Don't stop me now. Fri Jul 9

It was the first 3 day rally in the US since April with a 1% plus rise overnight but the Aussie market is reluctant to join in the fun. I'd like to see the rally continue but it's definitely in the balance in the short term. The 60 minute chart for the Xjo index has traced out a sharp 5 wave rally but it hasn't definitely completed.

I got out of Ozl at 106.5 and some Tse at 328. The Ozl because I've not been completely comfortable with this trade, my entry at 102 just seemed too late in the piece for a retracement rally. With Tse, 330ish is my target - it did trade up to 331 briefly but has slipped back to 323. I probably should have sold the lot and might just tip them out if it edges back to 326, say.

1 pm So far, yesterday's pattern of relative strength in banks and industrials is continuing. Despite that I've put on a long position in iron ore stock, Murchison, at 198. I'm looking for either a run up to the highs around 235 or just a little retracement rally to 210. Stop is at 185.

I normally wouldn't favour this trade because it looks like the rally has already happened in late May and June, but the chart of Fmg - another iron ore miner - implies that the rally could be tradeable. It seems to be a few days ahead of Mmx but pretty similar overall. A bit stronger, perhaps, as the June rally went relatively harder.

3.43 pm The market tried to sell off early but the tide has turned and we're now up 39 points. Any strength in resources is still patchy and tentative but I've placed my bets with longs in Mmx and Wsa. I'm out of Bsl at 218 and still sticking with Ipl which has disappointed slightly by only rising 1% when US potash stocks (not an exact proxy, but a good guide) were up 4%.

If the market continues this rally early next week then I expect resource stocks to catch up. The rally will only be sustainable if there's a view that the world economy is stronger than the recent fears and in that case, cyclicals would be bought.

4.10 We're closing up near the market highs. I'm heading off to yoga and will be thinking positive thoughts for a Spain win over Holland in the World Cup final.

Keeping it real. Thu Jul 8

A great lead overnight if you're bullish, with the US indices rising 3% on renewed optimism about bank profits and breaking back through the keenly watched 1040 level on the S&P 500 index. The Aussie market is not getting carried away with wild enthusiasm and despite a rise of just under 2%, the smaller resource stocks, which often lead the charge, are generally performing in line. It's the banks, reasonably enough, which are outperforming.
My only finance long was in Challenger and I sold out of that at 372 as the stock ran 5% early on.
I've got another new long in Incitec Pivot. I misread this one a couple of weeks ago but I'm having another go, using yesterday's low as a stop. The last drive down looks like it formed into 5 small waves and the reversal could jump up to 280 something quite quickly. Long at 264.

3.07 As noted earlier, it's not a crazy day in the smaller caps but the index has done quite well, holding a very tight range which should be supportive of further strength. The tone of the day is summed up by Anz being up 4% and Bhp 2%.

Just sold a few Bsl at 217. It's not a huge gain - long at 211 - but after rushing in and then being close to stopping out below 203, I'm quite happy to lose a few at this price.

Late, late show

Just back in the office, at 3.10 pm, after a few errands, and the market has had a retracement day, thanks to the US failing to hold onto early gains. The Xjo index is down 31 points now although for the moment I'd still say it looks bullish in the short term. Here's a 60 minute chart of the Xjo.

There's a reasonably good chance of another leg up, even if it's just for a day or two.

I did buy a few Ozl on the close yesterday at 102 and they've firmed up slightly to be trading at 104.
A new long is in Transfield at 311. The stock has been grinding down, but now the rallies are overlapping previous lows so negative momentum is much reduced. There's been a higher low at 301, but a short term turnaround is not yet confirmed. That would need a trade above 317. Stop is a cent or two below 300.

4.11 Tse traded through to 318 and closed at 317 so I'm hopeful that this will run up to the 330s.

Overall, there was a loss of 21 points in the top 200 index.

The eye of the beholder. Tue Jul 6

It's not looking so beautiful to me because I'm long a couple of stocks having got drawn in to picking turning points. The market is still grinding down on light volume and I'm close to stopping out of Bsl.
I can see that the market drop might be incomplete but in the short term, there's probably not too far to go.
There's not a lot else to add, we're responding to weakness in Japan and Korea this morning while the US overnight futures have slipped close to 1%. I find it hard to take the US futures seriously as the volume is probably tragically light.

Of interest yesterday were two takeover bids for CSR's Sucrogen business and, relevant to me, a takeover bid of 620 for Centennial coal. I was long Cey for a day or two last week but although the possibility of a bid had arisen recently, the speed at which it came was surprising. The point to draw from this, when there's much negativity about a double dip recession, is that Australian resource stocks are still in demand.

2.02 There's been a decent turnaround from early lows and the Xjo index is up 15 points. The market is waiting for a rate decision from the RBA and there are faint hopes of a cut, an acknowledgement that the May rise of 25bp was misjudged.
Real estate has stalled locally, metals prices have softened, retail sales are weak and corporate confidence is declining so there are a few reasons to ease. It probably depends on how willing the RBA is to eat humble pie. They're not terribly doctrinaire and don't seem to sit on their dignity too much, so a cut must be close, even if we have to wait until June.
It seems unfair to be selling off so hard on recession fears without the comfort of reduced interest rates!

3.09 A cut was not forthcoming but an ackowledgement of the slowdown from the RBA has been enough to help the index rise as much as 1% before easing fractionally.
Bsl has recovered which is good for me, while Cgf has had a good day, up 17 to 357.
Ozl has given a buy signal on a push through 102 and I'm hoping for some weakness which might allow me to buy at 102 because I could have gone earlier on this one. If I do get long then I'm going to have to put my stop below Friday's low of 98 because I missed a chance to buy at around 99 or 100 earlier today. I was reasonably confident that we'd seen the low and didn't need to see the break through 102. Still, it's a more convincing signal now with the confirmation of strength.

4.13 Here's a chart of the Xjo. We had a 96 point rally from the early low to the close on the high. The Spi has had a 106 point reversal as of now. Quite bullish in the short term, I think.

New start. Mon Jul 5

Coming in to work today, the streets were quite clear of traffic because school holidays have started and a lot of families must have taken a holiday. The market has ignored a negative lead, on very light pre-holiday volume, and after an hour's trading we're up by 7 points.
On a daily basis, the Xjo index is trending down and has closed at new lows the last two days. On an intraday basis, there was a lower low on May 21st. My take on the chart is that it probably hasn't hit a low yet, but that the low will be quite close in price and time. Here's the daily.

Looking at the bigger picture of a weekly chart spanning 5 years, I notice that it's quite similar to the daily chart above. There is a solid rally off the lows which retraces about half of the fall and then renewed weakness. In the case of the daily chart, the renewed weakness has obviously taken the index back to the lows and I expect something similar in the bigger time frame.
So my road map for the rest of the year is for general weakness and a sell the rallies type of market.

In light of that overall view, it's with a little trepidation that I've bought some Bsl today at 211. I was short this recently because of it having a slow shallow rally which is typical of an a-b-c correction and although I didn't show enough patience with my own short position, the stock did slip down to a new low. Having made that minor new low, I'm expecting a quick bounce back into the 220's as the first attempt at a rally.

There's a recent low, providing an emergency stop, at 203. The risk reward on this trade is not much better than 50/50 because, having missed my entry at 209, I chased it up to 211. That being the case, I'll need to be conservative with this one.

Looking over this post reminds me of my new (trading) year's resolutions. One of them is to let the market come to me and to trust that it's going to unfold as my reading of the chart suggested - unless there are subsequently clear signs to the contrary, of course. Patience and trust.

In the end, trading becomes an exploration of self as you find yourself dealing with your own patterns of behaviour and beliefs about success and failure, self worth, work ethic etc.

As you strive to improve your trading, it's important to be gentle with yourself. Some of those patterns can be quite deep rooted and changing them may take longer than you think, but it definitely can be done.

4.10 Our market continues to underperform and today we've drifted off after the early rise. The Japanese market is firmer and the Hang Seng only mildly down so there's not an obvious catalyst for the sell off except the pre-existing momentum on a quiet, US holiday affected day. We finish the day with the Xjo lower by nearly 17 points at 4222.