Sector Analysis

Explains how to use the [Sectors ASX 200] project file
and how to set up Sector Comparison charts.

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 continues to climb, up 0.8% at 8265 on lower volume. 
Monday's follow-through day is a reversal signal used by William O'Neil to pick market bottoms.
The intermediate cycle is down; until a higher low is formed, followed by a new high.
The primary trend is down.

The Nasdaq Composite eased 3 points lower at 1397.
The large correction does not alter the intermediate trend, which is still down.
The primary trend is up; a fall below 1108 will signal a reversal.

The S&P 500 recorded a similar gain to the Dow, closing 8 points up at 874.
The intermediate trend is down.
The primary trend is down; the next support level is at 768.

The Chartcraft NYSE Bullish % Indicator remains at 36% (March 18), signaling that the latest rally is concentrated on a few stocks and lacks breadth.

Oil prices continue to fall
Oil prices have fallen 21% in the last 5 days in expectation of a quick war. (more)

The latest rally
The market is pricing in a quick and painless war, but institutions are staying on the sidelines. (more)

ASX Australia

The All Ordinaries gained a further 11 points to close at 2815 on lower volume. 
The intermediate trend is down but the index has broken above the trendline.
The primary trend is down.

MACD (26,12,9) is above its signal line; Slow Stochastic (20,3,3) is above; Twiggs Money Flow (21) is rising.

Westpac [WBC]
Last covered on November 8, 2002.
WBC appears to have completed a double bottom on the weekly chart, with a break above the intervening high of [B].
Previously the bank had formed a broad top in 2001/2002 before commencing a stage 4 down-trend.

Relative Strength (price ratio: xao) is rising; MACD and Twiggs Money Flow display bullish divergences at [A] and [E]. 

The daily equivolume chart shows that the double bottom has been completed by a false break at [F], with price closing back below the resistance level; signaling weakness.
Earlier, the V-bottom at [A] was followed by a sharp rally to [B]. The subsequent shake-out ended with a false break below 13.00 at [E]. 

False breaks often result in a retreat to test the opposite limit of the trading pattern. Volume and volatility should provide further clues in the next few days, as to what will follow the latest false break at [F].

Stock Screens: 3-month High
The screen reflects a number of stocks in consolidations that may prove to be tops. 
Apart from the three banks mentioned earlier in the week, 100-day Twiggs Money Flow is bullish for Coates [COA], QBE and Sigma [SIG]; while OPSM, Burns Philp [BPC] and Foodland [FOA] are bearish.

Market strategy
For further guidance see Understanding the Trading Diary.

Short-term: Long. Slow Stochastic and MACD are above their respective signal lines.

Medium-term: Avoid new entries.

Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs

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: Reminiscences of a Stock Operator.

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