Bank on it. Wed May 25

A slightly disappointing night with regard to stock indices although base metals, gold and especially oil rallied. But the bank selling continues apace with the majors off by more than 1% again.

The Asx 200 has traded below yesterday's 4596 low, reaching 4590 and is back at that 4596 low, down 33. This swing down has now formed 5 waves on the intraday chart so there is a chance of a bounce today. No sign of it yet though.

11.56 US overnight futures are down 0.8% on banking fears of legal penalties stemming from GFC shenanigans. Newly listed resources powerhouse, Glencore, is also trading below the issue price in Hong Kong so it's actually quite surprising that the Asx 200 loss is holding at 30 points.

Maybe the wicked hedge funds should have a look in their own backyard and leave our Aussie banks alone! Actually, I don't mind this weakness in the banks, I want to start a buy/write book and I might be able to buy at the bottom of the range.

2.16 Another new low at 4584, down 45. Asian markets have trimmed their losses to around 0.5% and the S&P 500 futures are not getting any worse but there's negligible interest here and stocks prices are ebbing lower.

3.58 The AUD is below 1.05 to the USD and there's a downtrend in place which could gather steam. The DJIA chart is quite similar to the AUD/USD in recent weeks and that also looks as if it's in the early days of a sell off. Here's the chart of the currency cross.

I don't have much idea whether there are implications for our market. There was a period a few weeks back where the currency acceleration knocked resource stocks hard but the sell off hasn't generated any buying yet. I'd have to assume that we'll continue to be under pressure. I have a few longs still and that's a cause for concern but they're not quite at stop levels.

4.15 Down 44 at 4585. When we were close to these levels in March, it seemed like panic selling; now lower levels look inevitable and it's just a question of whether there is a rally first.

Oh, and I stopped out of IPL at 377. Yesterday's low failed so it's shaping as an a-b-c correction. It's one of the few positive looking stocks in my watchlist so I'll wait for another opportunity.

Ahead of the curve. Tue May 24

Apparently we were anticipating heavy overnight falls in commodity prices following the very mild drop in Chinese PMI yesterday. Extremely prescient, I have to say, and today the index is shrugging off European and US index drops with a "been there, done that" shrug of the shoulders. The support failed unsurprisingly since it was almost gone yesterday afternoon but the Asx 200 is off just 11 points after 44 minutes.
I've sold out most of the IAU balance at 178.5 and a few LYC at 219. OZL is arguably a cut but I'm holding on for now since there's a chance of a surprise up day. There was a 12 cent per share return of capital a few days ago, so my entry price is effectively 130.5 with the stock trading at 133.5.
It's quite difficult to trade with the index making choppy lows and the tricky part is that the pattern still looks corrective of the March/April rally.

11.52 The market is attempting to make a base but is facing the headwind of continued bank selling with 3 of the 4 majors down by over 1%. The talk is that hedge funds are initiating short positions so this could continue for a while.
12.23 Another wave down as support vanishes. Out of OZL at 131 and LYC at 216 with the last few IAU at 175.5.
1.01 On a daily basis, the index is chopping downwards in a trend channel and as per the comment above, it's probably retracing the earlier rally. On a weekly basis, it looks very much as if a lower high will be made if you compare the April 2011 high to the one made almost exactly a year earlier. So the next swing up might well fail at, say, 4800 and a couple of long term targets could be set.
A modest bear market might see a test of the bottom of the range at around 4200 while a "chickens coming home to roost" event would see the index back to the GFC lows. This would be on the basis that the retracement since the 2009 lows has failed to break the first GFC swing low down from early 2008. A 5th wave on the weekly chart could push the index down below 3100. Interesting.


3.13 I've reverted to Blogger for the time being after technical problems.
The market is bouncing finally, just down 13, was down 47. LYC has recovered to 222 so that's a lost opportunity but I bought more LNC at 383 and went long IPL at 387. IPL is one of the few stocks in the market that has potential for upgrades and is rallying after a lengthy, complete looking correction.

4.08 I bought back into LYC at 222. The rebound is impressive and if the market is due a bounce from trend lows then this will outperform. It looks like it's going to close at 226. 

Shame about cutting at 217.2 and buying back at 222 but that's an occupational hazard.

4.10 A decent recovery then, with a small late sell off leading to a 14 point lower close.

Black Knight. Mon May 23

At the risk of sounding like the black knight from Monty Python and the Holy Grail, I'm taking the view that the opening plunge of 61 points is a mere flesh wound. My scenario of support at 4710 vanished on the open as the market quickly moved to 4670 where it sits now but after a choppy 5 wave pullback in the market, I still think that we're liable to see support hold on a daily basis.

The US indices fell by 3 quarters of a percent while continental Europe fell 1% or more with the FTSE just a shade down. Spain is the next, and by far the biggest, domino expected to fall as the debt crisis unfolds. Gold rose over 1%, base metals were steady to up and oil was firmer too while the AUD held its ground. So the portents were not all bad for the Australian market despite the early reaction.

I've been a fan of LNC for a while and with coal prices stubbornly high, they're sitting on some juicy assets. The stock has been ranging for a while and that range is narrowing. Nevertheless, the price is tending towards the top of that band and after a 7 day retracement, the stock has traded above Friday's high. I'm hoping for a higher low here and have bought a few at 281.

12.04 There might soon be a test of daily support at 4840 as the market is now down 74 at 4658. Asian markets are around 1.5% off so there's no support there. As ever, the smaller cap stocks I'm trading in are moving more than the market but given that the main pressure is on the financial sector, the damage is limited.

1.21 There's still a pall over the market as a softening Chinese PMI figure has not helped sentiment. The AUD is weakening gently which is a medium term plus and it's possible that the PMI number is indicative that the Chinese authorities are successfully managing a slowdown rather than orchestrating a crash but for now, the glass is half empty.

I have one position which I need to cut and that's a bit of a surprise given the good lead from gold overnight. IAU has failed to hold support at 180 and has actually slipped as low as 174.5 on very light volume. I need to sell out today as I find that where the c wave retracement is much weaker than the a wave, as it is in this case, the subsequent falls can be pretty sharp.

3.02 The Asx 200 is inexorably closing in on support. There seems to be general surprise at the weakness across the board today throughout the region. Once again, it appears more like a buyers strike than serious liquidation and this approach is rational to me, stocks are in a downgrade cycle, rates have not topped and overseas holders are liquidating commodities and shorting our banks on the basis of wholesale funding issues and expensive real estate. I have a pool of money I want to allocate to some longer term trading but don't see the need to step in yet.

3.54 Out of half of the IAU on a minor rally to 177.5 but have held the rest as I think I can get them out at 179-181. The selling is driven by general market weakness and a large overnight fall is being anticipated when only a moderate one is so far indicated by the European opening calls and US futures.

4.06 Actually, the German and French markets are set to open down 1% plus, it's the UK market with its resource sector that is set to open down a comparatively healthy 41 points, on the back of relative outperformance on Friday.

4.12 The close was 4643 which is 1.6 points higher than last Monday's low of 4641.4 and what's more, last Monday's closing value was a tad higher at 4650. I'm close to stops in LYC, OZL and PDN and past the cut level in IAU with half done. My other long is LNC which had a good day and finished up 4 at 282. No shorts, unfortunately.

Here's the updated XJO daily.

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.