Trading Diary
January 22, 2005
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
The Dow Industrial Average recovered above resistance at 10600 (Tuesday) but failed to hold on to these gains, slipping back below the previous low on increasing volume. The marginal break [2] is a bearish sign, signaling continuation of the intermediate down-trend. This is supported by the 21-day Twiggs Money Flow which completed a peak below the zero line at [2]: a strong bear signal.
The Dow Industrial Average recovered above resistance at 10600 (Tuesday) but failed to hold on to these gains, slipping back below the previous low on increasing volume. The marginal break [2] is a bearish sign, signaling continuation of the intermediate down-trend. This is supported by the 21-day Twiggs Money Flow which completed a peak below the zero line at [2]: a strong bear signal.
The longer-term picture shows a large ("mid-point") consolidation
below 10600. The strength of the current correction is important.
Failure to breach support at 10000 would signal that bears are
weak and further attempts to break above resistance at 10600 are
likely. On the other hand, a strong correction that reaches
the previous low of 9750 would indicate bear strength: expect a
weak rally followed by a change in the primary trend.
The Nasdaq Composite index has penetrated the first line
of support at 2050 and a test of 1900 is likely. Failure of the
major support level at 1750 would signal a primary trend
change.
Twiggs Money Flow (21-day) has completed a peak below the zero line at [B-], signaling that bears are in control.
Twiggs Money Flow (21-day) has completed a peak below the zero line at [B-], signaling that bears are in control.
The S&P 500 has continued its downward slide on
increased volume, after briefly rallying back within the border
of the rising broadening wedge formation (Tuesday). Expect a test
of support at 1100. Some support is likely at 1160/1140 but this
may not hold, with the Dow and Nasdaq dragging the index lower.
Twiggs Money Flow has completed a peak below the signal line
at [B-], signaling that bears are in control.
The primary trend direction is up but we appear to be headed for a correction/consolidation.
A fall below support at 1100 would have (long-term) bearish implications.
The primary trend direction is up but we appear to be headed for a correction/consolidation.
A fall below support at 1100 would have (long-term) bearish implications.
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Treasury yields
The yield on 10-year treasury notes continues to consolidate in a narrow band above 4.00%, indicating that long-term yields may weaken further. A bearish sign for equity markets.
The yield differential (10-year T-notes minus 13-week T-bills) continues to fall: below 1.0% would be a long-term bear signal for equity markets.
The yield on 10-year treasury notes continues to consolidate in a narrow band above 4.00%, indicating that long-term yields may weaken further. A bearish sign for equity markets.
The yield differential (10-year T-notes minus 13-week T-bills) continues to fall: below 1.0% would be a long-term bear signal for equity markets.
Gold
New York: Spot gold has consolidated above support at $420, with Friday's close at $426.50 signaling another test of resistance at $430. A close below $420 would signal continuation of the intermediate down-trend, with a likely test of support at $400 and possibly the 1-year low of $375.
New York: Spot gold has consolidated above support at $420, with Friday's close at $426.50 signaling another test of resistance at $430. A close below $420 would signal continuation of the intermediate down-trend, with a likely test of support at $400 and possibly the 1-year low of $375.
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ASX Australia
The All Ordinaries continued to encounter resistance around 4080 after bearish activity in US equity markets. This is evidenced by a tall shadow on Tuesday at [T] followed by a retreat to test support at 4030. Friday [F] displays an inside day, signaling indecision. A close below 4030 would signal that a test of 3900 is likely (with possibly some support at 4000 or 3970).
A rally above the high of [F] would signal further consolidation.
The All Ordinaries continued to encounter resistance around 4080 after bearish activity in US equity markets. This is evidenced by a tall shadow on Tuesday at [T] followed by a retreat to test support at 4030. Friday [F] displays an inside day, signaling indecision. A close below 4030 would signal that a test of 3900 is likely (with possibly some support at 4000 or 3970).
A rally above the high of [F] would signal further consolidation.
Lower highs on 21-day
Twiggs Money Flow warn us to expect some form of
consolidation/correction. Overall, the index appears strong but
we need to bear in mind that at some point there is likely to be
a correction back to 3450. Not all readers share this view,
pointing to the amount of new money flowing into the market.
There may still be further life in the bull rally but, based on
observation of the
All Ords over the past 25 years, the index is likely to test
support at the previous highs in the up-trend.
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Colin Twiggs
If we begin with certainties, we shall end in doubts;
but if we begin with doubts, and are patient in them,
we shall end in certainties.
~ Francis Bacon
but if we begin with doubts, and are patient in them,
we shall end in certainties.
~ Francis Bacon
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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.