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Trading Diary
May 7, 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 .

The Dow formed an inside day, signaling uncertainty. The index closed 0.3% lower at 8560 on lower volume.
The intermediate trend is down. I prefer to wait for a clear break above resistance (8600) to signal the start of an up-trend. A fall below 8328 will signal continuation.
The primary trend is down; a rise above 9076 will signal a reversal.

The S&P 500 retreated 5 points to close at 929, forming an inside day.
The slow intermediate up-trend continues, with resistance overhead at 935.
The primary trend is down; a rise above 954 will signal a reversal.

The Nasdaq Composite retreated back below resistance, closing down 1.1% at 1506.
The intermediate trend is up, with resistance overhead at 1521.
The primary trend is up.

The Chartcraft NYSE Bullish % Indicator continues to rise, reaching 56.38% on May 6, following a Bull Correction buy signal on April 3. 

Market Strategy
Short-term: Long if the S&P 500 rises above 937; short if the S&P intermediate trend reverses down (or falls below 898).
Intermediate: Long if the Dow/S&P primary trend reverses upwards; short if the intermediate trend (S&P) reverses down.
Long-term: There are already two bull signals: the March 17 follow through day and the April 3 NYSE Bullish % signal. Wait for confirmation from a Dow/S&P primary trend reversal.

Bear market insights
McKinsey & Co report that the 40% fall in the S&P 500 over the past 3 years is attributable to large cap stocks in three major sectors: information technology, telecommunications and materials. Six of the other seven sectors showed positive returns. (more)

The network equipment manufacturer reports earnings above expectations, but gives a cautious fourth-quarter outlook. (more)

New York (17.37): Spot gold eased to $US 341.60.

ASX Australia
The All Ordinaries rallied above the previous day's high of 2949 but closed back at 2944 on higher volume.
The intermediate up-trend continues but the indicators show that it is weakening; a break below Monday's low of 2926 will signal a reversal.
The primary trend is down. A rise above 3062 will signal reversal to an up-trend.

MACD (26,12,9) and Slow Stochastic (20,3,3) are below their signal lines and the Stochastic has fallen below 80%, a further bear signal; Twiggs Money Flow (21) is below its upward trendline but continues to signal accumulation.

Market Strategy
Short-term: Long only if the All Ordinaries index rises above 2950; short if it falls below 2926.
Intermediate: Long if the primary trend reverses up (XAO above 3062); short if the XAO falls below 2926.
Long-term: There is already a bull signal: the March 18 follow through. Wait for confirmation from a primary trend reversal.

Brambles [BIL]
Last covered on July 17, 2002.
BIL is among several Industrial stocks showing signs of a recovery. After a classic downward spike (selling climax) on heavy volume at [1], Brambles made a false (marginal) break of support at [2], before rallying strongly to complete a double bottom reversal with a break above 5.00.

Twiggs Money Flow (100-day and 21-day) show bullish divergences between [1] and [2].

The daily chart shows the gap down signaling the selling climax at [1].
Another significant gap, sometimes referred to as a hole-in-the-wall gap, above the downward trendline at [2], is a strong bull signal. 

Relative Strength (price ratio: xao) has leveled after a lengthy decline and MACD shows a bullish divergence at [2].

The equivolume chart highlights the heavy volume on the hole-in-the-wall "breakaway" gap at [a]. 
The break above resistance at [b] shows heavy selling pressure, with weak closes at [b] and [c] and strong volume at [c].
The pull-back at [d] only lasted one day but showed significant volume.
The subsequent rally to [e] shows weak closes and thin volume. Expect further consolidation above 5.00

A break below 4.60 would be a bear signal.

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

Colin Twiggs

The future belongs to those who believe in the beauty of their dreams.

- Eleanor Roosevelt.

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