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Trading Diary
January 29, 2005

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 10500 after a short upswing, candles [2] and [3] displaying long shadows. This led me to believe that a strong down-trend would follow, but Thursday and Friday [5] both have long tails, reflecting buying support. Strong volume on Friday indicates a volatile market and we may witness a sharp move in either direction.





So far the index has held above the first line of support at 10350 (from the previous high in September). Failure to breach this level would be a strong bull signal.
If the index holds above 10000, that would still be moderately bullish and further attempts to break above resistance at 10600 are likely.  If the correction reaches the previous low of 9750, on the other hand, that would signal bear strength: expect a change in the primary trend.

Twiggs Money Flow (21-day) continues to signal distribution after the peak below zero at [B-] (a strong bear signal).





The Nasdaq Composite index appears more bearish than the Dow, having penetrated the first line of support at 2050. This was followed by a short pull-back to test the new resistance level. Resistance has held but I am suspicious of the long tail on Friday's candle [2] which, similar to the Dow, signals buying support. A close above 2050 would be a strong bull signal.
On the other hand, a further downward move would indicate that a test of 1900 is likely.

Twiggs Money Flow (21-day) continues to signal distribution after the bearish peak below the zero line at [B-].





The S&P 500 has so far held above support at 1160/1140. If the index respects this initial level of support that would be a strong bull signal. However, the Nasdaq may drag the index lower.
A fall below support at 1100 would have (long-term) bearish implications.





Twiggs Money Flow continues to signal distribution, remaining below the zero line.






Treasury yields

The yield on 10-year treasury notes remains soft, consolidating in a narrow band above 4.00%, despite the Fed being almost certain to raise interest rates by another quarter per-cent at next week's meeting.
The yield differential (10-year T-notes minus 13-week T-bills) continues to fall, reaching 1.75% this week. Below 1.0% would be a long-term bear signal for equity markets.







Gold

New York: Spot gold has consolidated in a narrow range between $420 and $430. A close below $420 would signal continuation of the intermediate down-trend, with a likely test of support at $400 and possibly the 1-year low of $375.
Though less likely, a break above $430 would signal another test of $450 (the one-year high).
Friday's close was $425.20.





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ASX Australia

After a hesitant start, with tall shadows signaling resistance on Monday [1] and Tuesday, the All Ordinaries rallied to a new high on Thursday [3]. The index has now encountered committed selling, with a weak close and strong volume at [4]. I expect resistance at 4100 to hold and a downswing to test support at 4030.
A close above 4100  (or a rise above the high of [4]) would signal continuation of the rally.





Lower highs on 21-day Twiggs Money Flow, followed by a fall below the previous low, signal distribution. A fall below zero would add further confirmation.
The primary trend still appears strong but we need to bear in mind that at some point there is likely to be a correction back to 3450. This is based on observation of the All Ords over the past 25 years, where the index has regularly tested support at previous highs in an up-trend.





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Colin Twiggs


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