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Watching the Australian market over recent weeks, I was anticipating a turn on the early November seasonal date. The SPI (AAI-SpotV) even gave us a nice signal day to go short on 9 November but there has been little support in the form of volume or a clear downward move out of there. Chart 1: SPI Showing Signal Day on 9th November
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The advanced trader could have been excused for taking a Short the Closers on the 9th or even a Short the Openers on the 10th but the market turned during the day and closed higher. We are seeing uncertainty in the markets. There is volatility without volume and any move in either direction is short-lived. At times like this it can be best to sit out and watch the market until a clear trend emerges.
Many Australian banks went ex-dividend last week around the time of the seasonal date. They gapped down by more than their dividend payment but haven’t continued to fall and are showing uncertain trends on the swing charts. Chart 2: Australian Banks with Gaps Highlighted
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Despite the gaps produced by the payment of dividends, the market has since wandered sideways.
Many Safety in the Market traders have been following the Commonwealth Bank (ASX:CBA), which wasn’t affected by a dividend payment, seeking a short trade out of the 9 November lower swing top, only to see a higher top form on 14 November. Watching the two- and three- day swing charts on this stock, we are seeing the trend change from up to uncertain, so there is a possibility of an advanced entry if the market moves down with strong volumes and breaks some of the existing swing bottoms.
However, we must remember that advanced entries are riskier because they are early in the change of trend and that sometimes we are better off waiting until a clear trend emerges. CBA has been essentially range trading over the past couple of years but there have been some great ABC trades within that range. Chart 3: CBA Showing Range of Trading for 2010 & 2011
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In August and September this year we saw the CBA briefly break below that range but it is currently back in that same range, bordered by the $47 level to the downside. I would like to see it move below $47 to be convinced that another leg to the downside is possible.
Be patient. We don’t have to be in the market at all times to be profitable. Keep watching the swing charts - they will tell us when the trend has changed.
It’s the Journey
Lauren Jones
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