the Teresa property is close to completion with one bid already received. $500 million plus is expected.

4.12 It was quite a squeeze today and the Asx 200 closed on its highs, up 75 at 4660. It's a pivot reversal, according to the Dow Jones news wire. Apropos the commentary earlier, I'm long and hoping for more.

FMG closed at 633 so I haven't bought the last portion of the calls. LNC, LYC, IPL and PDN all finished strongly. AWE hung around the early levels to close up 2.5 at 137.5.

Bank on it. Wed May 25

A slightly disappointing night with regard to stock indices although base metals, gold and especially oil rallied. But the bank selling continues apace with the majors off by more than 1% again.

The Asx 200 has traded below yesterday's 4596 low, reaching 4590 and is back at that 4596 low, down 33. This swing down has now formed 5 waves on the intraday chart so there is a chance of a bounce today. No sign of it yet though.

11.56 US overnight futures are down 0.8% on banking fears of legal penalties stemming from GFC shenanigans. Newly listed resources powerhouse, Glencore, is also trading below the issue price in Hong Kong so it's actually quite surprising that the Asx 200 loss is holding at 30 points.

Maybe the wicked hedge funds should have a look in their own backyard and leave our Aussie banks alone! Actually, I don't mind this weakness in the banks, I want to start a buy/write book and I might be able to buy at the bottom of the range.

2.16 Another new low at 4584, down 45. Asian markets have trimmed their losses to around 0.5% and the S&P 500 futures are not getting any worse but there's negligible interest here and stocks prices are ebbing lower.

3.58 The AUD is below 1.05 to the USD and there's a downtrend in place which could gather steam. The DJIA chart is quite similar to the AUD/USD in recent weeks and that also looks as if it's in the early days of a sell off. Here's the chart of the currency cross.

I don't have much idea whether there are implications for our market. There was a period a few weeks back where the currency acceleration knocked resource stocks hard but the sell off hasn't generated any buying yet. I'd have to assume that we'll continue to be under pressure. I have a few longs still and that's a cause for concern but they're not quite at stop levels.

4.15 Down 44 at 4585. When we were close to these levels in March, it seemed like panic selling; now lower levels look inevitable and it's just a question of whether there is a rally first.

Oh, and I stopped out of IPL at 377. Yesterday's low failed so it's shaping as an a-b-c correction. It's one of the few positive looking stocks in my watchlist so I'll wait for another opportunity.

Ahead of the curve. Tue May 24

Apparently we were anticipating heavy overnight falls in commodity prices following the very mild drop in Chinese PMI yesterday. Extremely prescient, I have to say, and today the index is shrugging off European and US index drops with a "been there, done that" shrug of the shoulders. The support failed unsurprisingly since it was almost gone yesterday afternoon but the Asx 200 is off just 11 points after 44 minutes.
I've sold out most of the IAU balance at 178.5 and a few LYC at 219. OZL is arguably a cut but I'm holding on for now since there's a chance of a surprise up day. There was a 12 cent per share return of capital a few days ago, so my entry price is effectively 130.5 with the stock trading at 133.5.
It's quite difficult to trade with the index making choppy lows and the tricky part is that the pattern still looks corrective of the March/April rally.

11.52 The market is attempting to make a base but is facing the headwind of continued bank selling with 3 of the 4 majors down by over 1%. The talk is that hedge funds are initiating short positions so this could continue for a while.
12.23 Another wave down as support vanishes. Out of OZL at 131 and LYC at 216 with the last few IAU at 175.5.
1.01 On a daily basis, the index is chopping downwards in a trend channel and as per the comment above, it's probably retracing the earlier rally. On a weekly basis, it looks very much as if a lower high will be made if you compare the April 2011 high to the one made almost exactly a year earlier. So the next swing up might well fail at, say, 4800 and a couple of long term targets could be set.
A modest bear market might see a test of the bottom of the range at around 4200 while a "chickens coming home to roost" event would see the index back to the GFC lows. This would be on the basis that the retracement since the 2009 lows has failed to break the first GFC swing low down from early 2008. A 5th wave on the weekly chart could push the index down below 3100. Interesting.


3.13 I've reverted to Blogger for the time being after technical problems.
The market is bouncing finally, just down 13, was down 47. LYC has recovered to 222 so that's a lost opportunity but I bought more LNC at 383 and went long IPL at 387. IPL is one of the few stocks in the market that has potential for upgrades and is rallying after a lengthy, complete looking correction.

4.08 I bought back into LYC at 222. The rebound is impressive and if the market is due a bounce from trend lows then this will outperform. It looks like it's going to close at 226. 

Shame about cutting at 217.2 and buying back at 222 but that's an occupational hazard.

4.10 A decent recovery then, with a small late sell off leading to a 14 point lower close.

Black Knight. Mon May 23

At the risk of sounding like the black knight from Monty Python and the Holy Grail, I'm taking the view that the opening plunge of 61 points is a mere flesh wound. My scenario of support at 4710 vanished on the open as the market quickly moved to 4670 where it sits now but after a choppy 5 wave pullback in the market, I still think that we're liable to see support hold on a daily basis.

The US indices fell by 3 quarters of a percent while continental Europe fell 1% or more with the FTSE just a shade down. Spain is the next, and by far the biggest, domino expected to fall as the debt crisis unfolds. Gold rose over 1%, base metals were steady to up and oil was firmer too while the AUD held its ground. So the portents were not all bad for the Australian market despite the early reaction.

I've been a fan of LNC for a while and with coal prices stubbornly high, they're sitting on some juicy assets. The stock has been ranging for a while and that range is narrowing. Nevertheless, the price is tending towards the top of that band and after a 7 day retracement, the stock has traded above Friday's high. I'm hoping for a higher low here and have bought a few at 281.

12.04 There might soon be a test of daily support at 4840 as the market is now down 74 at 4658. Asian markets are around 1.5% off so there's no support there. As ever, the smaller cap stocks I'm trading in are moving more than the market but given that the main pressure is on the financial sector, the damage is limited.

1.21 There's still a pall over the market as a softening Chinese PMI figure has not helped sentiment. The AUD is weakening gently which is a medium term plus and it's possible that the PMI number is indicative that the Chinese authorities are successfully managing a slowdown rather than orchestrating a crash but for now, the glass is half empty.

I have one position which I need to cut and that's a bit of a surprise given the good lead from gold overnight. IAU has failed to hold support at 180 and has actually slipped as low as 174.5 on very light volume. I need to sell out today as I find that where the c wave retracement is much weaker than the a wave, as it is in this case, the subsequent falls can be pretty sharp.

3.02 The Asx 200 is inexorably closing in on support. There seems to be general surprise at the weakness across the board today throughout the region. Once again, it appears more like a buyers strike than serious liquidation and this approach is rational to me, stocks are in a downgrade cycle, rates have not topped and overseas holders are liquidating commodities and shorting our banks on the basis of wholesale funding issues and expensive real estate. I have a pool of money I want to allocate to some longer term trading but don't see the need to step in yet.

3.54 Out of half of the IAU on a minor rally to 177.5 but have held the rest as I think I can get them out at 179-181. The selling is driven by general market weakness and a large overnight fall is being anticipated when only a moderate one is so far indicated by the European opening calls and US futures.

4.06 Actually, the German and French markets are set to open down 1% plus, it's the UK market with its resource sector that is set to open down a comparatively healthy 41 points, on the back of relative outperformance on Friday.

4.12 The close was 4643 which is 1.6 points higher than last Monday's low of 4641.4 and what's more, last Monday's closing value was a tad higher at 4650. I'm close to stops in LYC, OZL and PDN and past the cut level in IAU with half done. My other long is LNC which had a good day and finished up 4 at 282. No shorts, unfortunately.

Here's the updated XJO daily.

Inconsequential. Fri May 20

A mildly positive night on Wall Street which was largely built in yesterday, a pullback in commodities and largeish overnight drops in BHP and RIO have resulted in a weaker opening this morning. After 37 minutes the Asx 200 is down 19 at 4738 but it's looking like a standard sort of retracement. Here's the 60 minute chart. Yesterday afternoon saw the first correction of the morning's acceleration and this morning we're seeing the next leg. Support is around 4710 and the index could grind down all day, I suppose, but there doesn't seem to be any commitment to the early selling.

 

My stocks are mixed but the moves are small, best performer is PDN which is up 5 at 328.

12.56 The market is down 22. My positions don't require any action and there are no new signals. It's a test to do nothing when there's nothing to do, trading wise, that is. I've been analysing this year's trading and that's occupation enough.

2.43 Out of AWC at 227 as it was a short after all and I shouldn't have tinkered. It's not a compelling trade either way and one to prove the adage, "if in doubt, stay out". Otherwise, IAU, LYC, OZL and PDN are all fine with the thinly traded IAU the worst performer, down 4 at 183.

The market is recovering without really getting anywhere, a slightly ominous sign that it's likely to fade into the close. Asian markets are slightly better so that could help.

4.09 Stocks are just about to match. Days like this are about acceptance, there were no clear opportunities for me and my existing positions were a touch against me.

The index faded to a finish down 24 at 4732.

Sweet spot. Thu May 19

US and European indices up, commodities and commodity stocks up, the Aussie dollar flat and the Asx 200 already showing signs of life after a steep fall have combined to put the market into a sweet spot. Up 42 points after 45 minutes with most of my longs performing well and the lone short in AWC up just 3 cents.

I'm out of most of the balance of IPL at 392 as they approach the last swing high. I have a new long in junior gold miner Intrepid at 184. There was a grinding pullback to make a higher low and the medium term context is that this is the third higher low since January. So the grip has loosened and the stock has floated back up to 187. It's quite illiquid so I'm long a half portion.

There's another new long in PDN at 324. This has broken the high of the last 3 days as the stock seems to be turning following a 5 wave swing down – which could be the last leg of a larger pattern.

12.42 It's a strong day and the market has barely taken a backwards step. Up 66 at 4760.

The picture has changed in AWC, not surprising really as the commodity lift which had been restricted to copper became broader overnight. I shorted 15 thousand which is about half what I'd normally do, thinking that I could add more if the opening was weak. I'm now trying to buy back at 234 and have an extra 15k on the bid there to go long. Stop would be at about 226.

1.34 I got the AWC rather too easily at 234 and it's 233 now so I'm in that position where you start to think that you've cut and reversed when you were right all along. Oh well, the rest of the positions are pretty good and it's an occupational hazard, especially when you look to pre-empt breakouts. I sold a few LYC at 225 and OZl at 151 and the last of the IPL at 392.

4.13 A good finish kept the Asx 200 to a close near the days high, up 63 at 4756. IAU, LYC and OZL finished well, while AWC and PDN ended a touch below my entry price.

Looks are deceiving. Wed May 18

At first glance, the US indices looked to have had another weak night with the DJIA down 69 points but most of that fall was from one stock, Hewlett Packard, and there was a 100 point recovery from early lows. Meanwhile, the S&P 500 and the NASDAQ closed flat. Metals and oil were mixed with copper edging higher again despite weak US housing numbers.

With 40 minutes gone the Asx 200 is down 5 points in a very cautious opening period.

One of the other fresh longs from yesterday was in OZL at 142.5. The stock may have formed a higher low and I'm looking for a leg up into the 150s. Downside momentum has stalled and the copper price is supportive. The stock is chopping around but has just pushed up a cent to 144.5.

11.40 Wages inflation came in below expectation at 0.8% for the quarter. The market had already worked its way to a gain of about 15 and that's pretty much where it is now. What's interesting though is that the daily chart shows a break of the last 2 days' highs. When is this significant? I think it can be a good indicator after the sort of 5 wave downdraft that the index has just experienced. I don't know if the 5th wave is complete, it's always one of those things that you find out after the event, but for the short term the risk/reward favours being long.

2.27 The market is moving sideways but my longs are performing reasonably well with IPL up 9 at 379, LYC up 4 at 220 and OZL up 1 at 144.5. Asian markets are positive across the board while US futures and gold are also up.

4.14 Down a bit, up a bit...last at 4694, plus 10.

I sold out half of my IPL at 381 average since I see it as a fast reversal trade. If it gets near the last swing high at 393, I'm out of the rest.

And here's a short trade in AWC. Taking the view that this has had an a-b-c rally to a lower high at 238, this could be heading back to the March lows as while copper is firming, aluminium is going the other way. Short at 229.

Leap of faith. Tue May 17

Another fall in the US indices and weakness in oil left the overnight futures contract down about 0.4% but the market has ignored that lead and rallied a dozen points after half an hour or so. Helping matters is a UK led bounce in the big miners while base metals were again mixed with copper rising.

I've started an overdue review of my trading and one pattern that crops up quite regularly is to get on board a position before a break of the previous bar's high or low. I'm still comfortable with pre-empting a breakout because I'll do it when it allows me a tight stop, however, it pays to at least get the minor momentum in my favour.

The last leg of the fall has been costly because in a couple of cases, I got long anticipating a rebound without this supporting piece of evidence. Today is finally allowing the opportunity to do some bargain hunting on firmer footing and I've bought a couple of stocks after waiting for a push past yesterday's high. Having had a few poor days, I'm a little jittery so it has taken a leap of faith.

One of those positions is a long in LYC at 215. My stop is below Friday's low of 206 and I'm just looking for another leg up towards 240. The stock is holding an uptrend but has lost much of the momentum of recent months. I wouldn't be surprised to see it make a lower high in the next few weeks and commence a more serious pullback. However, it's reasonable to assume that the trend will persist for now.

IPL is a different kettle of fish. This is well and truly in a downtrend and I've put on a reversal trade. I like the wave count; I make it a (potentially) complete 5 waves down from the early April starting point for this swing. The big 3rd was also split into 5. The recent bullish reversals have been short but solid trades. Long at 368.

11.35 Slightly hawkish RBA minutes have cost the Asx 200 its early gains although the comments are already starting to look out of date as growth in overseas markets seems to be stalling.

1.14 Chinese markets are improving after a soft start and that could be the factor helping the Asx 200 to rally after hovering around breakeven for a couple of hours. Up 19 now at 4669.

3.36 The index has done pretty well and is now up 31. My longs are edging up after drifting off from buy levels earlier. The action itself is inconclusive with the Asx 200 printing an inside day at this point. Individual stocks look better as reversal plays are definitely on.

4.10 The opening calls for the UK market are down about 0.8% but the local market has held most of the gains despite that, finishing higher by 34 points at 4684.

Waiting for the dust to settle. Mon May 16

The blogger system was down on Friday so I didn't get the opportunity to post. The day was a choppy up day which didn't amount to much but the takeaway was that I held onto my few long positions which are sharply down this morning as the Aussie market continues to seriously underperform, helped by a loss of confidence in commodity plays. This despite a mixed lead overnight regarding commodities; gold was down but silver up, copper and zinc managed gains while aluminium, lead and nickel fell, WTI crude was up and Brent down. The US indices were down but the AUD also fell one cent which has been helpful in the past.

Anyway, we now have a picture on the XJO chart of 5 waves down retracing almost 2 thirds of the mid March to mid April rally.

I gambled with a couple of my stops and let them go too far. So, I'm out of ARU at 106.5 – couldn't have done much better there – but am still long RSG which is down 3 at 99 when I could have got out at, say, 104. That's quite a big miss in percentage terms so I'm disappointed with that one.

In the bigger picture, I tend to like trading reversals and you can see from the XJO chart above that the market has been unusually extended in both directions lately. It's probably why the last 6 weeks has been a tale of me trying to pick reversals and then having to stop out with reasonably good overall discipline and the odd winner meaning that I'm just above breakeven for the period.

My take is that the strategy is appropriate for a range trading market but that the recent moves have been unusual. If we were to enter a bull market, I'd be keener to buy breakouts and continuations.

1.55 The market has rallied moderately off the session lows but is down 1.2% at 4653. It seems like a buyers' strike rather than heavy selling. I sold out half of the RSG as the stock has rebounded to 100.5.

No new trades for now, the market is closer to to a buy than a sell but no end is in sight to the selling.

2.48 In my watchlist, 25 of 28 stocks are down with DJS, LNC and TLS the exceptions. The top 20 is much the same with 90% lower.

4.10 Got out of the last RSG at 100 and most of the SEK and WSA on Friday. Still have LNC which closed unchanged. The Asx 200 finished down 61 at 4650. Grim stuff and I'm counting the cost of some loose trading.

Watching the wheels. Thu May 12

The unwind of the short USD, long commodities trade resumed in earnest overnight. The US indices fell around 1% but commodities were hard hit. The outcome for me is not great in RSG, which is down 3 to 105, or WSA, down 29 to 632. Fortunately, my book is fairly conservative because the picture is not clear. I'd decided that there was a good chance of some short term upside in the index but after that....

Anyway, that didn't work. The Asx 200 is down 60 after 54 minutes as it traces out a choppy retracement from a low of down 68. The usual course of these moves is a tentative bounce about now, a slip down to a new low and then the chance of a better bounce. I'm hoping that we've already seen the low and have bought a few extra WSA at 635 because they're close to support and are probably due an intraday retracement. I did sell about half of my long out in the 650s and 660s yesterday so I'm just hanging in on this trade. It doesn't look great on a daily basis though.

11.21 The index is still edging higher so it's looking increasingly possible that the day's low has been seen. The XJO chart also shows a marginally lower low and rejection of that level so there's local bargain hunting. It makes sense given that local stocks are pricing in a continuation of the current headwinds and still aren't bad value. That won't help us if overseas sellers keep dumping what for them is also a successful currency play. However, it does suggest that the gap opens are buying opportunities while that phase is occurring.

11.52 The first thought was the right one. The Asx 200 has slipped to a new low after the first rally attempt. Here's a 5 minute chart.

1.07 The market is recovering and the Asx 200 is sitting at 4715, a loss of 65 points. I'm holding onto most of my positions as Asian markets are performing a little better, US futures are flat and the AUD has slipped almost a cent on weaker than expected jobs numbers.

2.01 I have to go out for an hour or so which is a shame because the market is just hotting up as we reach the heady heights of 4725.

4.07 Approaching the matchout and down 55 was about as good as it got. There was a marginal new low just before 4 pm and I sold out the extra stock in WSA at 629 although I'm still in the balance from earlier as well as my long in RSG. In both cases, I could easily stop out but am prepared to risk a bit more.

The final result is a drop of 84 points to 4696. After 9 consecutive winning days for me, a fairly chunky losing day.

Back on board. Wed May 11

The overnight leads were pretty good with the sell off in commodities seemingly over. After fearing the worst in our session yesterday regarding Greek debt, the outcome was quite different with strong rises in Europe. The result is a catch up day and a strong start has been maintained with a 48 point rise after 48 minutes.
I bought OZL on the opening match at 143. I was very tempted to buy back in yesterday and probably could have done but after two broker upgrades this morning, it seemed clear the stock would be well bid. It's an oversold bounce so the rally is likely to be short and sharp and I may be out by this afternoon.

11.19 The rare earths stocks in the US took a hit and after ARU failed to match the stock specific early strength of LYC, I sold for a small gain at 113.5.
I've gone long SEK at 705. It looks like a pennant correction which is breaking to the upside. My stop is just below the low from 2 days back because it's too far back to the last swing low.

12.04 The Chinese monthly figures are out. Early indications are that the numbers are fairly benign, with the economy slowing. I thought it could be a negative for the Aussie market but so far the reaction has been just a small drop. Still up 38.

12.44 I sold out half of the OZL at 146 as the market started to weaken. The index is recovering though and it looks most likely that there's more strength to come in the short term. Here's the XJO 30 minute chart. It's choppy but there was a rally from Friday's opening low, a fall to a higher low on the close yesterday, while today's rally has found support and could easily have another leg up of 40 or 50 points.

I'm getting to grips with different software for composing the blog and while it's generally superior to the other package, there's a real problem with fonts which is why I'm experimenting with them. It's particularly difficult to save a font size so it could be a day or so before things settle down.

2.39 There was an opportunity to buy LNC on a resumption of the rebound after a short consolidation. I'm long at 286 although I dithered for an hour or two and missed a cheaper entry. Stop is in the low 270s.
 

3.25 Out of the balance of OZL at 148. The market is having another attempt at the intraday high, up 50 at 4776.

4.15 Another leg up looks on as the Asx 200 pushed to a new intraday high and closed near that level at 4780, up 54.
I reconsidered ARU and bought back in at 114.5 as the stock took heart from the overall market strength and finished mildly firmer.