Some Market Psychology, the SP500 and AUDUSD FX..

I had a comment on Friday that my posting contained quite a few 'ifs and buts and possiblys' etc, etc. - This is no accident, nor an attempt to be try and be deliberately noncommittal, rather I always try to express all my views and opinions in terms of possibilities and probabilities, rather than definites or certainties. The reason for this is that I always assume there are no certainties in markets, the very best view I can have is what I consider a high probability view. I try to take this attitude into my trading, whereby I never think that a particular trade will make money, but I believe it may make money. - Furthermore, I do not necessarily always take a trade on every market view I have, in fact I take relatively few trades in relation to the many opinions I have, however what I do is try and understand the market at all times, then look for what I consider low risk/reward set-ups.  -- As an aside; - in my past I was guilty of placing trades which I considered guaranteed to make money, those were usually the ones which blew up in my face, furthermore, with these trades as they moved against me I was usually adamant that the trade would turn around and eventually make money, therefore I would hold these losing trades far longer than I should, thus compounding the original error. - This is why one of my favourite market quotes (Courtesy of Todd Harrison of Minyanville) is: 'Know what you know and know what you don't. And no matter how good you think you are, remember to stay humble. For if you don't, the market will do it for you.'

SP500

Harping back to Friday's post, not a lot has changed, Friday's rejection of the key resistances on Equity indices was always a strong possibility on a first attempt. The price action left a number of potentially bearish Daily candles across US equity indices, with the S+P e-minis producing a Shooting Star pattern. In order to see further gains a clear and sustained break has to be be seen above the congestion between around 121/124, and then the 126 area, which is approximately equivalent to 132 on the SP500 cash. Significant support for me is the gap on the futures at 1105.75/1108.5, I would not be surprised to see this tested at some point this week, particularly if the futures fails to clear the resistance area. If this test does happen, the reaction to it may be both crucial and pivotal as to how this performs moving forward. - The chart below highlights this:

AUDUSD

The AUDUSD FX has made a strong move higher this morning, if this can be maintained then this will favour the odds of a successful break higher on the AUDUSD. This comes in the wake of what appeared to have been a rejection on Friday when the AUDUSD produced a strong Bearish Gravestone Doji candlestick. This shows the importance of waiting for confirmation before taking a single candlestick signal. (This can be seen below). - I will add that if the current level, which is a break of major resistance, is not maintained or if the price fails to make a clear break over the next few days above the range of Friday's Doji candle then the possibility of a setback is still on the cards. If on the other hand a clear beak is maintained, then the range of this Doji is likely to become major support for a pullback.