January 2, 2002
These extracts from my daily stock
trading diary are intended to illustrate the techniques used in
short-term share trading and should not be interpreted as
investment advice. Full terms and conditions can be found
The Dow rallied late in the day to close at 10073 on normal
volume. It may well test resistance formed at 10200, the level
of the previous high. The bearish MACD
The Nasdaq rallied 2% to close at 1610, but is still in
, only reversed if the index rises above 1640.
K-mart falls 18%
K-mart stocks fell on reports of disappointing December sales.
Instinet, retail industry
analysts, project stronger retail industry sales
but "further damage to already weakened margins" due
to mark-downs and special promotions.
Australia - ASX
The All Ords continued to climb, closing at 3384 but
on very weak volume*. This is best illustrated on an Equivolume
chart where the thickness of the bars represents volume*. Since
the break above 3320, on December 24th, volumes have been
exceedingly weak, indicating that a correction is likely.
* When we refer to "volume" in relation to an index, we
actually measure the total value traded. This is a more
accurate reflection of market activity.
The bearish divergence on the MACD
has been broken, with MACD rising above the last peak. But
MACD does not take volume into account and MACD divergences
are powerful signals, seldom wrong. So I am still
anticipating a downward correction.
This is beginning to sound like my daily mantra. Just
remember that you don't make money by buying stocks when they
have a 50/50 chance of going up or down. We have to wait until
the odds are more like 70/30 in our favor.
Short-term: The Dow still shows weakness and the
Nasdaq is in a down-trend. Tighten up on stop
and avoid new entries.
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