30 November 2009 – The US Shrugs…

On Friday we wanted to know how the US would react to the Dubai crisis. We acknowledged that ‘usually’ the US shrugs off international issues. Whilst the US is still not on full power after its Thanksgiving break, we do seem to have an answer – that is, they shrugged it off. Europe rallied hard on Friday, as did all ‘risk’ instruments and markets, including the ASX. The UAE Central bank stated over the weekend that it would stand behind and provide liquidity and support to Dubai and banks exposed. All in all it appears the maelstrom from late last week has been an over reaction and we’re now left with debris to clean up. Stops on shorter term trades were triggered (I lost my gold position) and confidence has been eroded once again. Perhaps the seasonal Christmas rally can occur after all.

27 November 2009 – Weekly trend down

The $64 million question is how will the US react to the goings on in the last 24-hours? It was a holiday last night and only a half day session today. Chances are those that really matter will be taking a long weekend and will not return till Monday. Will they shrug off what happens on the other side of the planet? They usually don’t take too much interest in what’s happening over their back fence. If the re is follow through then we would expect a flight to quality to US Dollars and therefore see pressure come into commodities and in turn the ASX. The markets have been fickle in the last several months, more or less range bound. We’ve had concerns about the divergences for a number of months so now it may well be ‘make or break’ time there. The weekly trend flipped to DOWN today so really there is no reason to be looking at long trades. We’ll be scouring the charts for patterns over the weekend but awaiting the US response on Monday. From then we’ll have a better idea on which way to lean.

26 November 2009 – Directionless ahead of RBA

A weak day but lightly traded volume as the US heads into Thanksgiving tonight. All US markets are closed and its a half day session tomorrow in the US, so all in all a long weekend. More dull trading expected for the local market. Gold has continued its surge on back of a weakening US Dollar and rhetoric that India will continue on with its purchased. Next week is the RBA meeting on interest rates. Whilst the RBA has not raised rates in 3-consecutive months for more than 20-years, the market has priced in a 78% chance of a rise. Rhetoric out of the bank in the last few days certainly suggests that they will raise again. The broader consolidation continues to take shape and technically will continue to do so for at least a month. I’d like to be proven wrong and take the seasonal rally into Christmas, but I’m just not sure. If the chop does continue then trading shorter term swings will be frustrating.

25 November 2009 – Thanksgiving

The gap between the Transports and Industrials closed a little last night. We have a significant line of resistance in the Transports, that of breached will be an extremely bullish development. I’d need to see that happen before getting too carried away with the expected Christmas rally. Also on a positive note the continuing decline of the US Dollar is not only sending Gold through the roof but also supporting equities. It appears the US Fed is quite happy to keep the currency dropping with its almost zero interest rate policies.

25 November 2009 – Quiet ahead Thanksgiving

A very quiet day again with the market popping higher. Chart patterns on the XJO are quite interesting and point to some near term strength, maybe even a retest of the recent major highs. We’ll look into that in more depth tonight in the ASX Chart Research area. Bigger picture we still feel some broader consolidation may occur and in turn choppy price patterns.

24 November 2009 – Still watching divergence

The Dow Jones Transports continues its ‘non-confirmation’ of recent strength in the majors. This stays as our main concern. The Transports have reversed off a clear horizontal line of resistance three times. An upside breakout would be super bullish, but whilst price meanders below diverging from the big name indices we are not satisfied upside momentum will be maintained. The run into Christmas is is seasonally very strong, but recognized patterns like these haven’t heeded the past this year. Whilst the big name indices have moved onto new highs, the broader markets have been range bound since mid-August.

24 November 2009 – Losing momentum

The market was dragged lower by the banking sector after news that one of the largest rights issues ever will be placed in the UK. The banking sector was already vulnerable because of the ’sell banks, buy resources’ switch that we’ve mentioned over the last few weeks. From the early highs the market dropped 78-points and closed on its lows. Not a good performance. Resources held up okay but the likes of Gold is now getting a little parabolic so caution needed. I tightened up my trailing stops on my own Gold position today. The other concern is the divergences between the broader US indices and the majors. The Dow Jones Tranports is still wallowing below the highs and unwilling to confirm the Industrials recent strength. The same is true for the Russell 2000 and the Wiltshire 4000. In other words the market is not having a broad based rally and until this divergence corrects itself I’d be very cautious. Todays inability to hold gains flipped the daily trend back to negative again. We’re clearly sitting on a line of ‘make or break’ with the trend. It may well stay this way for the coming month.

20 November 2009 – I Stress Caution

A low volume selloff today but enough downside to flip the daily trend to DOWN. This means that the systematic portfolio will defend open positions and stop issuing new buy signals. The All Ords is either meandering in a larger triangle or has put in a ‘lower swing high’ pattern. Conformation of the latter is a break down through 4515 and a very bearish sign. The Dow Jones Transports have failed to make new highs again. For the third time price has reversed off a line of resistance even though the Industrials have pushed onward and upward. This situation remains very negative for the market remembering that this ‘non-confirmation’ rarely, if ever, lets us down. A lot or people are calling for a strong rally into Xmas being a normal seasonal expectation. In fact the US indices have a 72% chance of a positive close to the year. However, to date in 2009 seasonal tendencies have been a poor indication of what reality brings.

19 November 2009 – Pullback

The major indices dropped from the open, the Dow falling some -165pts before regaining some ground and closing off the sessions lows. The broader indices, including the Transports, fell about double. These broader indices, out to the Wiltshire 4000, are yet to make it into new highs territory, but they giving it ago. At this stage they retested old highs but need to get up and through to give some more confidence of bullishness. A few of the pending long trades appear to be doing some more consolidating, but this is good work if the broader market does indeed head higher.

18 November 2009 – Second weak close

Yet again the market firmed on open but slid through the balance of the day. This is the second straight session where early gains have been unable to hold. Many of the broader US indices are trying to punch up into new high ground, so it could be that traders are feeling more consolidation is needed before the next leg higher. My preferred exposure remains with the commodity based stocks. Seasonally this period running into January is very strong but seasonals have let us down a bit this year.

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