Trading Diary
July 24, 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 rallied an amazing 6.3% to close at 8191, the biggest percentage gain since October 1987. The index is back above resistance at 8000 which may again act as support. Primary and secondary cycles trend downwards.

The Chartcraft NYSE Bullish % Indicator has now entered oversold territory. See Bullish % Index for more details.

The Nasdaq Composite rose 5% to close at 1290. Primary and secondary cycles are in a down-trend.

The S&P 500 rallied 45 points to close at 843.
Primary and secondary cycles trend downwards.

The S&P 500 formed a strong key reversal signal, while the Dow formed a weaker pivot point reversal and the Nasdaq just failed to complete a reversal signal. These are short-term signals and it will take at least a week before we know whether this is a "V" bottom, as in September 2001, or a "sucker rally". The major bottoms in the past 40 years were:

1962 - ascending triangle
1970 - ascending triangle
1974 - double bottom
1980 - ascending triangle
1988 - ascending triangle (long)
1990 - symmetrical triangle
1998 - double bottom
2001 - "V" bottom

Bears will remind us that in 1985 the dividend yield on the Dow was 4.5%. This fell to 3.0% in 1987 before retreating to 4.5% after the crash. In 2002, the yield has just recovered above 2% after falling to almost 1.5%. 

 
AOL Time Warner
AOL reported second-quarter earnings of 9 cents per share, compared to a loss of 17 cents a year earlier, but is facing a probe into how it accounted for advertising deals. (more)
 
JP Morgan, Citigroup
Standard & Poor's say that investor fears about J.P. Morgan Chase and Citicorp are "unfounded". (more)
 
 
ASX Australia
The All Ordinaries had disposed of the 3000 support level by lunch-time, falling more than 2% to close at 2965 on strong volume.

Trading Diary
The primary cycle and secondary cycles trend down. The next support level is 2828, from September 2001

Slow Stochastic (20,3,3) is still above its signal line while MACD (26,12,9) is below. Exponentially-smoothed money flow signals distribution.

 
 
Gold stocks
Local gold stocks were sold down as bullion prices fall. (more)
AOR relative strength (price ratio: xao), MACD and exponentially-smoothed money flow are weakening.

 


 

Newcrest Mining [NCM] has experienced even steeper falls with declining relative strength (price ratio: xao) and MACD, and exponentially-smoothed money flow falling sharply.


Lihir Gold [LHG] is threatening to break out on the downside of a triangle. Relative strength (price ratio: xao) and MACD are weak but exponentially-smoothed money flow still shows accumulation.


 




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:
One of the most helpful things that anybody can learn is to give up trying to catch the last eighth - or the first.
These two are the most expensive eighths in the world. - Edwin Lefevre.
 
 




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