Trading Diary
July 26, 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 made further gains, closing up 0.95% at 8264. The 8000 level is again acting as support. Primary and secondary cycles trend downwards.

The Chartcraft NYSE Bullish % Indicator has a reading of 24% (July 25). See Bullish % Index for more details.

The Nasdaq Composite formed a second inside day, rising 1.8% to close at 1262. Primary and secondary cycles are in a down-trend.

The S&P 500 closed up 14 points at 852.
Primary and secondary cycles trend downwards.

 
Consumer confidence
The final University of Michigan figure for July came in at 88.1, a lot higher than 86.5 from the preliminary survey. (more)
 
GE Capital
Following accounting concerns, Chairman Denis Nayden is ousted by parent General Electric Co. and GE Capital is split into four units. (more)
 




Gold
Gold fell through the key $US 310 support level with spot gold at $US 303.5 and August futures at $US 303.3. (more)
 
Bear market - no end in sight
Analyst Paul F Desmond says that "panic selling" has not been followed by sufficient "panic buying" for this to be the end of the bear market. (more)
 
 
ASX Australia
The All Ordinaries fell 50 points to close at 2941 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) and MACD (26,12,9) are below their signal lines. Exponentially-smoothed money flow signals distribution.
The Coppock indicator is likely to finish the month below zero, for the first time since 1995.
 

 
 
Cochlear ache [COH]
Cochlear shares tumble after the US Food and Drug Administration warns of 25 cases where patients with an inner-ear implant contracted meningitis, including 9 deaths. (more)
Relative strength (price ratio: xao) and MACD are declining while, surprisingly, exponentially-smoothed money flow signals a bullish divergence.

 


 

 

Bad debt concerns weaken bank stocks [ANZ]
Bank stocks have declined since ANZ disclosed its exposure to troubled UK Marconi group. (more)

ANZ is approaching the target of 16.80 from a completed head and shoulders pattern. Relative strength (price ratio: xao), MACD and exponentially-smoothed money flow are all declining.

 


 
Commonwealth Bank [CBA] is also declining, with falling relative strength (price ratio: xao), MACD and exponentially-smoothed money flow.
 

 
 
Sector Analysis
 Stage changes are highlighted in bold. 
  • Energy [XEJ] - stage 4 (RS is rising)
  • Materials [XMJ] - stage 4
  • Industrials [XNJ] - stage 4 (RS is rising)
  • Consumer Discretionary [XDJ] - stage 4
  • Consumer Staples [XSJ] - stage 4 (RS is rising)
  • Health Care [XHJ] - stage 4
  • Property Trusts [XPJ] - stage 3 (RS is rising)
  • 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)
Sectors: Relative Strength
 A stock screen of equities using % Price Move (1 month: +10%) is dominated by:
  • Application Software
  • Diversified Financial Services
  • Diversified Metals & Mining
  • Gold
  • Internet Software & Services
  • Oil & Gas Exploration & Production
  • Real Estate Management & Development
 
Conclusion
 
Short-term: Enter short in selected areas. The Slow Stochastic and MACD are below their respective signal lines. Keep stops tight.
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:
I think it would be a good idea.
- Mahatma Ghandi, when asked what he thought of Western civilization.
 
 




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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.