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.