Trading Diary
July 19, 2002

These extracts from my daily trading diary are intended to illustrate the techniques used in short-term trading and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use .




USA
The Dow crashed more than 4.5% to close at 8019 on strong volume, just above the key 8000 support level. We are now entering the third stage of the bear market. Primary and secondary cycles trend downwards.

The Nasdaq Composite lost 2.8% to close at 1319, below the 1357 October 1998 support level.
The primary and secondary cycles are in a down-trend.

The S&P 500 dropped 34 points to close at 847. The next support level is 804, from April 1997.
Primary and secondary cycles trend downwards.

 
Johnson & Johnson
J&J stock fell 16% on allegations of false record-keeping at a plant that makes the Eprex anemia drug, linked to serious side-effects. (more)
 
AOL Time Warner
AOL falls 7% after a management shakeout and resignation of COO Bob Pittman. (more)
 
Sun Micro
 Sun Microsystems stock dropped 27% after the company lowered 2003 revenue and earnings forecasts. (more)
 
ASX Australia
Another drop of more than 1%, with the All Ordinaries closing down 42 points at 3058 on above-average volume.
The primary cycle and secondary cycle are in a bear trend.
Slow Stochastic (20,3,3) is above its signal line while MACD (26,12,9) is below.
Exponentially-smoothed money flow signals distribution.


Brewers group 
Fosters [FGL] and Lion Nathan [LNN] have enjoyed a year of "friendly" competition. (more)
FGL has experienced a downward breakout from a symmetrical triangle formed over the past 9 months. Relative Strength (price ratio: xao) is improving, while MACD and exponentially-smoothed money flow are negative.


LNN has formed a similar triangle but has not yet made a breakout. Relative Strength (price ratio: xao) is strong, MACD is neutral, while exponentially-smoothed money flow signals accumulation during the recent flag pattern.


TAB [TAB]
TAB Limited has formed a congestion pattern that could be described as a large pennant or small triangle.
Relative Strength (price ratio: xao) is positive but MACD has turned back down. Exponentially-smoothed money flow signals distribution over the period of the triangle pattern.


 

Sector Analysis
 Stage changes are highlighted in bold. 
  • Energy [XEJ] - stage 1 
  • Materials [XMJ] - stage 4 (RS is rising)
  • Industrials [XNJ] - stage 4
  • Consumer Discretionary [XDJ] - stage 4
  • Consumer Staples [XSJ] - stage 4
  • Health Care [XHJ] - stage 4
  • Property Trusts [XPJ] - stage 3
  • Financial excl. Property Trusts [XXJ] - stage 4
  • Information Technology [XIJ] - stage 4
  • Telecom Services [XTJ] - stage 1 (RS is rising)
  • Utilities [XUJ] - stage 1 (RS is rising)


The ASX has ceased to provide the old ASX indices.

 
Sectors: Relative Strength
 A stock screen of equities using % Price Move (3 months: +10%) is dominated by:
  • Base Metals
  • Computer & Office
  • Diversified Media
  • Gold Explorers
  • Gold Producers
  • Mining Explorers
  • Miscellaneous Industrials
  • Miscellaneous Services
  • Oil & Gas Explorers
  • Oil & Gas Producers
 




Conclusion
 
Short-term: Avoid new entries. The Slow Stochastic is above, and MACD below, its signal line.
Medium-term: Wait for the All Ords to signal a reversal.
Long-term: Wait for a bull-trend on the Nasdaq or S&P 500 (primary cycle).
 
Colin Twiggs
 
Thought for the Day:
 There are a few really outstanding companies, whose stock normally sells at a substantial premium, except in the final throes of a bear market.
 
 




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Colin Twiggs

Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.