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Trading Diary
February 5, 2003

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 is still within the congestion pattern, easing down 0.3% to 7985 on average volume. 
This is a likely continuation pattern and the index appears headed for a re-test of support at 7500.
The primary trend is down.

The Nasdaq Composite lost 5 points to close at 1301. The next major support level is at 1200.
The primary trend is up (the last low was 1108 and the last high 1521).

The S&P 500 is also in a congestion pattern, closing down 5 points at 843, and appears headed for a re-test of support at 768.
The index is forming a base between 768 and 964.

The Chartcraft NYSE Bullish % Indicator is on a bull correction signal at 46% (February 4).
Powell addresses U.N.
Colin Powell's address to the U.N. Security Council fails to sway Germany and France who are opposed to military action. (more)



Gold
New York (16:55): Spot gold dropped to $US 369.90 after reaching 388.00 earlier in the day.



ASX Australia
The All Ordinaries has broken through the 2915 support level on strong volume, closing down 28 points at 2898. The next support level is at 2850.

Slow Stochastic (20,3,3) has crossed back below its signal line; MACD (26,12,9) is below; Twiggs Money Flow signals distribution.





Orica [ORI]
Last covered on October 29, 2002.
Orica commenced a stage 2 up-trend after completing a double bottom, [A] and [B], with a breakout at [C]. The trend commenced at a very fast pace and, as often happens, this proved unsustainable. After [D] ORI slowed to a creeping up-trend before forming a top at [H]. The chart now shows a strong breakout from the congestion pattern at [J], which has also breached the long-term trendline.

Relative Strength (price ratio: xao) is falling and MACD has completed a strong bear signal with a peak below zero.



The daily chart shows that the top from [H] to [J] was a descending triangle. Twiggs Money Flow, which showed exceptional accumulation over the past year, now signals distribution.





False breaks at [I] and [9] are evident on the equivolume chart before the break-down at [J] on strong volume. The width of the bars at [11] and [12] shows determined selling, overcoming buying support around 9.00.

A drop like this is unsustainable and a pull-back can be expected in the next few days, possibly at the 8.50 support level (highlighted on the daily and weekly charts). The duration and strength of the pull-back will indicate the likely speed of the down-trend.






Market strategy
For further guidance see Understanding the Trading Diary.

Short-term: Short. The Slow Stochastic has re-joined MACD below its signal line.
Medium-term: Avoid new entries.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


We have identified danger, physical exertion, intelligence, and friction
as the elements that coalesce to form the atmosphere of war,
and turn it into a medium that impedes activity.

The novice cannot pass through these layers of increasing intensity of danger
without sensing that here ideas are governed by other factors,
 that the light of reason is refracted in a manner quite different
from that which is normal in academic speculation.


- Prussian military thinker Claus von Clausewitz:
 translated from Vom Kriege ("On War") (1831)







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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.