Trading Diary
February 26, 2005

USA

The Dow Industrial Average has had a turbulent week. Stocks fell sharply on Tuesday, with a large red candle and strong volume. Support then held at 10600, with a 3-day rally testing resistance at 10850 to 10860. Lighter volume on the rally indicates that resistance may hold and we could see further consolidation between 10860 and 10600.

A rise above 10860 would signal that further gains (and a test of resistance at 11400) can be expected.
Twiggs Money Flow has strengthened: the last pull-back respected the signal line and the indicator appears about to complete a broad double bottom.

The Nasdaq Composite is headed for a third test of resistance at 2100, after failed attempts at [b] and [c]. With successive lower lows at [c] and [e], and fairly light volume on Friday, we may see further consolidation between 2000 and 2100.

A fall below 2000 would signal a re-test of support at 1750, while a rise above 2150 would signal an upward breakout.
Twiggs Money Flow (21-day) is weaker than the Dow or S&P 500, lingering below the zero line.

On the longer-term chart we can see the significance of support at 1150/1160. The market has a positive outlook as long as the index stays north of this line.

Treasury yields

Last week's jump in the core PPI gave long-term yields a boost, with the yield on 10-year treasury notes back above 4.25%.
The yield differential (10-year T-notes minus 13-week T-bills) continues to weaken: back at 1.6% this week. 
Below 1.0% would be a (long-term) bear signal for equity markets.

Gold

New York: Spot gold has broken above resistance at $430 (upper border of the recent consolidation) with Friday closing at $434.70.
If this holds, we are likely to see a test of resistance at $450. Look for a pull-back that respects the new support level at $430.

ASX Australia

After a brief consolidation the All Ordinaries fell sharply on strong volume at [3]. The attempted rally [4] at the first line of support quickly faded, ending in further losses; but buyers were able to gain control on Friday [5], with a tall blue candle on strong volume. 
Expect a test of the initial resistance level at 4130. If this holds, there is likely to be another strong down-swing. 
A fall below the low of [5] would signal that a test of support at 4030 is imminent.
A rise above 4160 would signal that the intermediate trend has reversed upwards.

Twiggs Money Flow displays a strong bear signal, with a peak below the signal line, followed by a fall below preceding lows. A recovery that fails to break above the resistance line would add further confirmation.

Weekly reminder:
Bear in mind that at some point there is likely to be a correction back to 3450. This is based on observation of the All Ords over the past 25 years, where the index has regularly tested support at previous long-term highs during an up-trend.