July 31 – Weekly trend now up

The big news on this Friday evening is that the weekly trend filter has turned up. This is the first bullish signal since it turned bearish in January 2008. The last time it gave a bullish buy signal, preceding that January 2008 bear signal, was July 2003 back when the index was at 3000. So it caught the move from 3000 to a little over 6000 in 5-years. The market caught a bid today after China quietened yesterdays fears of significant clamp downs on stock lending. Also of note today were comments by an esteemed ex-colleague of mine, a well respected economists and an ardent bear, who reversed his opinion on Australia and agreed he was a little misaligned. As I have stated, we’re overheated, but we can’t fight it. Go with the flow and see where it takes us.

30 July 2009 – Weak close this time

An interesting day today with many of our picks making an early charge but reversing and closing weak. One pick, MXIM, tagged our target price allowing profits to be banked. ADCT on the other hand hit the trailing stop locking in a minor profit. Why does this matter? Because its the first time we’ve seen it in a few weeks. Action of late has been the opposite; a weak start and a firm close. Whilst we have none of our red alert bars, meaning the market is tracking higher within a sustainable pace, momentum is at extreme readings. I remain very cautious of a reversal of form in the near term and as such will not be making new recommendations until the heat is taken out. The trend remains up.

29 July 2009 – Treading water

Still nothing to report suffice to say that the longer price can hold these recent gains the higher the chance that a renewed push higher will be forthcoming. We’ve mentioned the important of the Dow Jones Transports before as a confirmation tool. I happily note that the Transports have also managed to break up through the May / June highs and are also holding their own. The important level to watch is 940.0 basis the S&P 500 being last weeks lows. Its at list this level that the weekly Type-A Bearish divergence confirms and open the door to either prolonged sideways action of, on occasion, a decent selloff. Bottom line the market is a little stretched in the short term but pause is healthy for further gains.

29 July 2009 – Catching its breath

A day for the market to catch its breath which, as I have been alluding to over the recent few days, is a positive sign. Markets only get more dangerous the quicker they rise, but when they meander higher the gains are more sustainable. I would suggest todays weakness will continue for the next week or so as domestic earnings start coming out. They peak in mid-August and after recent gains a few profits may be being banked. As such I will take it easy on new recommendations. If we can see some weakness we’ll lock in profits on existing trades and gain a new group of setups for the next leg higher.

July 27 2009 – Approaching 1000

A repeat performance of last weeks activity to get this week going; a bit of range trading with a firm close. We’re just trading below the psychological 1000 level in the S&P 500 so we’d expect to see some posturing in and around it. What is clear is that the major range has been broken and price appears to be happily holding up. That said we’re very stretched so I am very wary about adding any new positions at present and feel it more appropriate to manage current trades. Our red alert bars have now registered their sixth consecutive warning and momentum is now at the highest levels seen since April 2007. Like the ASX we are also seeing Type-A Bearish divergence on the weekly charts, but need a reversal down and through last weeks lows to get confirmation. If strength remains that divergence will dissipate.

27 July 2009 – A solid gain

Good strong day after breaking through the upper boundary of the recent frustrating range. Our red alert lights have come back after Friday but this should still be seen as a slight warning. We did mention on Friday that Type-A Bearish Divergence was in place. That remains so, but will only be triggered should last weeks lows are penetrated. Also we’re on the cusp of the Weekly Trend turning up. A strong close this week will confirm – the first time since April 2008. I read with interest of the US analysts earnings estimates this season. Some 75% of earnings reported to date are above analysts expectations – showing that either analysts still have no idea or that the economy is doing swimmingly. Either way, you can’t fight the trend. We’ve introduced the Systematic Power Setups tonight which may look a little daunting to start with. Persevere – it will be worth the effort.

24 July 2009 – A warning sign appears

The market closed quite well off its intra day highs as is been doing come Friday. Its obvious that traders don’t wish to go home long over the weekend and also the NAB capital raising is still weighing on prices. The good news is that daily trend and momentum filters remain up and our red alerts have worked back to normal now. However we do have a serious pattern to consider; Type-A Bearish Divergence is now present on the weekly charts. If price breaks back below this weeks lows of 3992 then we should be very wary of some extended weakness of at best sideways trading. We have come a long way very quickly which is why we got the red alerts, but a breather should be expected and it may well be signaled from this divergence. The positive spin on this is that we’re sitting on a nice zone of support which could cushion and moderate any falls.

*Note: The Systematic PowerSetups will start on Monday. We’ll be posting Monte Carlo simulations tomorrow for your consideration.

July 23 2009 – Up and running

We had been saying for a few days that the fact that price was ’sticking’ to the upper side of the range and not reversing was a good signal for the next leg higher. After last nights burst we need to assume that we’re on the way now. I’m still wary as we now have 4 consecutive red alert bars but we can’t fight the trend as is. We take the information on board and manage the open trades without getting overly stupid with long positions. Many A-B-C patterns are already beyond our required entry points so we’re left with more typical momentum based patterns. I have added a few more today but don’t go gangbusters if you’re already long.

July 23 2009 – Holding the highs

Again not much to add today. A tight range but a positive day as the range highs continue to hold us nearby. I would be concerned if price reversed immediately off these highs but the fact we’re holding is positive. The longer we stick here the better the foundation for the next leg higher. That said we now have 4 consecutive alert bars. The ideal situation is we move sideways for a week or so and allow the market to catch its breath. What we want and what the market gives are two different things though. Resources did well and our nightly chart analysis suggests this trend should continue for the coming few months.

July 22 2009 – Holding the highs

Even with the surprise announcement by NAB about bad debts and further capital raising the market held itself together remaining in touch with the range highs. This buoyancy continues to extend from the US gains on back of their earnings.Over the last 3-days I have highlighted the read alert bars, so we’ll cover that in some depth during tonights ASX-200 (XJO) review, needless to say that today is the third consecutive red bar, where 5 or more are considered overextended. However, the trend is what it is and the strength into reporting season is a positive sign.

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