Trading Diary
August 2, 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 has failed to hold above Monday's follow-through, falling 2.3% to close at 8313. The primary cycle trends downwards.

The Chartcraft NYSE Bullish % Indicator has given a bull alert signal, starting a new column with a reading of 30% (August 1).

The Nasdaq Composite, down 2.5% at 1247, closed the breakaway gap from Monday's follow-through. The primary cycle is in a down-trend.

The S&P 500 closed 20 points down at 864, holding just above the follow-through day from Monday.
The primary cycle trends downwards.

 
Weak job growth scares the market
Net jobs created in July were only 6000, compared to 66000 in June. (more)
 
Further rate cuts
Goldman Sachs predicts that the Fed will cut rates further before the end of the year.
 
US bond yields fall
Money flowing out of equities and talk of further rate cuts drive bond yields to new lows. (more)
 
 
ASX Australia
The All Ordinaries closed down 21 points at 3003 on low volume. The index is still above the 2940 support level. The primary cycle trends down.
Slow Stochastic (20,3,3) crossed below its signal line. Exponentially-smoothed money flow signals distribution.
 

 
 
Spot the typo (from yesterday's newsletter)
LHG is entering a stage 4 decline, with 20-day moving average crossing below the 150-day moving average. Relative strength (price ratio: xao) is declining and MACD is weak but exponentially-smoothed money flow displays a bearish divergence.
 

 

Exponentially-smoothed money flow displays a bullish divergence.

 
United Energy [UEL]
UEL recently broke up from a large triangle. Relative strength (price ratio: xao) is improving, MACD is positive and exponentially-smoothed money flow signals accumulation.

 


 

 
 
 
 
Telstra [TLS]
TLS relative strength (price ratio: xao) has lately been improving and MACD is strong but exponentially-smoothed money flow has failed to hold in positive territory.

 


 
 
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 4 (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 the ASX 200 using % Price Move (1 month: +5%) shows the strongest sectors as:
  • Electric Utilities
  • Construction & Engineering
  • Oil & Gas Exploration & Production
 
 




Conclusion
 
Short-term: Avoid new entries. Slow Stochastic and MACD are on opposite sides of their respective signal lines.
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:

The stock market is neither efficient nor random. It is not efficient because there are too many poorly conceived opinions; it is not random because strong investor emotions can create trends.
- William J O'Neil.
 
 




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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.