Monday's action - not so quiet....

Kalgoorlie Superpit - or your trading account if you're not careful

A very poor day today on the XJO - down 38 points or 0.8%, due to most of below:

• BHP closed below 7 day HI EMA, long red candle, local resistance at $46. Medium term weekly trend still intact (from late August 2010), watch for close below $45 in coming days to signal reversal
• CBA Bearish engulfing candle - not unusual in an uptrend, but definite resistance at the $51.50 mark. I am long term bearish on the banks (due to the coming debt deflation) but I can't let this sway my short term trades. Having said that, might be time to add to this call and place a medium term Bear Call Spread (say $54 or $53 lower strike, March/April expiry).
• MQG uptrend with long shadow - KC Signal possible retracement/sideways. Awesome volatility for any long option holder out there (hello!), but I am concerned about a reduction in value if goes sideways from here. Hasn't closed above historical resistance (at approx. $40.25ish). In fact, the recent 1 year daily chart of MQG looks like a simile of the late 2008 to mid-late 2009 chart....

GFC after-math

current activity...although the rebound from the low isn't as dramatic

• RIO close below 7 HI, long red candle - almost closed below 15 EMA. Seems to be forming a triple top - not many buyers beyond $88 or so. Hmm.
• WBC Bearish engulfing candle - that's it, I'm convinced WBC will stay in a sideways bearish mode for awhile. I'm keeping my March $21/20 BPS (lost 2c per spread contract so far on an initial 13c spread), but will go bearish with either a $23.50 or $24 Bear Call Spread (BCS), probably Feb or March, depending on if I can get filled and if the spread is worth it.
• WOW fast uptrend with long shadow - KC Signal possible retracement/sideways

XJO itself has bounced off the critical 4800 points level again, and I frankly am getting quite frustrated with this!

I have a modest 4700/4650 Bull Put Spread open on XJO at the moment, but according to my defensive action criteria, I will leave it well alone until the sold position doubles in value (one of my specific stop losses).

It might be time to exit my WOW trades (long and BPS) too - although it hasn't triggered any of my exit signals yet, I have a tidy profit so far. Again, I don't take much credence in directional plays on WOW, but I will keep an eye on this - and keep you updated!

As an aside, I believe WOW is one of the best companies in the ASX50, and have heavily researched it as part of my private investing company - Empire Investing (closed to new investors unfortunately!). I also personally invest in WOW through my SMSF (self managed super - come on, start to learn the acroynmns!) using a cash secured put strategy. More on this strategy later, which, combined with what I call a "over-valued" covered call strategy, I intend to adopt as a longer term trading plan for super and possibly, Birch Creek.

I will probably add to my hedge on XJO in the coming days, and will be watching the overnight markets for a lead (like everybody else), although the US market is closed for Martin Luther King day.

If Europe appears to be correcting, I will use a 24-hour Index CFD (or Option CFD) as my hedge, although I've never had much luck with CFD's!! (Gold is an exception, but mainly due to following some very good trends last year). As of 6pm local time, WA, the European market is down, on aggregate by 0.5%, mainly due to FTSE and CAC (France).

I follow another watchlist, appropriately called my "Crashlist", which includes the following:

• Australian dollar/US dollar currency pair
• Baltic Dry Index (not much use actually, but interesting to watch)
• 10 year US Treasury yield
• China Shanghai Composite Index
• Dow Jones Industrial Index (USA)
• Euro/US Dollar currency pair
• FTSE 100 Index (UK)
• DAX Index (Germany)
• Gold USD per oz
• Hang Seng Index (Hong Kong)
• Nikkei 225 (Japan)
• NASDAQ Composite (USA)
• S&P 500 Index (USA)

I've tried to put live charts on the bottom of the blog for some of these, but I usually analyse them using my Incredible Charts software. (I use the premium version, a free version is available with delayed data and advertisements, but is more than capable for the infrequent trader)

More on the "Crashlist" and how I use it in other post. For the time being, keep your powder dry and watch this market closely. I think the full effect of the QLD/Victorian floods crisis has yet to be priced in (although BOQ/SUN have been dealt some serious blows)