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Trading Diary
January 4, 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 at Terms of Use .




USA
The Dow broke clear of the 10200 resistance level, closing at 10259 on reasonable volume. The bearish MACD divergence appears to be over. 
The Nasdaq was more subdued, closing 0.5% up at 1675.
 
Conditions ripe for a January rally
Abby Cohen, Goldman Sachs chief investment strategist, says that conditions are ripe for "a notable January rally". While Barry Hyman of EKN feels that "high valuations should keep investors prudent". (more)
 
BUY, HOLD or Sell
Investment banks seem to be shy of making SELL recommendations. (more)
 
Australia - ASX
The All Ords closed up at 3374 on reasonable volume. The inside day indicates that there is still uncertainty. The 20-Day Slow Stochastic is in overbought territory, confirming that this is not a good time to enter the market.
 

 
The bearish MACD divergence has weakened but should not be ignored.
 




Conclusion
It appears that the tide of optimism is carrying us into a typical January rally. Bear in mind that February often brings a correction.
There may be opportunities for short-term trading profits over the next few weeks but be on your guard for a correction. It is by no means clear that corporate profits have recovered so stick to companies with sound fundamentals.
Short-term: Tighten up on stop losses. Avoid new entries.
Long-term trades: Wait for a correction on the secondary cycle.
 
Colin Twiggs
 
 
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