Sent: Saturday, December 08, 2007 3:39 AM
Subject: False Breaks Warn Of A Market Top
False Breaks Warn Of A Market Top
By Colin Twiggs
December 8, 2:00 a.m. ET (6:00 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 rallying in anticipation of a rate
cut at next weeks FOMC meeting. It is doubtful whether providing banks with
cheap money will encourage them to resume lending in a market with falling asset
prices, but it may improve their ability to carry non-performing assets rather
than being forced to sell at fire-sale prices.
Probability of a bear market remains high: at least 2 to 1. Current activity
resembles a market top, with failed upward/downward breakouts accompanied by
heavy volume. Twiggs Money Flow continues to
display a large bearish divergence, signaling long-term distribution.
Short Term: Declining volume and a doji star candlestick pattern
indicate that the rally is losing momentum. Reversal below 13500 would warn of
another test of primary support at 12800, while respect of 12800 would signal a
test of resistance at 14200.
I knew what to do..... Tape reading was an important part of the
game; so was beginning at the right time; so was sticking to your position. But
my greatest discovery was that a man must study general conditions, to size them
so as to anticipate probabilities.
~ Jesse Livermore in Edwin Lefevre's
Reminiscences of a Stock Operator
(1923).
To understand my approach, please read Technical Analysis &
Predictions in About The Trading Diary.