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Trading Diary
October 9, 2004

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 encountered resistance at 10200, with a weak close on Monday. Strong downward bars on Thursday and Friday precede another test of support at 10000. Penetration of this level would likely reach 9800. A successful test of support would be a long-term bull signal.




The longer-term consolidation pattern around 10000 continues to reflect market uncertainty. An upward breakout would be signaled by a trough above 10000, while a peak below this level would signal a bearish breakout.
Twiggs Money Flow remains bearish, having fallen sharply since the beginning of the year.




The Nasdaq Composite is about to test the new support level at 1900. A successful test would signal a rally to test resistance at 2100. A break back below support would likely test the next intermediate level at 1750. Twiggs Money Flow is whipsawing around the signal line, reflecting indecision.

The primary trend remains downward.





The S&P 500 encountered resistance at 1140. Strong downward bars on Thursday and Friday signal a likely re-test of support at 1100. Another successful test of support would be bullish, resulting in a likely rally to 1150, and possibly a breakout.

Twiggs Money Flow whipsaws around the signal line, reflecting indecision.
The long-term consolidation around 1100 continues. Falling troughs signal weakness but there is no clear breakout as yet.





NYSE Bullish Percent

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Treasury yields

The yield on 10-year treasury notes appears headed for another test of support at 4.00%. Weaker than expected increases in non-farm payrolls support the view that the Fed will have to be cautious with further rates increases. 
The yield differential (10-year T-notes minus 13-week T-bills) is at 2.5%. Differentials below 1.0% are long-term bear signals.






Gold

New York: Spot gold has rallied to close the week at $422.30
A pull-back that respects support at $410 would be a further bull signal.
Expect resistance at the 10-year high of $427.25.





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ASX Australia

Increased volume on the All Ordinaries, accompanied by weak closes on Wednesday and Thursday, signaled profit-taking. The further that price climbs above a base, the scarcer buyers become on dips, and the more ready sellers there are at the first sign of weakness. The result is shorter rallies and longer corrections.

Friday's strong close on a red candle may herald a test of support at 3660.




Twiggs Money Flow has crossed back below the signal line, raising doubt over the strength of any further rally.
The All Ords is in a strong primary up-trend. However, we should allow for a test of support at 3550 in the medium-term; and 3450 in the longer-term.




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About the Trading Diary has been expanded to offer further assistance to readers.

Colin Twiggs


Thank you for the feedback regarding last week's quote.
The original source appears to be Russell Sage, a wealthy US investor from the early 20th century.


The first rule is, to keep an untroubled spirit;
for all things must bow to Nature's law,
and soon enough you must vanish into nothingness.
The second is to look things in the face and know them for what they are,
remembering that it is your duty to be a good man.
Do without flinching what man's nature demands;
say what seems to you most just - though with courtesy, modesty, and sincerity.

~ Marcus Aurelius




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