Monday, August 31, 2009

Trade 69 and 70 - Fundamentals Intraday Opportunity


Entry ASX short 3 contracts @ 4501.5 for the technical buyin at the 20DMA and the expectation of a breakout below the day's pivot point.

moreso, today's trade was based on the following fundamental information

MSCI reweights today

[X] 18 stocks upweighted, adding +0.6951%
[X] but against that 55 stocks are thus down -weighted to make room
for them.. The downweight is -0.6951%
Thus at face value everyone thinks there if no net effect - they seem
to "match off" but look into it further...

So although it looks perfectly weighted the actual index effect - on the
ASX 200 - is different
[X] The ASX weightings of the inclusions is 21% of the ASX 200,
[X] BUT of more relevance the selling is in stocks that make up
65.6% of the ASX 200...

The other way to look at it is that of the $149m of buying 2 stocks make
up $112m of it -GMG ($+71m) & CBA (+$41m) , given GMG index effect is &
CBA is big, but it's only 1 large stock so the real buying is about $37m
vs the selling of -$56m across the board...

But there is another effect to consider... the stocks going in are more
likely to be sold off into the close by those traders who have been
running "negative MSCI baskets" - in fact looking right now at the 18
upweights interestingly 11 are actually trading lower on the day !!!!

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I proceeded to sell another 3 contracts after the index decides to retrace midway through the downswing - I was fairly confident given the weakness in china in addition to the MSCI reweighting that should happen later today.

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and for the first time in a long series of losing asx trades, I made a profitable exit.
I managed to scrape another 5 points in the first 5 minutes of after hours trading - before the index started to shoot back up - practically a perfect exit.

Trade 69 - Entry short 4501.5 - Exit long 4468 = $100.50
Trade 70 - Entry short 4493 - Exit long 4469.8 = $69.60