Inconsequential. Fri May 20

A mildly positive night on Wall Street which was largely built in yesterday, a pullback in commodities and largeish overnight drops in BHP and RIO have resulted in a weaker opening this morning. After 37 minutes the Asx 200 is down 19 at 4738 but it's looking like a standard sort of retracement. Here's the 60 minute chart. Yesterday afternoon saw the first correction of the morning's acceleration and this morning we're seeing the next leg. Support is around 4710 and the index could grind down all day, I suppose, but there doesn't seem to be any commitment to the early selling.

 

My stocks are mixed but the moves are small, best performer is PDN which is up 5 at 328.

12.56 The market is down 22. My positions don't require any action and there are no new signals. It's a test to do nothing when there's nothing to do, trading wise, that is. I've been analysing this year's trading and that's occupation enough.

2.43 Out of AWC at 227 as it was a short after all and I shouldn't have tinkered. It's not a compelling trade either way and one to prove the adage, "if in doubt, stay out". Otherwise, IAU, LYC, OZL and PDN are all fine with the thinly traded IAU the worst performer, down 4 at 183.

The market is recovering without really getting anywhere, a slightly ominous sign that it's likely to fade into the close. Asian markets are slightly better so that could help.

4.09 Stocks are just about to match. Days like this are about acceptance, there were no clear opportunities for me and my existing positions were a touch against me.

The index faded to a finish down 24 at 4732.

Sweet spot. Thu May 19

US and European indices up, commodities and commodity stocks up, the Aussie dollar flat and the Asx 200 already showing signs of life after a steep fall have combined to put the market into a sweet spot. Up 42 points after 45 minutes with most of my longs performing well and the lone short in AWC up just 3 cents.

I'm out of most of the balance of IPL at 392 as they approach the last swing high. I have a new long in junior gold miner Intrepid at 184. There was a grinding pullback to make a higher low and the medium term context is that this is the third higher low since January. So the grip has loosened and the stock has floated back up to 187. It's quite illiquid so I'm long a half portion.

There's another new long in PDN at 324. This has broken the high of the last 3 days as the stock seems to be turning following a 5 wave swing down – which could be the last leg of a larger pattern.

12.42 It's a strong day and the market has barely taken a backwards step. Up 66 at 4760.

The picture has changed in AWC, not surprising really as the commodity lift which had been restricted to copper became broader overnight. I shorted 15 thousand which is about half what I'd normally do, thinking that I could add more if the opening was weak. I'm now trying to buy back at 234 and have an extra 15k on the bid there to go long. Stop would be at about 226.

1.34 I got the AWC rather too easily at 234 and it's 233 now so I'm in that position where you start to think that you've cut and reversed when you were right all along. Oh well, the rest of the positions are pretty good and it's an occupational hazard, especially when you look to pre-empt breakouts. I sold a few LYC at 225 and OZl at 151 and the last of the IPL at 392.

4.13 A good finish kept the Asx 200 to a close near the days high, up 63 at 4756. IAU, LYC and OZL finished well, while AWC and PDN ended a touch below my entry price.

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.