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Trading Diary
November 6, 2003

These extracts from my daily trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use .




USA
The Dow Industrial Average formed an outside day, closing up at 9857. Low volume signals a lack of enthusiasm from buyers and sellers. 
The intermediate trend is up.
The primary trend is up. A fall below 9000 will signal reversal.



The Nasdaq Composite formed a bearish hanging man on strong volume, closing up 17 points at 1976.
The intermediate trend is up.
The primary trend is up, approaching resistance at 2000. A fall below 1640 would signal reversal.


 


The S&P 500 rallied 6 points to close at 1058 on higher volume. 
The intermediate trend is up.
The primary trend is up. A fall below 960 will signal reversal.



The Chartcraft NYSE Bullish % Indicator weakened slightly to 81.47% (November 6).

Market Strategy
Short-term: Bullish if the S&P500 is above 1055.
Intermediate: Bullish above 1055.
Long-term: Bullish above 960.


Jobless claims fall
New unemployment claims fell to 348,000 last week, the lowest level since January 2001. (more)

Treasury yields
The yield on 10-year treasury notes rallied to 4.45%, reversing the intermediate trend (upwards).
The primary trend is up.




Gold
New York (18.56): Spot gold eased to $379.70.
The intermediate trend is up. Price has formed equal highs in the past 6 weeks; a fall below 370.00 will be a bear signal.
The primary trend is up. Expect resistance at 400 to 415.




ASX Australia
The All Ordinaries made another test of the 3250 support level, before closing back above at 3258. Higher volume and a weak close signal continued buying support. A rally from above the initial support level will signal trend strength.

A reader posed the question: How does one interpret the weak close on higher volume as "buyer support" rather than sellers' lack of confidence? When we see large volume on a small range one can assume buyers are keen at the price but large volume opening on the high and closing on the low suggests to me that the bears won out forcing prices down and reflecting a lack of confidence (hence the volume).

Answer: If price moves lower, this signals that sellers are in control and driving price lower. But if the Close is weak, it indicates that buyers have entered the fray in sufficient numbers to drive price back up to near the middle of the daily range. Increased volume and the close above the 3250 support level are further evidence of buying support.



The intermediate trend is down, with a band of support between 3238 and 3250.
The primary trend is up. The rally is extended and probability of a reversal increases with each successive primary trend movement. A fall below 3160 will signal reversal.  

MACD (26,12,9) is below its signal line; Slow Stochastic (20,3,3) is below; Twiggs Money Flow (100) is below its signal line and displays a bearish "triple" divergence.

Market Strategy
Short-term: Bullish if the All Ords is above 3296. Bearish below 3238.
Intermediate: Bullish above 3296.
Long-term: Bullish above 3160.

Tabcorp, Tab and Unitab
There was mixed reaction to Tabcorp's offer for TAB. The TAH proposal appears more attractive than the earlier Unitab [UTB] offer, but is likely to face legislative hurdles and a challenge from the competition watchdog. (more)



The market has sensibly downgraded TAH and UTB, in expectation of a bidding war. Management egos play a role in most takeovers.





St George Bank [SGB]
Last covered yesterday November 5, 2003.
SGB broke through support after strong bear signals on Relative Strength (xao) and Twiggs Money Flow (100).



I am wary of shorting stocks when the overall market is still in an up-trend. SGB has given strong bear signals but it would be prudent to wait for the pull-back and not take any position on the initial breakout.



Signs to look for on a pull-back are:
  • a short duration (ideally not more than 3 days);
  • volume dries up;
  • volatility (daily range) dries up; and
  • price respects the new resistance level.
Resistance may form at the round number (20.00) rather than at the previous low of 20.20.


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The weekly Trading Diary offers fundamental analysis of the
economy and technical analysis of major market indices,
gold, crude oil and forex.
The monthly What's New newsletter covers new articles
on Trading and the Economy, as well as new software updates.



Understanding the Trading Diary has been expanded to offer further assistance to readers, including directions on how to search the archives.

Colin Twiggs


I don't mind making mistakes,
what I don't like is being wrong.

~ Jesse Livermore in Reminiscences of a Stock Operator,
by Edwin Lefevre (1923).

(We all make mistakes, but you need to analyze them and modify your behavior to avoid repeating them.)




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