See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
Keeping with the theme of the last few weeks - which has been
1/ its a bull market.
2/ the top does not appear to be here.
3/ trading is about probability not prediction.
4/ historically there is a strong correlation between the Russell 2000 and the XAO.
5/ US stocks appear to be rotating from large caps into the Russell 2000 suggesting that stock market breadth in the US is widening - which is bullish.
6/ The XAO is lagging the Russell, as seen in the chart above, either the Russell will fall or the XAO will catch up - I think the latter is more probable.
Overall this appears to be a very strong market - a big rally or even a blow off top may be coming, who knows. If a blow off top eventuates we will deal with it at the time.
My experience and intuition tell me this market is similar to the late 1990's. A period when the market produced gains beyond peoples wildest dreams. Its also a very difficult market to trade because moves up, and down, are fast and unsettling. Dips are to be bought (which takes nerve) and big gains after fast rises are to be sold. A strategy I have used over the years is to sell 50% of my holdings after a stock has risen 70% - by tightening the stop, after that I let the rest ride until my primary stop has been hit. I do not re-enter the trade, gnash my teeth over "what may have been" " I should have " "I could have" etc. Rather than re-enter I move on to the next trade. Like a pro tennis or golf player we play one shot at a time. One trade at a time. Let the bad trades and shots go.
Otherwise they are all negative, soul destroying thoughts, often produced by the simple fact the trader had no strategy in mind to deal with the many possibilities the market may throw at us.
So! Have a plan in mind how you will manage your trades if the market rallies hard and even produces a blow off top from here * Also keep an eye on that correlation between the Russell and the XAO, it's an important one IMO. If the XAO plays follow the leader, there are going to be many opportunities in the Aus market, maybe starting as soon as Monday.
Until next time
Peter
* ATR trailing stops, active at all times in the market are an effective tool. At times they will whip you out - but save you if the market plummets suddenly.