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Trading Diary
October 20, 2003

These extracts from my daily trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use .

The Dow Industrial Average formed an inside day, signaling support above 9660. The index closed up at 9778 on low volume.
The intermediate trend is up. An up-turn above 9660 will signal trend strength.
The primary trend is up. A fall below 9000 will signal reversal.

The Nasdaq Composite formed a weak reversal with low volume, closing up 15 points at 1925 on lower volume after testing support at 1910.
The intermediate trend is up.
The primary trend is up. A fall below 1640 will signal reversal.


The S&P 500 rallied 6 points to close at 1045 on low volume.
The intermediate trend is up.
The primary trend is up. A fall below 960 will signal reversal.

The Chartcraft NYSE Bullish % Indicator eased further to 81.62% ( October 20).

Market Strategy
Short-term: Bullish if the S&P500 is above 1045.
Intermediate: Bullish above 1045.
Long-term: Bullish above 960.

Leading indicators mixed
Economists received mixed signals from leading indicators for September. (more)

Treasury yields
The yield on 10-year treasury notes eased to 4.38%.
The intermediate trend is up. Expect resistance at 4.60%.
The primary trend is up.

New York (13.30): Spot gold is up slightly at $373.50.
The intermediate trend is down.
The primary trend is up, with support at 343 to 350.

ASX Australia
The All Ordinaries displays an absence of buyers, with a weak close on lower volume; down 6 points at 3295 after an early rally.

The intermediate trend is up.
The primary trend is up. A fall below 3160 will signal reversal.

MACD (26,12,9) is above its signal line; Slow Stochastic (20,3,3) has whipsawed above; Twiggs Money Flow (100) is below the signal line and displays a "triple" bearish divergence.

Market Strategy
Short-term: Bullish if the All Ords is above 3307. Bearish below 3283.
Intermediate: Bullish above 3250.
Long-term: Bullish above 3160.

A new sub-industry was highlighted by weekly stock screens:

APN News Media [APN] faces strong overhead resistance at 4.00 after rallying off a V-bottom in late 2002.
Twiggs Money Flow (100) has risen above zero, signaling accumulation.

Closer examination of the V-bottom shows that a re-test of support levels did take place at [1], encountering strong support at 2.95 before resuming the rally.
Relative Strength (price ratio: xao) is recovering, after a secondary correction. Price is likely to encounter strong resistance at 4.00: there has been insufficient volume on the sell-off in 2002.

John Fairfax Holdings [FXJ], last covered May 28, 2003, formed a broad base in 2002 to 2003 accompanied by a strong bullish divergence on Twiggs Money Flow (100).

Price completed a primary trend reversal at [6], with a new high after higher lows at [3],[4] and [5]. Relative Strength (price ratio: xao) is rising strongly. Resistance at 4.00 to 4.10 is the next target.

PMP Limited [PMP], last covered July 5, 2002, has formed a broad double bottom over 2001/2002. The cathartic sell-off at [1] should weaken resistance at 1.10. A large amount of stock has changed hands at low prices; and buyers at low prices will be less inclined to sell on a recovery to earlier highs.

West Australian Newspapers [WAN], last covered April 30, 2003, formed a broad consolidation above support at 4.80. Price recently rallied, to consolidate below 6.10, before breaking through resistance.
Twiggs Money Flow (100) signals strong accumulation. The target is overhead resistance at 6.80.

The equivolume chart shows initial tests of resistance at [1], [2] and [3] all retreated back below 6.10, signaling a lack of buying support. This was followed by profit-taking at [4], with heavy selling into the rally. The latest breakout shows stronger support on the short-term pull-back at [5] but subsequent days display thin volume and we may see further re-tests of the new support level.

Prudent traders may wait for an intermediate-term pull-back to respect support at 6.00 to 6.10 before increasing long positions. A close below 5.80 would be a strong bear signal.

Understanding the Trading Diary has been expanded to offer further assistance to readers, including directions on how to search the archives.

Colin Twiggs

A market which has been overbought becomes dull on rallies and develops activity on declines;
conversely, when a market is oversold, the tendency is to become dull on declines and active on rallies.
Bull markets terminate in a period of excessive activity and begin with comparatively light transactions.

~ Robert Rhea: Dow Theory (1932).

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