Risk assets generally have had a bounce — the bounce I tried to wait out but that actually stopped me out — and have re-tested their breakout levels. The stories that are driving them down do not look like changing. China is still tightening, and the Eurozone is still going to slow.

AUD/JPY has had the best technical re-test; it is a more general bet on Chinese action than any one commodity, and it is less subject to local factors than the US equity market. The price is close to the lows of the past several months, despite the situation looking worse now than it was then.

Intra-day, the market dropped from the re-test level on high volume early in the day; later on it rebounded, but failed to make a new high; thrust was down for most of the day, and ended at a low for the day.

Downside breakouts have generally not been working recently, because the market has been in a range. I have looked back at the behaviour of the market in its last downtrend (shown on the market personality page) and seen that the best trading method seems to have been to use wide stops and to wait for retests. We have now had more of a re-test than the system demands (it uses a close above the blue line shown on the stop loss chart), so I have placed the stop just over 1 ATR from the current level (shown by the line on the stop loss page), which is around 2 ATR’s from the system’s re-test entry point (first bar that closes above the blue line after the last breakout).

Update: I forgot another reason for further bearishness this morning: the TED spread is still widening.
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