Click here to view the Trading Diary in full-screen view
with your web browser.
Declining Volume On The Dow
By Colin Twiggs
March 10, 2007 1.00
a.m. ET (5:00 p.m. AET)
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.
The
Dow Jones Industrial Average is holding below the 100-day
moving average, warning of a secondary correction. Expect a
test of the long-term (green) trendline -- and support at the May 2006 high of
11600.
Twiggs Money Flow (21-day) continues its down-trend; a fall
below zero would warn of further distribution.
Long Term: The average remains in a primary up-trend.
A fall below the June 2006 low of 10700 would signal reversal.
Short
Term: The Dow is consolidating, with weak closes and
declining
volume signaling buyers' lack of interest over the last 3 days. Breakout
above 12350 would signal that the correction is slowing, but a fall below
12050 is more likely and would warn of a test of 11600.
The
Dow Jones Transportation Average is holding
below 5000, signaling weakness. A fall below 4500 would be bearish, while
below 4100 would signal that the primary trend has reversed. Respect of the
100-day
moving average and recovery above 5000, though unlikely,
would signal that the up-trend has resumed.
The
Nasdaq Composite has so far respected the first
line of primary support at the April 2006 high of 2350, but is holding below
the 100-day
moving average, signaling weakness. Penetration of support
would signal a test of the
July 2006 low of 2000.
Long
Term: The primary trend is up, but a fall below 2000 would signal
reversal.
The
S&P 500 is holding below the 100-Day
moving average and appears headed for a test of the lower
border of the trend channel, (drawn at 2 standard deviations around a linear
regression line).
Twiggs Money Flow (21-day) bearish divergence warns of
distribution.
Long Term: The primary trend is up. A healthy
correction would test the first line of support at 1325 (near the lower
channel line), while a fall below 1220 would signal reversal to a down-trend.
The
FTSE 100 respected
support at 6000/6100 and
Twiggs Money Flow (21-day) recovered sharply. Expect further
consolidation between 6000 and 6400. A fall below 6000 remains a possibility,
however, and would warn of a test of primary support at 5500.
Long
Term: The primary trend remains up.
The
Nikkei 225 retreated below
the first line of support at 17600, but respected the long-term (green)
trendline). The up-trend appears to have some life left, with
Twiggs Money Flow (21-day) holding well above zero, but the
real test is whether buyers are sufficiently committed to drive price back
above 17600.
The target of 21000 ( 17600 + [ 17600 - 14200 ] ) seems a long
way off at present.
Long Term: The primary up-trend continues,
with support at the June 2006 low of 14200.
The
All Ordinaries rallied
slightly at the center regression line [3] of the trend channel. This is
typical of a secondary correction, with earlier examples visible at [1] and
[2]. Expect a second downward leg to test the lower border of the trend
channel.
Twiggs Money Flow (21-day) has so far respected the zero
line; a fall below zero would warn of further distribution.
Long
Term: A fall below the first line of primary support at the May 2006 high
of 5300 would signal that the primary trend is losing momentum. Only a fall
below the June 2006 low of 4800, however, would signal a reversal.
Short Term: The All Ords encountered support at the
December high of 5650, signaled by large volume on Monday and Tuesday. The
attempted rally, however, ran into resistance, indicated by the
hanging man candlestick on Thursday and a weak close with
increased volume on Friday. A rise above 5850 is unlikely; and a fall below
Tuesday's low would warn of a test of the lower trend channel.
There is a time for all things, but I didn't know it. And that
is precisely what beats so many men in Wall Street who are very far from being
in the main sucker class. There is the plain fool, who does the wrong thing at
all times everywhere, but there is the Wall Street fool, who thinks he must
trade all the time.
~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre
(1923)
To understand my approach to technical analysis, please
read Technical Analysis & Predictions in About The Trading
Diary.