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Trading Diary
February 24, 2004

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 .




USA (23rd)
The Dow Industrial Average again tested support at 10600 before closing at 10609. The weak close and slightly higher volume signal some buying support.
A fall below the January 29 low of 10417 would signal a re-test of support at 10000.
The primary trend is up. Resistance is at 11300 to 11350. A fall below support at 9600 would indicate the start of a down-trend.



The Nasdaq Composite displays a strong downward bar, closing at 2007 after testing support at 2000. The strong close and higher volume signal selling pressure, indicating that the support level may be under threat. 
The intermediate trend is down.
The primary trend is up. A fall below support at 1640 would signal reversal.


 


The S&P 500 closed lower at 1141. The weak close and lower volume signal the absence of selling pressure. 
The intermediate trend is uncertain. A rise above 1155 would be bullish. A fall below support at 1122 would signal a down-trend.
The primary trend is up. Expect strong support at 1000. A fall below 960 would signal reversal.



The Chartcraft NYSE Bullish % Indicator retreated to 85.06%.




Gold
New York (Feb 24 02:06): Spot gold recovered to $400.70.
The intermediate trend is down.
The primary trend is up. A fall below $370 would signal reversal.




ASX Australia
The All Ordinaries penetrated support at 3350, closing at 3341; a signal that the intermediate up-trend has slowed. Volume is reasonable but does not show real "fear" - like the break below 3320 on January 28. A rise above today's high would still be bullish. A fall below last Monday's low of 3333 would be bearish.



The intermediate trend is up. A fall below support at 3320 would be bearish.
The primary trend is up. Resistance is at the 2001/2002 highs of 3425 and 3440. Support is at 3160.

Stock Screening - Stage 1 Breakouts
 Correction to yesterday's Diary:
  • To eliminate stocks already in strong trending moves:
    enter 25 as the Maximum % Move for 1, 3 and 6 months.

Directional Movement
Welles Wilder's Directional Movement system measures the ability of buyers and sellers to move price above or below the previous day's trading range. There are 3 lines:
  • The Positive Direction Indicator (+DI) summarizes upward trend movement;
  • The Negative Direction Indicator (-DI) summarizes downward trend movement; and
  • The Average Directional Movement Index (ADX) indicates whether the market is trending or ranging.
In screening for Stage 1 breakouts, the most important line is the ADX. Low levels, below 20 or 25, indicate a ranging market, while high levels signal a strong trend.

Our screen will therefore include:
  • Directional Movement ADX Crossover: crosses above 25 within the last 5 days;
Then we add the same filter as yesterday, to eliminate stocks already in a strong trend:
  • % Price Move: enter 25 as the Maximum for 1, 3 and 6 months.

Again, this is an imperfect screen, but it does turn up some interesting stocks. 
What we really need is an additional filter where we can set the minimum time that ADX must be below 25 (to filter out stocks where ADX whipsaws above and below 25). This is on our list for the planned upgrade of the stock screens. 







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

Colin Twiggs


Lives of great men all remind us
We can make our lives sublime,
And, departing, leave behind us
Footprints on the sands of time.

~ Henry Wadsworth Longfellow 
(1807 - 1882).



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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.