The Black Knight. Wed Jun 2

The overnight report on FNArena has a nice summary of the problems affecting markets at the moment with the Israeli attack and the increasing problems with the Gulf of Mexico oil spill being just the latest. Like Monty Python's Black Knight, the Australian market is ignoring these flesh wounds and charging into the black after early losses.

My featured trade is a long position in PanAust which is a copper and gold producer with interests in Laos and Thailand. A few brokers have recently affirmed buys on the stock and though there's development risk and sovereign risk, it seems to be built into the stock price. Anyway, I'm not a long term holder here, just buying at 48.5 as it breaks out of a small congestion with a stop at 46. Here's the daily.

1.30 pm Macquarie has been one of the beneficiaries of the turnaround after just about holding support. I'm less enthusiastic now, regretting a lazy entry and just hoping for something close to square as a good result on this. Here's the daily.

I bought my first set of options on the little spike up which was not the greatest risk reward. The second set was ok as I was using the higher support level just above 4200. However, it has already been chopping around now for a couple of swings so it doesn't bode especially well for a strong rally.

2.34 It's another topsy turvy day with the market back on the early lows at 4380, down 33 points after reaching a high of up 15 points. I'm stopped out of Awe at 200 and have cut Pna for square because I'm not so keen on chasing breakouts but I thought there was a chance it could surge today on a new high. I'm also a little chastened from having chased Mqg to my cost and trying to stick to my strategy of putting on low risk trades.

2.42 Having already cut my featured trade, here's another one. It's a short in Stockland at 387. This has rallied up in 5 (maybe not complete though) and there's a potential stop level at the 396 level where there was a retracement high.

I'm happier with this trade because I'm following my methodology here.

Peaks and valleys. Tue Jun 1

A few times a year we have these occasions when the markets are on hold as the US or most of the European markets are closed. Quite often the market will form a slow valley or slow peak over the two days which doesn't have an awful lot to do with what's going on outside the quiet period. For example, on a negligible lead the market might run up 1% and then retrace 1% the following day.
In this particular case, we've had more than a negligible lead because the US market fell around 1% on Friday but it was on low volume and possibly triggered by nervousness over the downgrading of Spanish bonds and furthermore, the Eurozone markets were unconcerned last night. Normally, it would be slightly surprising that we fell almost 1% by 11 am but it does reflect the nature of these days. I've done some buying here and there and the market has recovered a few points but I am a little concerned about buying too much because it's not out of the question that the retracement could be over.

2.02 The day was starting to pan out according to the template as it recovered from a low just before midday but another shake out has left us still down by 35 points or 0.8%. Despite my positive spin on Macquarie the market is less confident and they are down by 1.7% with the calls down to 69 cents. The other banks are weak too as the market waits for the RBA interest rate decision for May. Rates are widely expected to be kept on hold although it will be interesting to see if there's any hint that they could drop back in the months ahead now that Europe's woes have worsened and the Australian consumer seems to have hit a brick wall.

4.10 The RBA left rates unchanged and I saw no hints of a softening bias creeping in. Despite that, the market recovered somewhat into the end of the day. The Xjo closed down 16 points.

Raw deal.

Macquarie bank got a hammering in the business pages today for supposedly abusing the Australian government's taxpayer funded AAA guarantee which has helped them to emerge from the GFC in great shape. You can read about it on the smh.com.au website in the business section but essentially they took advantage of this guarantee to borrow more than $16 bn and in an unintended consequence proceeded to buy up loan books trading at hefty discounts such as a $1 bn portfolio owned by Ford Credit Australia. Treasurer Wayne Swan is said to be furious about this but I can only imagine that this is a pose for public consumption. I'm no fan of Macquarie, our closest equivalent to the vampire squid, but they represent raw capitalism, red in tooth and claw and they have done EXACTLY what every economist and central banker has wanted done with our stimulus dollars. They've recycled them and if Ford's Australian dealerships survived the GFC because Macquarie would give their customers loans then it's hard to see what the crime is.

Macquarie was sold down on the open which wasn't great for me, having punted a few June 4500 calls on the close, but since it was above support I bought some stock at 4279 which I've tipped out at 4350 and paid for the mark down on the calls. Since it's lagging the other banks and holding above support, I've also bought a few more of the June 4500 calls at 114.

Here's the daily chart.

Otherwise, I'm out of Qan at 251. This could be premature but with the US and UK markets closed overnight then today is a suitable day for some end of month window dressing. I'm out of Ozl at 109 also but like most of my positions at present, I'm a good chance of buying back in on pullbacks.

4.10 That was a tedious day though not unexpected with a guaranteed quiet night tonight, on the markets at least. Window dressing just isn't a factor anymore which is a success for ASIC, I suppose, although I miss the fun and games. Although the market has outperformed relative to the drop in the US, we've actually fallen while the Tokyo and Hong Kong markets are flat and the Kospi is up. Mqg has drifted to 4333 and the options are worth about 100 now.

Clearing skies. Fri May 28

It's all looking fine again and despite having pre-empted some of the overnight move in yesterday's trading, the news was good enough to send us up another 71 points at 11.20 am.  We've pretty much got to where I thought a correction in an ongoing downtrend could get to and there's still plenty of momentum so I'm leaning towards the low having been made with quite a good chance of another 150 or so points of rally as the first target would be the last swing high on May 13th.
The featured trade is another bullish one, this time in Awe. I'm long this at 208 and it's another retracement trade with a similar pattern to everything else at the moment. It's just lagging slightly which is why I'm still able to put it on. There could be a reason for this; it's a prime candidate for tax loss selling, having been a big underperformer this tax year, but I do think it's a little early for that as our tax year ends on June 30th.

Here's the chart.

1.51 The market is gently easing back and I've been taking profits here and there. I'm out of Awc now as it has eased back and most of the Ozl, which is up to 109, along with a few Qan at 244. I've sold out of some other long positions as well although in most cases I'm looking to get back in on a pullback. Actually, after another hectic week, I'm kind of distracted and wishing that I'd organised a lunch.

4.02 Heading into the match out, the market is back to the top of the range. I'm still pretty long but have trimmed again - out of a few more Qan on a blip up on April passenger numbers. I just had a little option punt on Mqg, buying some June 4500 calls, they're lagging the other banks slightly.

White picket fences. Thu May 27

Maybe it's just the snapshot as we approach midday with the index flat but Japanese and Korea markets are also pretty much unchanged and although we have had some action this morning with a 30 point rise and retracement, it's generally settling down. The US sold off late yesterday but that doesn't seem to have affected things much. There was some early enthusiasm about a watering down of the resources rent tax and although it has been denied, the general assumption is that there's room for negotiation.

I haven't done much today, just sold a few Awc at 161 and Ozl at 108. I'm keeping a core position and trading around the swings in a few other stocks as well.

1.30 pm It's definitely a housekeeping sort of day. I'm still unsure whether we might have made a low or not. If anything, I think that once this little correction plays out we'll make a minor new low. As my positions are all long then I'm not adding any more and just managing them.

Here's a 60 minute chart of the Xjo index.

(I'm experimenting with larger charts - they used to stuff up the spacing but it's always changing).

If this turns out to be just a retracement before another low then there's still a bullish case to be made. Yesterday's closing level could be a higher low while today's action so far is supportive of another push up, perhaps to 4450ish. Whereas, if we've seen the low then the index could quite quickly bounce up to the top of the last correction at around 4600 to 4650.

By the way, it still does stuff up the spacing but I don't mind it so much now. It's nice to have a more readable chart without having to open it up in another window.

2.15 The market is firming and I've decided I can risk another long trade (I've trimmed my dollar exposure overall). This is a long in Qantas at 239. It's another retracement story with a fairly tight stop in the high 220s.

2.45 The market is really taking off now - up 49 points.
No, this doesn't work after all. I've just spent 15 minutes trying to work out how to put this text at the bottom of the Qan chart without just entering a whole bunch of spaces. Back to normal for chart size.

4.12 The futures ran into the 4.10 match out and helped the ASX 200 to close on its highs at 4370, a rise of 1.7%.