Holiday mode. Wed Apr 27

The Aussie market is having a sleepy start to a shortened week. It's a safe assumption that many participants are away and despite quite strong gains overseas, when the missed days are netted out, the rise is just 7 points after 45 minutes.
The best mover for me is Lynas which has fallen 16 to 229 after some bad news over the break. According to the Dow Jones news wire, its Malaysia based processing plant is facing an environmental review next month. Lyc has first mover advantage so delays in the commisioning process will be a big negative. Secondly, there is a bit of a stink about a related party transaction which has also put investors offside. I suspect that if more players were on deck, the falls would be larger. The situation won't be resolved until next month and that's plenty of time for uncertainty to do its worst.

I've been watching Arafura with the intention of shorting it and although Lynas' misfortune could be construed as Aru's gain, the action is not positive. It's down 5 at 122 and I've shorted a small amount at 122.5 although I might have done better since I'd identified it as a short pre-market and the stock opened unchanged at 127. In mitigation, the opening market moves were strong. Anyway, here's the Aru daily.

11.19 The Asx 200 is just hovering above breakeven but with quarterly CPI figures due at 11.30 am there may be some impetus soon. I heard an estimate for 0.7% compared with two recent 0.4% rises as the flood effect is anticipated to kick in.

11.48 The CPI figures came in higher than expected and the market has dipped into the red by 6 points.
Early reaction is that I've read that a hawkish economist is calling for rate rises while the dovish RBA is pointing to the effect of the Queensland floods. Gee, a resources rent tax would make sense! Shame that the Rudd government lost the PR battle so badly.

12.15 The loss has extended to 23 points. I've been having a look at the top 100 to see if there's a pattern. It's generally a switch to defensives although that's a debatable strategy given a 2 speed economy. In the short term, the logic could be that downgrades due to the recent AUD strength are yet to find their way into analyst estimates.
One takeaway that is working in my favour is some weakness in Boral. Continued US housing weakness and the prospect of more of the same in Australia has seen the stock slip 11 to 501.

2.22 Back in the saddle after running some errands to find that the index is making new lows, down 32 points.

I sold some of my Resolute long at 126.5 before leaving the office, on the basis that momentum is fading and it could test the lows again even if the trade idea is ultimately correct. The stock is a shade lower now at 125. Stop for the rest is at 118. Entry level was 122 but even if I stop out for the balance, the trade will be about breakeven overall.

There's some selling across the board in the gold stocks and 13 out of 19 stocks in the Asx 300 gold index are down 2.9% or worse. One of those is Perseus which is back at 303, roughly my entry level. The stop is at 295 there.

3.01 Just bouncing now, down 33 but 9 points off the lows.

Bought some Linc at 284 so I'm glad I managed to hold myself back from buying too many at 292 last Thursday. This is more like the level I was looking for.

4.13 The index drifted down to new lows before closing just off the worst at 4873, down 41. An ok day for me with shorts in Bld and Lyc doing well.

I think the market might have over reacted to the headline CPI.

Whites of the eyes. Thu Apr 21

I'm really looking forward to a break, this is the last trading day until next Wednesday. Early gains are fading slightly as some caution prevails but the market is still up 31 after a strong overnight lead where it seemed as if everything went up.
For the umpteenth time this month, my longs and shorts are balancing out and I've nothing much to show for the day. One reason for that is that I'm not waiting until the balance is my way. For example, Lynas is up 7 at 247 where I've shorted some more. I should have been starting here, it was a toss of a coin trade yesterday when I shorted the first few at 238 and 240. The stock has rallied past what I thought could be resistance at 247 (intraday high of 251) but I think it's a good bet that there'll be a second swing down, it's just not the simple 5 wave thing I was anticipating. A stop above 260 is reasonable as I'd expect another drop to get to 220 but it does highlight that the risk/reward isn't there for yesterday's initial shorts.
My usual logic is that if I can consistently get the trade on at a really good level, my returns will be much better. The corollary is that there are going to be plenty of opportunities where a stock goes the way I expected and I don't get on board. The point to remember is that there will still be plenty of opportunities.
Here's the Lyc daily.

Looking at the chart, above, you can see that this is no sure bet. It's only in the short term that the stock is weak, on any medium term basis, the stock is in a good uptrend so any short I put on has to be well judged.

11.56 Fortescue is gathering speed and I'm out of the last of my short. It may have completed an a-b-c correction, in which case, it could pop up to a new high. I bought stock 1 for 1 with my puts so I'm synthetically long calls now.

Linc made a sell signal on Tuesday and reversed yesterday. I reluctantly cut but now, once more, it looks massively bullish. I'm loath to chase it up here because I'd like to see a pullback to the mid 280s but I'm worried about missing out! Now that it has had a c wave down, albeit a short one, the downside risk seems milder. It could track all the way back to 250, 260 but there has been ample opportunity in the midst of a sharp market correction and it hasn't happened so far. Here's the daily.

And here's the weekly.

12.32 Gold is rising in the Asian session, unusual lately when it has tended to pare back some of the overnight gains. If it wasn't for the Aussie dollar running even harder, I might be getting some joy from the gold longs.

2.40 Decided to buy a few Lnc on the backfoot at 292. I'm hoping to get more lower but with a couple more coal mines sales due to be announced, there is the possibility of market moving news over the long weekend.

4.28 That's it, a rise of 55 to 4914 and a strong finish to the week.
Same old April story for me, longs and shorts cancelled out although having reversed in Fmg, I'm bullishly positioned now.

Bucket of cold water. Wed Apr 20

A reasonable bounce overnight and after 25 minutes the response in Australia is roughly in line. Gold was a touch firmer and gold stocks started to recover in the US as did steel stocks after Korean company Posco increased prices.
I had more of a look at Intrepid and the report on their Indonesian mine. I realised that there was a good reason the stock had underperformed yesterday because the market capitalisation had moved well ahead of NPV estimates which are going to tend to the conservative anyway and administer a bucket of cold water to overheated speculators. I dumped the stock at 198 on the open, which was unchanged and the stock has slipped to 195. I feel that it's too late to chase but it's probably going lower. In hindsight, the sell signal was obvious but my bullishness about gold blinded me to it.

In the meantime, I'm fairly happy with the rest of my holdings. The steels are moving conservatively but could gather momentum through the day. I bought more Bsl at 194.

On the gold front, I bought some Perseus at 300 yesterday afternoon and have added the rest at 305 this morning. There was a gap to fill and some support at around 295 so I took that as a reasonable level from which to try to pick a retracement completion.

11.11 It's quarterly reporting season for the miners and Resolute have announced increased gold production at a lower cost than the previous quarter. The company is making money and paying off debt. It looked pretty good to me and using a previous 118.5 swing high as the basis for a stop, I've gone long at 122. I'm hoping that an a-b-c retracement is complete.

1.03 The Asx 200 is having a very decent recovery, up 55 points at 4849.

I sold a third of my Fmg May 650 puts at 36 with the stock just up a couple of cents. Telstra is unchanged and only Boral is moving against me with a rise of 8 to 506, although I'm more inclined to short stock into the rally.

I wouldn't mind re-shorting Lynas either, but there doesn't seem to be any rush. Something in the 240s would be reasonable because I'm looking for the rally to fail below the last swing low which is at 247.

2.44 The market is steady over the last couple of hours.

I shorted a few more Boral at 506 and made a start on Lynas at 238. The steel stocks haven't got a move on but they're holding while Resolute is up at125.

3.18 I've been buying odds and ends in Toll holdings this week. I've averaged around 566 with a few jobbing profits as well. I'm fairly confident that it is turning around and should make a higher low. My stop is going to depend on how serious any selling might be but, I guess, somewhere in the mid 550s.

Actually, this looks like a stock which would be quite a good buy for a value investor. It's trading well below its long term P/E and is priced at bottom of the cycle levels on the assumption - probably accurate - that consumption won't improve in a hurry. Nevertheless, the cycle will turn eventually and the stock will get the benefit of increased earnings and P/E expansion. In the meantime you could keep writing option premium around the edges to get a return on top of the dividend.

The weekly chart shows one bounce from the post GFC lows which has retraced over 15 months but looks like making a higher low.

4.18 The Asx 200 added 66 points to close at 4859 so it was almost a complete recovery of yesterday's loss.

I shorted a couple more Lynas at 240 - where they closed - and it was yet another flat day in a month that hasn't got off the ground for me.

Shock, horror. Tue Apr 19

Ratings agency S&P put the US on credit watch and the early impact was a 250 point drop in the DJIA but there was a gradual recovery and the Dow finished down 140. Most metals were lower, as was oil, but gold had a 10 buck bounce.
There's a school of thought that the need for a credit alert is so blindingly obvious that even the S&P could see it and that the headlines will allow US legislators to cut budgets much more easily. With that in mind and despite an early 50 point fall in the Asx 200, I'm not uber bearish for the rest of the day and I suspect that overnight leads would need to be very weak for further substantial falls because there'll be a fair bit of book squaring going on leading into Easter.
I was net long overnight and my book is about square this morning but I can't quite take a trick in April. Iau was the fly in the ointment as it has fallen to 201 on what seems like mild panic. I bought more at 201 on that basis and I'm hoping to flick it out later to soften the blow.
Otherwise, I bought back the Fmg short stock at 629 but still have May puts and bought back half of my Lynas short at 235. I've added a couple more Tol at 568 and Ost at 226 as they flirt with support on the basis that it's a close stop if I'm wrong and I'm looking for a retracement.
My energy longs, Karoon and Linc, are also flirting with support but I'm less confident about them and just watching.
Looking at the Xjo chart, there's no particular reason why the fall should stop here and that gives me reason to be cautious. V tops are much less common than V bottoms however and there's maybe a bit of previous resistance around 4800 from October/December plus the chance of some round number support that might help the index.

11.45 The index fell out of a little range as the Chinese markets opened so that the drop is now 62 points and the Asx 200 is right on 4800. Asian markets are posting equivalent losses of just over 1%.

I've started to sell out of Karoon as it slowly tips over. I was using a swing low at 695 as a stop and sold some at 694. There's some steady buying so although the stock is now 689, I'm hopeful of getting out of this illiquid stock at slightly better levels.

2.02 Just bobbing along on the bottom of the intraday range with signs of minor support as Asian markets recover slightly.

Boral is catching up with the state of play and is down 18 at 493. I bought back half of my short stock but added puts yesterday which means my net position is little changed. The chart looks more bearish than my initial ideas so I'm hoping for a couple more weak days.

4.03 Another stop in Lnc as 280 fails to hold. Out at 279.

I also bought back the last Lyc at 233; prematurely it seems as the stock has hit 229 and looks set to close around that level. Molycorp is still performing well so I'm worried about the risk/reward in this one on a change of sentiment. Shorted them at 255 so not a bad little trade.

4.12 The Asx 200 closed at 4793, down 69 points. It was a breakeven day which is ok because although the dollar value of my book is pretty square, it's a high beta shape with a few mid cap shorts and a bunch of smaller cap longs.

Indiscriminate. Mon Apr 18

A late Easter is fast approaching, the kids are on holiday and the weekend is extended to 5 days this year because of Anzac day on Tuesday next week. The upshot is that the market is softening quickly after a mildly positive open and scant attention is being paid to overnight leads.
For example, gold rose just short of 1% but the response has been negligible as investors continue to lighten off ahead of the holiday. I bought a handful of Intrepid at 217 with a tight stop at 210. It either fails and drops back into the December to March trading range or resumes the rally. The risk/rewards seems ok but I'm hoping to see some direction emerge before buying more.

On Friday, the union movement came out strongly in favour of the steel industry gaining exemptions to the proposed carbon tax. I thought it could provide a strong catalyst for the steel stocks but there's no response so far.

11.32 Short and not so sweet. Out of the Iau at 212, they're 210 now, as the selling continues. Lynas is down 10 at 243 and Fmg is weakening so a bit of joy there.

11.48 Bought some more Ost at 229. It's just ticking back up and Bsl has got some support so I'm hoping that we could get a squeeze this week as the long break approaches.

12.08 Talking of squeezes...Boral is up 7 at 514 but I can't take it too seriously. I'm going to leave a stop in the mid 520s and I'm actually looking to buy a few June puts on the back foot if it keeps edging up.

12.50 A sharp change of sentiment has helped the market to bounce 34 points off the lows. Just a tad below the high now, up 21.

I bought some Bsl as well since it has a similar chart to Ost. I like the Ost story better but they're moving in tandem and both now finding support; Bsl slightly more so than Ost. Long at 191 with the stop below Thursday's low.

I was too hasty in Iau which has had a clear rejection of the old trading range. Fortunately, it was for a small amount and I've re-entered at 217 in larger size as the picture is better now.

3.03 The index has held most of the gains and looks ready to firm into tomorrow.

Boral has been as high as 517 but is back at 513. I bought June 516 puts at 20 when it was a touch higher.

3.14 Definitely a counterintuitive few days in the gold space. Out of Resolute at 125. The sell signal was 125.5 but I was hoping for a false break and gave it an extra half cent. I could have cut and reversed but the sector is flaky at the moment so I might try to short on a weak looking rally.

4.12 There was selling across the board in the closing match so that the gain was trimmed to 10 points.

A pretty flat day for me, with a small loss attributable to Rsg.