May 28, 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
The Dow Industrial Average intermediate up-trend has lost
momentum, consolidating in a narrow range above 10400 over the
last week. Friday's narrow range and low volume at  are a
result of the long weekend: the market is closed Monday for
Memorial Day. A test of resistance at 10900 is the most likely
outcome; while a close below 10400 is still a reasonable
possibility and would signal a re-test of support at 10000.
Although we are in an intermediate up-trend at present and
Twiggs Money Flow
(21-day) is above recent highs, signaling
accumulation, the index is likely to encounter fierce resistance
around 11000. We could well suffer a repeat of the pattern at
[a], despite buying support between 10000 and 9750, the October
low. Resolution of this latest "top" may take time and the
direction of the final breakout is by no means certain.
The Nasdaq Composite
is climbing strongly and
Twiggs Money Flow
(21-day) signals active accumulation
Expect a test of resistance at 2150 which may trigger strong
selling. If resistance holds, then a re-test of support at 1900
A close above 2180, on the other hand, would signal resumption of
the primary up-trend.
The S&P 500 intermediate up-trend has lost momentum,
consolidating below 1200 for the last week; accompanied by
declining volume. The narrow range and low volume on Friday 
are due to the long weekend. A re-test of support at 1165 is
still a reasonable possibility, while a breakout above 1200 to
test resistance at 1225 (the March 2005 high) is more likely.
A successful test of support at 1160 would be a strong bull
Twiggs Money Flow
(21-day) signals strong accumulation; a
pull-back that holds above zero would be a bullish sign.
A close above 1225 would signal a primary up-trend.
The yield on 10-year treasury notes is headed for a test of
support at 4.0%, while 13-week T-bills have risen to 2.8% from
below 1.0% over the last year. This explains why the
(10-year T-notes minus 13-week T-bills)
has fallen to 1.2%. Below 1.0% would be a long-term bear
New York: Spot gold is consolidating in a narrow band below
resistance at $420, signaling (down-) trend weakness. The
metal closed at 419.30 on Friday.
The primary trend will reverse downward if price falls below the
February low of $410.
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The ASX 200 has broken through the first line of
resistance at 4100 on strong volume. Unless there is a reversal
early next week, this signals that the down-trend is weakening.
The All Ordinaries has lagged behind the ASX 200 and is
still testing resistance at 4080, the first line of resistance
(from the February and March lows). The expected test of 4080 has
a good chance of success considering that the ASX 200 has already
A break above 4080 would not signal a change in a primary trend,
merely that the trend is weakening. Only a rise above the high of
4255 would signal that the primary trend has reversed upwards.
Expect resistance at 4255 to be exceedingly strong -- investors
may take the opportunity to exit at close to the previous
If resistance at 4080 holds then expect a test of support at
3900. Failure of that level would signal that a test of support
at 3450 is likely, amounting to roughly a 50% retracement of the
previous up-trend. If you review the
over the past 25 years, the index has regularly cut
back to test support at previous highs.
First weigh the considerations, then take the
~ General Helmuth von Moltke (1848 - 1916)
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