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Trading Diary
February 19, 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 respected resistance at 10850 to 10860, with a strong red candle on Thursday. However, Friday shows buying support at 10750 with strong volume and a close near the high. A rise above Friday's high would signal another attempt at resistance at 10850 to 10860. A break through resistance would be a strong bull signal. A fall below the low of February 9 would signal that a re-test of support at 10350 is likely.





If price breaks above 10860, expect a test of resistance at 11400.
Twiggs Money Flow (21-day) is above the zero line, but the longer term trend is lower and it is too early to call this a recovery.





The Nasdaq Composite is headed for a third test of support at 2050 after encountering committed resistance at 2050. Note the long shadow and higher volume at [2]. A close below 2050 (or fall below 2040) would signal a test of support at 2000. A fall below 2000 would be a (long-term) bear signal.





Twiggs Money Flow (21-day) appears weaker than the Dow and SPX: still hovering below the zero line.





The S&P 500 resembles the Dow with a strong red candle on Thursday [4], in this case testing support at 1200. Friday showed buying support with a long tail and a close back above 1200. If the index now rallies to above the high of [2] that would be a strong bull signal. A fall below 1160, though less likely, would indicate further consolidation.





Further troughs above zero, like the one below at [B+], would be a bullish sign on Twiggs Money Flow.









Treasury yields

The yield on 10-year treasury notes jumped after a sharp increase in the January core producer price index re-ignited fears of inflation and consequent steeper rates increases from the Fed.
The yield differential (10-year T-notes minus 13-week T-bills) increased to 1.70% this week. Below 1.0% would be a (long-term) bear signal for equity markets.





Parcel delivery services like Fedex [FDX_NY] are a good indicator of the level of underlying economic activity, giving an idea why producer prices have started to rise.









Gold

New York: Spot gold has broken through resistance at $420, the base of the recent consolidation, with Friday closing at $427.30.
The (intermediate) down-trend has slowed and further consolidation below $430 is likely. A rise above $430 would signal a test of resistance at $450.





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ASX Australia

The All Ordinaries has retreated from its February 7 high. An attempted rally at [1] quickly reversed due to a lack of buying support, with support later evident at 4130. A weak close at [3] indicated selling pressure, before a brief consolidation with inside days at [4] and [5]. A rise above the high of [3] would signal another test of the February 7 high, while a fall below support at 4130 would signal that a test of support at 4030 is likely.





Twiggs Money Flow continues to decline, signaling that the up-trend is weakening. A fall below below zero on 21-day TMF would add further confirmation.





My weekly reminder:
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 during an up-trend.




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Colin Twiggs


Your emotions are often a reverse indicator
of what you ought to be doing.

~ John F. Hindelong




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