Left at the starting gates. Fri Jun 11

A week of minor misjudgements has left me with the wrong book today. The US indices bounced strongly, once again following the lead from this time zone, but this time taking it further. We've peeled off earlier highs but the Xjo is still up 51 points just after midday. It seems about right because we had been leading the rally.

Resource stocks recovered again, while gold fell. I got out of my golds early, the options in Lgl and the stock in Sbm. My exit prices were ok although Lgl has slightly surprised me by holding up well with a gain of 2 or 3 cents. It's only a slight surprise, Ncm is the driver and it still looks good. I'd like to get long Lihir again but I want a better entry and I think I'll stick to stock rather than options because I'm less convinced now that we'll get an explosive move.

I've put on a new resource long in Alumina. There's a recent double bottom, close enough to provide a nice stop level. I think it's likely to be a trading range play with a move up to around 170 most likely. Long at 156.

3.02 I'm pretty evenly balanced now, with equal longs and shorts and no particular sectoral bias. It's been a choppy week and while the recovery has been strong, I'm not super bullish precisely because the market is so choppy. Here's the Xjo.

I haven't cut Sgp because it went through my stop and pulled back below. If anything, it looks a better bet since I want to fade the rally and it's got a pattern that's looks close to completion. I'm stretching the stop out to 406.

Skewed. Thu Jun 10

It's funny, I'm looking for a higher low in the market which we might have already had, but my book is skewed to the downside with long in the golds really more of a bet on a falling market.

It's nearly midday and the market has ignored a soft lead and continued yesterday's late, late rally to be up 43 points or 1%.

My general thought with the Xjo index was that it would retrace towards around 4440, where it fell from on Monday but I wasn't expecting it to get all the way there. Here is the 60 minute chart.

Looking at the chart, it's make or break for that idea.

Mainland markets in China were strong yesterday and I think that, and bouncing commodity markets, has been the driving force today. Strong Chinese exports for May are possibly helping the rally along although so far the Shanghai market is pulling back.

I do have a new long position in Incitec Pivot around 290. I'm looking at this having made a higher low, with my stop around 270. The last retracement was quite strong so I think there could be some reasonable buying again.

2.44 In a development absolutely typical of markets, the Xjo index has rallied just enough to push through what I thought might be resistance but not to convincingly smash it. At least the gold stocks are rallying which is keeping me out of trouble.

3.34 St Barbara is strong, I'm out of half now at 37. The market is still up 1%, sitting at 4430.

4.12 Funny old day, the index hung around the highs, closing up 50 points but just below minor resistance. Tomorrow could be weak, being Friday, but I'm feeling more bullish than bearish.

Tail wagging the dog. Wed Jun 9

It looks like we're running ahead of US markets having pre-empted their overnight reversal yesterday. Meanwhile, we've opened stronger this morning and quickly tailed off. It's 11.34 am with the Xjo index back up a couple of points and we're having a second attempt to push on.

My short positions are performing reasonably well, while gold stocks in general are firmer despite gold having peaked early and fallen away later as the US stock indices recovered from early losses. The chart of the DJIA is interesting with a minor new low after a 4th wave correction.

It implies that the Dow is near to a short term low and as the US indices have been lagging our market slightly, I think that we're still looking good to make a higher low on the Xjo.

My featured trade today is a long in Challenger Financial. It's actually a similar sort of chart to the DJIA with no higher low, but the general shape of a short term low. I'll use around 330 as my stop. I'm long at 344 and it has firmed since then to 350.

3.06 The second attempt to bounce was just a flirtation and the market has gently slid to be down 21 points with the Japanese indices, the Hang Seng and the Kospi all weaker as well, dragging the US overnight futures lower. My Cgf long has turned back down to 340 but with the golds still firm and the short positions performing pretty well, the overall book is quite healthy.

4.14 A late squeeze left us up 4 points.

Live and learn. Tue Jun 8

In a happy development, I might be showing signs of increasing patience as I get older. I don't know whether it's a healthy way to start the day but I set my radio alarm clock to go off just as the announcer is giving the overnight market run down. When I went to bed, markets were showing signs of strength which had evaporated by this morning so I consoled myself with the thought that Lgl is my only long (gold was up) and I had at least managed to put on a short position in Cey.

As it turns out, the Xjo has ignored the negative overnight lead and, by 11.40 am, had reached a peak of up nearly 60 points. So my patience was rewarded and I've been able to short some more Cey at a better price of 422, along with some more Sgp accompanied by new shorts in Bsl, Fmg and Ost as they retrace after gaps down yesterday. Of course, now I'm starting to worry that the retracement might be too strong and I'm shorting into the start of the bounce off a higher low. It's just the low level anxiety that I've yet to shake off and obviously I've put these trades on because the stops are manageable.

The story of the day is gold and with the AUD below US 82 c it means that the price in our currency is very strong indeed. It's increasingly likely that the takeover of Lgl by Ncm will go through as the deadline for other bidders is about to pass but I'm treating Lgl as a proxy for Ncm especially as it's trading at a 1 or 2% discount to the bid price. Ncm is charting very well. The first leg up in May was able to temporarily breach resistance at 3360 and after a higher low and a recent brief consolidation, it looks ready to surge up towards 3600. I've bought some more Lgl July calls, this time the 400 strike, and paid 24.5 for them, which was an implied volatility of about 31 or 32%. While I don't expect to make anything on an upward revaluation of volatility, the premium levels are reasonable enough and there are always sellers of options on the first good up day after a congestion. The main reason is to get some leverage. Here's the Ncm daily chart.

Actually, I bought a small gold stock as well, St Barbara Mines. It's got good reserves, increasing production, it's relatively low cost but mainly it's under new management having underperformed for years. The daily looks pretty good but I like the weekly chart. I'm long at 31.5.

2.22 It looks like we'll hold the gains this afternoon. The market has tracked sideways and is showing signs of pushing higher.

3.26 Talk about sellers in Lgl options. There's been a wall of them so that with the stock barely changed, the July 400 calls are down to 22. I'm aiming to buy a few more at that level. I'm not overly concerned, if there's going to be a surge, it'll be in the next day or so and the premium will be far less relevant in that situation once the options are deeper in the money.

4.16 It was a good close for the bulls, finishing up 55 points. It's setting up for early strength and lacklustre follow through tomorrow or at least, I hope so.

3% solution. Mon Jun 7

After an hour we're down 3% and it has been quite orderly with a 2.5% opening drop and a slow grind for the rest. Mmx was somewhat forgotten early and I got out at 191. I've actually bought a handful in the mid 180s to try and sell out later. Otherwise, I haven't bought back shorts, or put on new ones. I'm waiting for some sort of bounce to offer better opportunities.

There doesn't seem to be a lot of bearishness around but locals will probably think we're cheap to reasonably priced as a market. The issue is going to be carry trade sellers with resources and the AUD hard hit overnight. So, I'm hoping for an intraday bounce to supply an opportunity to put on a few short positions but not necessarily expecting one to come along.

12.14 Comparative strength - a drop of less than 3% - in the Hang Seng, along with milder falls of 1.5% in Shanghai, are helping the Australian market consolidate after it continued to grind lower into midday. We're still down 3% though.

I missed a chance to short Fmg on the first intraday rally when it recovered to 402 but I'm hoping that one or two stocks out of list of 6 potential shorts will rally enough to make a new short position worth while.

1.36 I'm left with a long option position in Lgl and a couple of modest shorts positions in Ipl and Sgp which are performing in line. I sold half of my Mqg June 45 calls on Friday for a reasonably good price but sold the rest this morning for 53, losing about half the premium. Unfortunately, I missed hedging these last few calls by not being agressive enough on the Friday afternoon match; it would have more than paid for the premium loss.
I'd like to put on a couple of new positions but most of them are too far gone. I'm not willing to chase so it's a quiet time for me as I wait for an opportunity to present itself. Tomorrow or Wednesday are looking more likely than today.
Cey is probably the closest thing. Here's the daily chart.

It had a very sharp rally which looks like it was 5 waves, implying short term completion. It could slip back down towards the 355 lows and it's not far away from the high of 440 recorded last Thursday. I'm waiting on this because the market has had one intraday bounce now and pulled back. I think there's a good chance of a second bounce which may give me a better entry. It's trading at 417.

3.26 I've put on the short in Cey at 413. The futures rallied but most of my stocks didn't perform and as this started to slip I had to chase it. It has quite quickly dropped to 409.

I'm glad to get something on but I'll be happy to see this rally tomorrow if the broad market pushes up because it would give me some opportunities elsewhere.