Tension mounts

US markets fell late on thin volume to eventually follow suit led by more European falls. The local market was unable to withstand the pressure after yesterday's outperformance and has been weak but in a tight range with a few minor rallies as Asian markets are restrained in their falls. The index is down 65 points at 2.30 pm having been 78 off at the day's lows.

I've got a mixture of longs and shorts, reflective of the choppy market we've been seeing and the success story was PRU where I bought back the last half of the short position at 301, on the open. It was another gap down of 6% and having sold at 355, I decided not to get greedy. The stock has chopped around subsequently. I've also bought back half of a WSA short at 552 (v 580) on a profit target.

The longs are mixed. ALL has held very well, BLD is possibly a cut, KAR is bouncing and OSH also has me pondering stopping out.

My initial stop in BLD was 353 and it touched that earlier. I like the chart, it has a reverse head and shoulders look about it. Also, stocks with exposure to an improving US economy are doing well, eg ALL and JHX. However, if it makes a higher low, I could easily get another opportunity to buy this and there is no clean uptrend, although there are a few higher lows. My thought is to wait until the close to see if any late buying improves matters and to sell if it doesn't.

The other problem long is OSH and this has also been through a stop at 618. It touched 614 and is now 619. I'm usually prepared to wait once stops are triggered intraday because if volume is light and it's a gap opening then the situation can change quite quickly. In this case, it hasn't become much clearer. I think I should cut because it is starting to form a downtrend but I suspect that it's just a correction and it hasn't, so far, overlapped the peak of wave 1 which was at 612.

My aim is to get out of stocks which aren't going my way and this is one of those situations. Again, I think it might be worth waiting to see if the market firms into the close.

3.02 Another point to bear in mind is that the potential for the market to rally upwards out of a pennant is much lower now. There's a sell signal on the XJO chart with the bottom of the recent range at around 4150 starting to look vulnerable.

4.08 Approaching the closing match out and I'm selling out of BLD and OSH and also ALL, which has slumped in the last hour. There are no new positions, the shorts are mostly too far gone while there was one potential long which has weakened into the close and lost appeal. It's been a choppy week and it's interesting to see how this style works. It's pretty sharp to take me in and out but because entries are on the close of day, it's not overly intense. This week has been modestly positive, a series of small gains and losses with a couple of better gains in IAU and IPL and a good result in PRU.

That's the finish; out of ALL at 236, BLD at 356 and OSH at 621. I'm still long KAR and short AWC, FMG, OST and a half position in WSA. The index closed just above the low at 4177 for a loss of 1.9% or 81 points.