Panicking? That's so last night. Fri May 7

 It's been a buy the dip day with the overnight Spi indicating a drop of about 3.5% which was way too much. The US is about 8 trading days behind most other markets and they were having a catch up. It's 12.25 pm and our market is down 1.5% now amid lots of interesting political and financial events. I'm watching the UK election results come through as I write.
The selling in Cba continued although it looks like it might have hit a short term bottom about half an hour ago. The rest of the banks have been much the same as the bank carry trade unwinds. I've been buying the Spi and some of the hardest hit on my watchlist for short term trading and that's been pretty good so far.
The feature trade today is in One Steel and it's essentially the same story as for Bsl and Ozl this week. The opening was overdone and I bought at 317 with decent support just above and below 300. It's up to 330 now but probably still reasonable buying.

Actually, I've bought another of these patterns in Qantas just now, at 257 and 258, as it has made a marginal new low and reversed, raising the possibility of an island reversal. There's more support around this level from further back, last November and December.

2.18 Quite a day with the market not far from breakeven, down just 22 points recently, with the early lows having been down about 146 points. I'm pretty long but cautiously so with the Spi showing signs of stalling so that I'm getting out of shorter term intraday trades. 

3.20 An interesting theme: for the first half of the day resources outperformed, since when they've been steady while the rest of the market has taken the baton.

4.18 The bubble burst at around 2.30pm and although I got out of some speculative stuff, the fall was bigger than I expected so I gave back some profits. Still happy to be long a few beaten down stocks which are hovering around support but I'm also aware that I've got to be quick with these - either to take a quick turn or stop out.

Overall the index was down 92 points or 2% giving us the weakest close since last September.

Also....not panicking is so this morning.

Asset allocation. Thu May 6

3 pm A late blogging start for me today as I've been out of the office for a few hours. The market is down almost 2% and worse than might have been expected with the banks leading the retreat. There's more bullishness around for the US dollar lately and the AUD failed to breach 94 cents so it's possible that the trade of being long Aussie banks and gaining the double whammy of rising currency and rising stock price is now being unwound - and unwound rapidly as is the nature of these things.
I did alright with my Cba puts although I got out too early. Still, the average selling price, including a small amount yesterday, is 352 versus a purchase price of 152.

Generally, the resources sector is outperforming but still a little weaker. Awc is up though and I sold a few at 157.5 along with some Bsl at 252. I'm less enthusiastic about these stocks today because they're countertrend trades and time is as much a factor as price. I have nibbled at another trade of this type though, buying some Ozl at 102.5 because there's a close stop at around 96.

4.16 Got out of a few positions, both long and short, as I want to take stock of things. Sold out the last of the Awc at 159.5 and bought back Fxj and Cgf today. The market closed down 2.2%, still with lots of downside momentum but not far from February lows and the potential for a reversal day.

4.21 Yesterday I wrote that it wasn't a good day for shorting while at the same time suggesting there was still plenty of downside momentum. I meant that it wasn't a good day for me to short as I prefer to sell into retracements. What I did instead was to hold on to my existing shorts which were performing well. In those situations where my method is missing opportunities, I'll tend to look for day trades in stocks or the spi to compensate.

Knife juggling. Wed May 5

Momentum still favours the downside and even the US market responded last night as Europe capitulated. It's 1pm here and the market has been pretty steady for a while, down about 85 points or 1.8% with Asian markets much the same. We led the falls to an extent yesterday by ignoring a strong US lead and after the panic selling in resources, which carried through into the opening today, there has been relative strength in the sector.
It means I've half got away with a couple of undisciplined trades yesterday afternoon. I eventually averaged in to Awc yesterday at 154 and that fell early to 145, recovering now to 151, leaving me underwater but relatively unscathed. I gave it some room as I figured that the open would be the worst which turns out to have been right for resource stocks, at least. The reasoning is that the resources super tax is not law and faces 6 months of negotiations with miners and we're in an election year so one week drops of 30% were quite excessive.
I punted a few stocks early and made some good gains in the iron ore sector while, finally, the stuff I'm short, like Challenger and Commonwealth bank, is getting sold off. So, after a week or so of missing opportunities and breaking even, I seem to be back in sych.
I've put on a few small longs here and there with Bluescope being representative of the type of pattern.
It's simply based on a scenario where the February/March lows hold and the stock has a retracement rally. Essentially, it's a quick countertrend proposition - not great, but then today is not a day when there are short opportunities presenting themselves. Long at 248 with recent lows at 238. I'd be prepared to sit through a blip below support but not a serious breach of it so the stop would be somewhere in the mid 230s. A standard sort of retracement could get to 270-285 so that's what I'm angling for.

2.46 pm The resources rebound is still on. Bsl is up to 252 and Awc to 156 where I've just sold a few as my entry was premature. It does look like it's setting up for a rebound but having diced with danger, my inclination is to reduce the risk slightly, especially as I have managed to enter Bsl and a couple of others at better stages. Here's the updated Awc chart, as I type it's up to 157 and setting up for a key reversal day which would imply some follow through over the next couple of sessions.

4.12 pm Some outperformance compared to Northern Hemisphere markets by the close with the Xjo down 1.3%. Awc didn't manage a key reversal day as 157 was the top - it would have needed to trade above yesterday's high - but it closed at 156.5 and has made a nice reversal. I'm hoping for another day or so of relative strength in the miners.

Which way to turn? Tue May 4

The market doesn't quite know which way to turn. The increasingly volatile US market rallied strongly last night but I still think that the Australian market does not take it too seriously at present. It could have been an opportunity for buyers to step into the resource sector but the repercussions of the Henry review are worse than the worst case scenarios imagined leading into it; ie, all the sticks but none of the carrots. That leaves the non-resource sector but a, it's not looking especially cheap, b, there's a rate rise coming today or next month and c, the backlash could be so intense that the Henry recommendations are watered down in next week's budget and then the resource sector can rally and switching out of resources might have to be reversed.
The result is a market which is up a mere 3 points at 11.15 am after a 20 point rise early. I'm sitting on my hands but itchy to do some bargain hunting in resource stocks while grateful that I sold out some intraday resource longs yesterday. Fortescue, for example, was right on long term support at 439 last night but has crashed through that with barely any resistance to be trading at 421.

12.30 pm On the subject of bargain hunting, I've bought a few Alumina at 157, with the idea of buying a few more on the back foot. My stop is around 148, give or take a margin for error/whippy trade.

Unlike some of the other stocks where you might be catching a falling knife, Awc is at least showing signs of support above the late February low. It's not a momentum stock either so may not have the panic selling element.

The selling continues, by the way, and the market is down 22 points with early strength in the banks starting to fade.

3.18 Another 25bp rate rise takes the official rate to 4.5% and the market is down 40 points now as the capitulation continues in the resource stocks and the banks slip too.

Bought a few more Awc at 155 to average 156. They're down at 154 now.

O Henry. Mon May 3

The Henry Tax review had more of an impact on resources prices than I anticipated and I missed some shorting opportunities as I didn't realise it would be a catalyst to break uptrends and support levels. Oh well, I bought back my Cey short on the open as the weak US market and the prospect of a resources tax hike had it opening down 24 at 406. It seems like the selling this morning was a short term culmination after a few days of heavy selling late last week and a number of resource stocks have bounced from their opening lows.
I've gone long a couple of them on a fairly short term basis but the trade I'm most interested in today is a short position in Commonwealth bank via some May puts. It's not on my official watch list but I do keep an eye on the top 20 and this has been interesting me for a week or two. I was very tempted to try to pick the top (like everyone else in this stock) as it hit 60 on slowing momentum. The sell off overlapped a previous swing high and I thought about buying some puts this morning as Cba regained 5900. Unfortunately, I dilly dallied and the stock dropped right back to 5830. It's recovering now and I'll keep my eye on the May 5900 puts. If the stock makes a lower high and drops down it could comfortably reach 5600 and depending on how it looked then, I might sell them out or sell a lower strike to turn the position into a spread. If it keeps running then I'm risking most of the premium so it's something of an all-or-nothing bet.
Here's the chart.

1.41 pm Decided that the rally back in Cba might not go too much further so I've bought a handful of May 5900 puts at 152.

3.01 I jumped in too fast as Cba is closing in on 5900 again as the Henry review, which favours the non resource sector, is probably providing a nice lift.