Potential for a break lower in the XJO
11.58 am US tech stocks were hit hard overnight and by my reckoning only Netflix is still in a clear uptrend amongst the FANG stocks. There's a divergence in the major US indices where the NASDAQ reached new highs but the S&P 500 and DJI have made lower highs. I'm not convinced that the NASDAQ has absolutely topped yet but it seems imminent.
In our local market, the ASX 200 may be forming a pennant where the February slump was a 3rd wave and the narrowing range since then is forming a 4th wave. If it breaks below 5900 then I think we might see a quick fall to 5750.
I'm not wedded to this hypothesis as 5900 is tentatively holding but there's clearly no uptrend and that makes it difficult for long sided trend trading which is what I do. So you tend to get quick bursts up which don't follow through as they would in a trending market or even in a more neutral setting. Despite resource stocks holding relatively well overnight and further weakness in the AUD providing a tailwind for Australian resource stocks, they have been quite hard hit. AWC and WHC are down 3.5 and 3% respectively while S32 which I'm out of, is down 3.1%. The banks have caught a bid today so I guess there's a certain amount of switching too.
I've sold my Santos long at 501, down a couple of cents on yesterday's close which is good in the context of the resources sector and the other oil and gas stocks. I got out of a third of the balance in SYD at 674, a couple of cents up on yesterday's close but it has since slipped to 666.
The small caps are square net, a good result as they can sometimes present an amplified version of what's happening in the rest of the market.
I'm most confident about my long position in Resolute as gold is holding, the AUD is falling, the chart is solid and it may be time for some defensive positioning. I continue to look for a short term push to 128-130 and bought back the stock I'd sold yesterday at 123.5 to top up the position.
It's not a huge upside target but I think the stock can push towards 180 in the event of market weakness and this is early stages.
2.22 pm The index has been in a very tight range after an opening gap down. It's presently off 0.6% at 5924. Interestingly, talk emerging out of the Peoples' Congress in China is of trade concessions. The market hasn't reacted strongly to it but it seems very bullish to me as the recent weakness has been attributed to fears of a trade war. AWC has recovered to 237, down 4, and I'm hoping for something similar in WHC. RSG is back down at 122 and if the broad market was to rally on tariff relief, I'd expect it to chop lower to around 118 in a more extended consolidation.
3.55 pm There's been a recovery since Premier Li's announcement and I think it could be a short term circuit breaker even if it seems to me that most markets are not looking good. I'm out of the last of the SYD at 668 and pleased to see some recovery in RSG and WHC.
The index is down 24 points and finishing strongly while Asian markets are off their lows.
4.20 pm The market finished close to the highs at 5936, down 23 points. I'm not sure what to make of it as I'm essentially concerned about downside risk but I thought the Chinese trade concessions were potentially quite short term bullish. Given that, I've stayed with the longs in AWC and WHC and held RSG with a more medium term bias as a hedge against a weak market.
I lost more on this book than I made yesterday but it felt like a win as I did fear a bigger sell off. The small caps were slightly lower but I was happy with that. DEG fell 2 to 14 and this is only a short term momentum play but my entry price is 14.5, I sold half at 15.5 and it looks like an inside day so I'm giving it till tomorrow with the hope of getting 16 or 17 cents for the rest.
In our local market, the ASX 200 may be forming a pennant where the February slump was a 3rd wave and the narrowing range since then is forming a 4th wave. If it breaks below 5900 then I think we might see a quick fall to 5750.
I've sold my Santos long at 501, down a couple of cents on yesterday's close which is good in the context of the resources sector and the other oil and gas stocks. I got out of a third of the balance in SYD at 674, a couple of cents up on yesterday's close but it has since slipped to 666.
The small caps are square net, a good result as they can sometimes present an amplified version of what's happening in the rest of the market.
I'm most confident about my long position in Resolute as gold is holding, the AUD is falling, the chart is solid and it may be time for some defensive positioning. I continue to look for a short term push to 128-130 and bought back the stock I'd sold yesterday at 123.5 to top up the position.
2.22 pm The index has been in a very tight range after an opening gap down. It's presently off 0.6% at 5924. Interestingly, talk emerging out of the Peoples' Congress in China is of trade concessions. The market hasn't reacted strongly to it but it seems very bullish to me as the recent weakness has been attributed to fears of a trade war. AWC has recovered to 237, down 4, and I'm hoping for something similar in WHC. RSG is back down at 122 and if the broad market was to rally on tariff relief, I'd expect it to chop lower to around 118 in a more extended consolidation.
3.55 pm There's been a recovery since Premier Li's announcement and I think it could be a short term circuit breaker even if it seems to me that most markets are not looking good. I'm out of the last of the SYD at 668 and pleased to see some recovery in RSG and WHC.
The index is down 24 points and finishing strongly while Asian markets are off their lows.
4.20 pm The market finished close to the highs at 5936, down 23 points. I'm not sure what to make of it as I'm essentially concerned about downside risk but I thought the Chinese trade concessions were potentially quite short term bullish. Given that, I've stayed with the longs in AWC and WHC and held RSG with a more medium term bias as a hedge against a weak market.
I lost more on this book than I made yesterday but it felt like a win as I did fear a bigger sell off. The small caps were slightly lower but I was happy with that. DEG fell 2 to 14 and this is only a short term momentum play but my entry price is 14.5, I sold half at 15.5 and it looks like an inside day so I'm giving it till tomorrow with the hope of getting 16 or 17 cents for the rest.
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