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Trading Diary
July 28, 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 traded in a narrow range below 9300, closing slightly lower at 9267 on average volume.
The intermediate trend is up. A decline below 9000 will signal a down-turn.
The primary trend is up.

The S&P 500 failed to make further progress, closing 2 points lower at 997. Lower volume indicates that this may be a continuation pattern.
The intermediate trend is up. A fall below 976 will signal a down-turn.
The primary trend is up.

 


The Nasdaq Composite closed slightly higher at 1735 on lower volume. The doji shows indecision.
The intermediate trend is up.
The primary trend is up.

The Chartcraft NYSE Bullish % Indicator is lower at 75.16% on July 25.

Market Strategy
Short-term: Long if the S&P 500 is above 1000. Short if the index falls below 976.
Intermediate: Long if the S&P is above 1015. Short if below 962.
Long-term: Long if above 962.


US to borrow $104 billion
The Treasury Department expects to borrow $104bn in the current quarter to fund the growing budget deficit. (more)

Treasury yields
CBOE: The yield on 10-year notes continues to rise, closing at 4.28%.
The intermediate trend is up; the primary trend is down.




Gold
New York (19.49): Spot gold continues to rise, reaching $US 364.20.
On the five-year chart gold is above the long-term upward trendline.



ASX Australia
The All Ordinaries broke above resistance at 3089 to close at 3103, completing a bullish ascending triangle with a target of 3150. Lower volume warns us to exercise caution in case of a sharp reversal.
The intermediate trend is up.
The primary trend is up.

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



Market Strategy
Short-term: Long if the All Ords is above 3089. Short if below 2978.
Intermediate: The primary trend is up; Long if the All Ords is above 3089.
Long-term: Long if the index is above 2978.


Wesfarmers [WES]
Last covered on August 6, 2002.
WES has recently broken above its long-term downward trendline after forming a narrow V-bottom. As I have mentioned before, narrow bottoms are unstable and often break down (especially near the long-term trendline) to re-test support at the bottom of the "V".

In this case MACD has completed a bullish trough [+] above zero, just below the trendline. Relative Strength (price ratio: xao) is rising, but slowly.



WES appeared to form a base in 2002, with support evident at 26.00, but we were then treated to a strong shakeout at [a] on exceptionally high volume. The pull-back to [b] was short and on low volume, signaling further weakness. Price then fell sharply to [c], again on strong volume. The next correction, starting at [c], showed stronger volume and started an intermediate rally to [e]. The break above the trendline at [e] is accompanied by low volume, signaling possible weakness. 



Twiggs Money Flow (21) is whipsawing around the zero line and presently signals distribution..



The daily volume chart merely confirms the weekly chart: there is a dry-up of volume from [5], with the only large volume on a down-day at [6].

Note the earlier double bottom at [1] and [2], with strong volume on the higher low at [2]. A similar pattern occurs at [3] and [4], but this time the second low displays a false break at [4]. Both [2] and [4] are bullish signals.



The rally above the long-term trendline appears uncertain and it would be prudent for longer-term traders to wait for a more stable pattern.

Short-term traders should always be on the lookout for a change in the intermediate trend. A fall below 26.18 (beneath [6]) may present a short opportunity, while a break below support at 25.00 would be a strong bear signal. 





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

Colin Twiggs


Laws Absolute #2

"Run quick" or not at all;
that is to say, act promptly at the first approach of danger,
but failing to do this until others see the danger,
hold on or close out part of the "interest".

~ S.A. Nelson: The ABC of Stock Speculation (1902).


 
Stock Screens: Trending Stocks

Directional movement is another useful screen for identifying trending stocks. To identify up-trending stocks:

(1) Select ASX 200 from Indices and Watchlists and 200 as the Maximum Return;
(2) Open Directional Movement;
(3) Select DI+,DI- (14) Crossovers: Bull Signal within the last 9999 trading days; 
(4) Also select ADX Crossovers: ADX (14) crosses above 20 within the last 5 trading days;
(5) Submit.

This will return stocks commencing a bull trend.




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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.