AUSTRALIA...........F*CK YEAH

WHY THE ASX IS A HIDDEN GEM FOR DAY TRADERS

Did you know that the ASX is the first major index to open each day, and (in my opinion) gives us Aussie traders an enormous advantage over our offshore friends?

Being the first market to open following the closure of the big daddy, (the American markets), means that we get the first glimpse into how fund managers and hedge fund CIOs and CRO’s have digested the overnight action and what actions these guys are taking. There are too many predictable patterns to list here that I’ve found in the data (which I use to formulate my personal trading around), but I’ll touch on a couple of high-level ones below.

Consider that over the past 4 years, there have only been 3 occasions where the S&P has fallen significantly following a decent day rally in the Aus200 (S&P average move is 22pts higher when this happens). Even more pronounced for the UK100, with again only 3 occasions where it finished significantly lower (UK average move 37pts higher when this happens).

Consider yesterday, 10th October, when our futures rallied ~46pts. The UK rocketed from their open at 6pm AEDT, up over 100pts, followed by a sluggish S&P, which rallied 50pts to its high.

As a general rule, when our fundies are happy to take on more risk, so are those in the UK, and USA, and vice-versa.

The same is true when our market is jittery. The UK100 subsequently falls 55pts, and the S&P falls an average of 30pts when we head for the exits (with only 1 record of any decent rallies in these markets following a fall in ours).

I’ll speak about how the Aussie trading day can be split up into different ‘zones’, where price action is driven by different market participants in another post, however if you take a look at volumes, the last ~90 minutes of trade in our market represents a significant chunk of overall volume, due in part to international institutions ‘front running’ their exposures before their own markets open up.

Large rallies into close generally indicate potential for higher overseas moves, large falls generally indicate lower moves. This obviously doesn’t play out every time, but does give us a) a tip-off that some volatility is likely (this should be every Day Traders’ dream scenario) and b) some level of buying/selling pressure is expected when those markets open.

LATE RALLY IN AUS200 AND SUBSEQUENT MOVES IN UK100 & S&P

LATE FALL AND SUBSEQUENT MOVES IN UK100 & S&P

The strategies traders can use to profit from this kind of insight is varied, but obviously, for a start, taking a contrarian position to a large move in the Australia 200 is unlikely to provide YOLO style, 100pt gains in other markets, historically.

So while many of the big boys may view our market as ‘the little market that could’, it also gives us Aussie battlers a potentially significant advantage when trading against our much larger peers.

Cheers

Marto