Dow Correction
By Colin Twiggs
February 28, 2007 1:00 a.m. ET (5:00 p.m. AEDT)
Occasionally we will issue a mid-week update when a significant
event occurs on one of the major indexes.
These extracts from my daily trading diary are for educational
purposes and should not be interpreted as investment advice.
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Dow Jones Industrials
The Dow Jones Industrial average recorded a sharp fall, breaking below the recent trend channel and closing below the 100-day moving average. The bearish divergence on Twiggs Money Flow has been warning of profit-taking for some time. A secondary correction will be confirmed if the next rally fails to take out the previous high -- close to a certainty after the extended up-trend. This is not a good time to go bargain-hunting.
The primary trend remains up. The correction is likely to find support at the previous high of 11600, while a fall below 10700 would signal a primary trend reversal.
A correction on the Dow is likely to drag other equity markets down as well, regardless of their fundamentals.
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.