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Trading Diary
April 24, 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 retreated 0.9% after testing resistance above 8500, closing at 8440 on lower volume. The bullish ascending triangle continues.
The intermediate trend is down. A rise above 8587 will signal reversal to an up-trend; a fall below 8109 will signal continuation.
March 17th's follow through remains valid (as long as the index holds above 7763).
The primary trend is down; a rise above 9076 will signal a reversal.

The Nasdaq Composite formed an inside day, signaling uncertainty, down 9 points at 1457.
The intermediate trend is up.
The primary trend is up.

The S&P 500 lost 8 points to close at 911.
The intermediate trend is up.
The primary trend is down; a rise above 954 will signal a reversal.

The Chartcraft NYSE Bullish % Indicator is at 50% (April 23), after completing a Bull Correction buy signal. 

Market Strategy
Short-term: Long if the S&P 500 rises above 917; short if the intermediate trend (Dow or S&P) reverses down.
Intermediate: Long if the Dow/S&P primary trend reverses upwards; short if the intermediate trend (Dow or S&P) reverses down.
Long-term: There are already two bull signals: the March 17 follow through day and the NYSE Bullish % signal. Wait for confirmation from a Dow/S&P primary trend reversal.


Jobless claims rise
New unemployment claims jumped to 455,000 for the week ended April 19, signaling contraction. (more)

But durable goods orders increase
A 2% jump in March durable goods orders (1.3% excluding defense items) is welcome news for the manufacturing sector. (more)




Gold
New York (19.00): Spot gold is back up to $US 333.60.



ASX Australia
The ASX formed an inside day and closed down 2 points at 2962 on strong volume; signaling increased selling pressure. 
The intermediate trend is up.
The primary trend is down; a rise above 3062 will signal a reversal.

MACD (26,12,9) and Slow Stochastic (20,3,3) are above their signal lines; Twiggs Money Flow (21) signals accumulation.




Market Strategy
Short-term: Long if the index rises above 2966; short if the intermediate trend reverses.
Intermediate: Long if the primary trend reverses up (XAO above 3062); short if the intermediate trend reverses.
Long-term: There is already a bull signal: the March 18 follow through day. Wait for confirmation from a primary trend reversal.


Unitab [UTB]
Last covered on September 2, 2002.
Here is an interesting divergence between two key indicators.
UTB has been in a stage 2 up-trend for the past 3 years, not crossing below its' long-term moving average in the last 18 months.

But notice how Twiggs Money Flow (100-day) has dipped below the zero line, showing a strong bearish divergence just when the general market appears to be strengthening.
On the daily chart UTB has broken above the upward trend channel.

Relative Strength (price ratio: xao) is rising and MACD shows a strong bull signal. Twiggs Money Flow (21) displays the same bearish divergence as the 100-day indicator.





The equivolume chart shows strong accumulation between [1] and [3], with buying support entering at the bottom of corrections as at [3]. From [5] to [18] there is very light volume on rallies and large volume on the corrections - the reason for the bearish divergence on Twiggs Money Flow - but what does this signal?

There are a few points worth attention:
  • long shadows at [5] and [7] signal accumulation;
  • all corrections are of short duration - not more than 4 days;
  • down-volume is largest on square bars [11], [13] and [15] - signaling the presence of strong buying support;
  • even though down-volume appears dominant, it has not broken the upward trend.
My assessment is that we are witnessing "intelligent" buying, at the bottom of corrections. The buyer is not chasing the stock up, when it rallies, but patiently waiting for the next correction. This changes at [15], with profit-taking near the top of the rally and further selling into the correction [17].





Short-term traders may find opportunities when UTB corrects back to the intermediate trendline [5] to [17].
Long-term traders should wait for opportunities at the long-term trendline.
When price is above the upper trend channel traders should lock in profits with tighter stops (or a trailing % stop).

A break below 4.87 (the intermediate trendline) would be bearish.





New! Understanding the Trading Diary has been expanded to offer further assistance to readers.
Colin Twiggs


If you examine their trades,
many failed traders will show a series of small or moderate gains
and then a few large, devastating losses. 
Successful traders may, at times, incur a series of small losses
but these are then offset by several large gains.

~

Protect the downside and the upside will take care of itself.

- Donald Trump: The Art of the Deal







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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.