China Builds Up Steam
By Colin Twiggs
July 7, 2007 2:30 a.m. EST (4:30 p.m. AEST)
These extracts from my 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: Dow, Nasdaq and S&P500
Most markets took a breather this week and the Dow Jones Industrial Average was no exception, consolidating at the upper border of its 3-year trend channel. Twiggs Money Flow recovered sharply, signaling short-term accumulation.
![dow jones industrial average medium-term chart dow jones industrial average medium-term chart](https://tradingdiary.incrediblecharts.com/images/20070707_djiaa_w.png)
Long Term: The primary trend is up, with support at 12000 and 12800.
Short Term: Breakout below 13250 would warn of a secondary correction, while a rise above 13700 would signal another primary advance - and possible acceleration into a blow-off. Low volumes are attributable to the Independence Day holiday.
![dow jones industrial average short term chart dow jones industrial average short term chart](https://tradingdiary.incrediblecharts.com/images/20070707_djiaa.png)
The Dow Jones Transportation Average respected support
at 5000 and is now rallying to test 5300. Breakout above this
level would be a bull signal. Twiggs Money Flow recovered
sharply to signal short-term accumulation. Reversal below 5000
is not expected and would signal trend weakness.
Fedex and UPS both appear bullish, echoing the index.
![dow jones transport average dow jones transport average](https://tradingdiary.incrediblecharts.com/images/20070707_djtaa.png)
The Nasdaq Composite displays a failed down-swing in the
ascending broadening wedge pattern: signaling that an upward
breakout is likely. Twiggs Money Flow is edging lower, but
watch for a break of the downward trendline.
Long Term: The primary trend remains upwards, with
support at 2340 and 2500 (from 2525).
![nasdaq composite nasdaq composite](https://tradingdiary.incrediblecharts.com/images/20070707_comp.png)
The S&P 500 continues with similar consolidation to
the Dow. A rise above 1540 would signal another primary
advance, while breakout below 1490 would warn of a secondary
correction. Twiggs Money Flow has recovered above zero,
signaling short-term accumulation.
Long Term: The primary trend remains up, with support
levels at 1460 and 1375.
![standard and poors 500 standard and poors 500](https://tradingdiary.incrediblecharts.com/images/20070707_spx.png)
LSE: United Kingdom
The FTSE 100 is rallying towards the upper border of an
ascending broadening wedge. A swing that fails to reach the
upper border would be bearish, while an upward breakout would
signal another primary advance - towards the all-time high of
6900/7000. Twiggs Money Flow threatens to break above the
downward trendline, which would be a bullish sign.
Long Term: The primary up-trend continues, with support
at 6000 and 6450.
![ftse 100 ftse 100](https://tradingdiary.incrediblecharts.com/images/20070707_ftse.png)
Japan: Nikkei
The Nikkei 225 shows short-term distribution on
Twiggs Money Flow, but narrow consolidation below
resistance at 18215 would be a bullish sign. The target for an
upward breakout is 19800 (18200+[18200-16600]). A fall below
the trend channel is not expected, but would signal another
test of primary support at 16600.
Long Term: The primary trend remains up.
![nikkei 225 nikkei 225](https://tradingdiary.incrediblecharts.com/images/20070707_n225.png)
China: Hang Seng
China is going gangbusters, with the Hang Seng index powering through resistance at 22000 and now headed for a test of 23000. Twiggs Money Flow is close to completing a bullish trough above zero, signaling strong accumulation. Reversal below 21600 is not expected and would signal a test of the new support level at 21000.
![hang seng index hang seng index](https://tradingdiary.incrediblecharts.com/images/20070707_hsi.png)
ASX: Australia
The All Ordinaries consolidates at the upper border of
the trend channel. Downward breakout would warn of a secondary
correction, while upward breakout would signal another advance
- and an accelerating up-trend, possibly leading to a blow-off.
Twiggs Money Flow (21-day) continues to display a long-term
bearish divergence, though a break of the downward trendline
would end this.
Long Term: The primary trend remains up, with support at
5650 and 6000.
![all ords medium-term all ords medium-term](https://tradingdiary.incrediblecharts.com/images/20070707_xao_w.png)
Short Term: The broadening top formation lost its shape and now resembles a regular rectangle, with support at 6200 and resistance at 6420. Look for a failed swing or breakout to indicate future direction. Higher volumes on Monday and Tuesday signal selling into the rally, but this has faded.
![all ords short-term all ords short-term](https://tradingdiary.incrediblecharts.com/images/20070707_xao.png)
If you know the enemy and know yourself, you need not fear the
result of a hundred battles. If you know yourself but not the
enemy, for every victory gained you will also suffer a defeat.
If you know neither the enemy nor yourself, you will succumb in
every battle.
~ Sun Tzu
To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.