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Trading Diary
July 3, 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.

The Dow Industrial Average broke through support at 10300 and we are likely to see another test of the 10000 support level.

The overall pattern is one of consolidation around the 10000 support level: marginally lower highs at [c] and [e]; marginally lower low at [d]. This pattern can break out in either direction. Obviously, in an up-trend, an upward breakout is more likely but a possible reversal cannot be ignored. We may witness further marginal highs or lows and direction will only be clear when we have a breakout followed by confirmation, with a pull-back that respects the upper or lower border of the pattern.
Twiggs Money Flow
is drifting lower.

The Nasdaq Composite displays a similar consolidation pattern to the Dow, with a consolidation between 1900 and 2000. 
Twiggs Money Flow
is drifting sideways.

The same pattern also appears on the S&P 500. Breakouts will need confirmation before they can be relied upon. 
Twiggs Money Flow continues to signal distribution.

The point & figure chart shows the consolidation more clearly, with resistance at 1150 and support at 1080.

The NYSE Bullish Percent Index rose to 66.22%: making a weak Bull Confirmed signal.

Treasury yields

The yield on 10-year treasury notes is testing support, with a close on Friday below 4.50%. The Fed raised interest rates by a quarter percent as expected but undid the effect, to some extent, by uttering soothing words about increases at a measured pace. The yield differential (10-year T-notes minus 13-week T-bills) is still a healthy 3.2%.


New York: Spot gold closed up at $398.20. The metal has encountered resistance at the 400.00 level. The intermediate up-trend will require further confirmation, with a rise above Monday's high of 404.25.

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ASX Australia
The recent retracement on the All Ordinaries encountered support above 3500; a bullish sign. An up-trend where troughs and preceding peaks do not overlap signals that buyers are dominant, with sellers unable to drive the index below the first line of support at the previous high (in this case at 3500). The reaction on Friday is also encouraging, with a weak close and strong volume signaling buying support.

The primary up-trend continues; though readers should bear in mind that we may still see a secondary correction later test support at 3450. Twiggs Money Flow continues to signal strong accumulation.

Point & Figure - Breakouts and Confirmations

We have had a few distractions this week, so I will continue with the series on Point & Figure charts in next week's newsletter.

Equivolume - Candlevolume

Notice anything different about the equivolume chart below?
The next update of Incredible Charts will include an improvement suggested by some members several months ago: equivolume bars presented as candlesticks.
  • Both Open and Closing prices are displayed;
  • The bar is colored blue if the Close is higher than the Open; and
  • Red if the Close is lower than the Open.
  • If the Close is equal to the open, the bar takes the same color as the previous day.
The bars can be used in the same fashion as candlesticks, with the added advantage that the width of the bar indicates trading volume.
On Microsoft we can see that the recent rally is supported by strong volume. The stock then encountered resistance at 28.50 before consolidating in a narrow band between 28.00 and 29.00: a bullish sign.

On the weekly chart, Microsoft has formed a broad base, with resistance at 29.00 to 30.00. 
A breakout, confirmed by a pull-back that respects support at these levels, would be a strong bull signal.
Failure to break through resistance at 29.00 would be bearish, while a fall below 24.00, would add further confirmation.

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Colin Twiggs

You are successful the moment you start moving toward a worthwhile goal

~ Chuck Carlson

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