Reluctant followers

The local market has followed overseas leads to be down 111 points after 41 minutes but there's not much going on really. There are buyers around at these lower levels and although the index chart indicates further to go over the next few days, there's probably not too much more to go this morning.

Here's the Asx 200 chart.

My short positions have gone alright but a couple of the positions (FMG, OSH) that I closed out yesterday or shorted intraday would have been better. I've bought back the QAN at 152.5, some DJS at 276 and TOL at 433. I also had a few puts in NAB, Aug 2400 strike, that I sold out at 150. I've bought some AWC, IPL and OSH as intraday longs because they've been pretty hard hit and shorted a few WSA because it hasn't.

11.38 The index is a little worse, down 2.9%, but sitting above the opening low. The usual pattern is for a low to be set at around 12.30 pm. I've been jumping in and out of positions but I'm broadly looking at trading an intraday bounce. It's neither here nor there at the moment.

11.53 Lost patience with DJS and closed it out at 275.5 average. The index is firming now as the HSI is only down about 2.5%. The search for yield is increasing as for the first time in decades, stock yields are higher than cash rates in more than just the odd dying or boring stock. It's making for a confused market because there are compelling valuation arguments in the resource sector.

12.46 Unusually, the index hasn't made a minor new low. The 10 minute chart, below, shows quite a narrow trading range. I'm easing out of both longs and shorts and will probably leave myself pretty flat going into the weekend. (Just noticed it's not there, inserted this at 1.44 pm).

1.36 It's fairly dull stuff and I'm out of most positions now. The overnight obviously favours the downside and I might reinstate some shorts if anything interesting pops up. It's such a strange market though. For example, Boart Longyear announced their half yearly result making USD 74 million compared to expectations of 64 mill, I believe, and upgraded second half estimates by 9%. The stock is trading on a 2011 P/E of about 11 with earnings expected to grow in FY12, taking that P/E to about 9. If those figures are reasonable, and today's result would tend to confirm that, one would expect the world to be pulling out of recession and results to be improving further in the following year or two. But the chart looks poor as the overriding theme of decrepit public finances in Europe and North America taints sentiment.

3.37 Moving into the close, the index has finally capitulated and is down 145 points now. I had no positions but have reinstated a short in NAB at 2252. It's well past the short term break at 2300 but momentum is to the downside.

On a shorter time scale, it sat in a narrow range for most of the day and is now fading.

3.47 I also re-shorted TOL at 430. I'd bought back the last of them at that level, thinking we could have an intraday bounce. It didn't amount to much but despite that, the stock has been a relative outperformer today and the risk/reward still favours the downside in a weak market with a stop around 455 and a recent low of 370. Here's the 30 minute chart.

4.07 The market is just about to close for the day. While there's a bit of a 5 wave look about the 10 minute chart, I'm doubtful that there'll be much of a rally on Monday. If there is, it's probably one where I'll be looking to put on a couple more short positions. On the flipside, if there's another crunch on Monday, it's likely that the open will be the worst. There are plenty of buyers locally, only held back by international conditions. The irony is that it's the institutions who have been selling against the prospect of redemptions which are yet to materialise. The last two days must have them breathing a sigh of relief because they would have had to rush in and buy if we'd seen a V bottom.

The index closed down 149, NAB finished at 2240 and TOL at 427.