Sunday, May 23, 2010

Charts Still Do and Have Always Mattered

April 27 was the key day and was confirmed on April 30th. That was the day the technicals started to roll over on the indices. The weekend of May 1&2 I started posting support levels for the SPX, SPY, QQQQ and IWM. There were still a lot of long set ups within the financials, tech and retail. Pharma and commodity related stocks were getting toppy with a bunch of great shorts. I, along with everyone else, was calling for new highs for GLD and GC_F and a run for the dollar. Then came the 'flash crash' May 6th. The speed of the fall was as incredible as how fast it stopped and reversed. Following that day there were pundits and 'professionals' on the boob tube, as well as educated professional traders and self proclaimed part-time technicians on social networks (like Stocktwits, my preference) stating that in this environment that the charts do not matter anymore. To that I call bullshit!

It is not surprising that this would occur. In any world disaster afflicted people question their religion, in government induced disasters they question the President and Legislature. I do not put the flash crash into these categories but I think it helps make the point. But come on, it makes no sense to give up on the technicals just because the market moved a lot. First, a good technician knows that technical analysis give you an edge, but is not a guarantee of where a stock price is moving. Second, the basis of technical analysis is that all information is included in the price. Finally, much of the history and following of technical analysis is based its applicability during a crisis.

But this blog is supposed to be about charts so how about some proof.



Notice the notes detail a fall totally undeterred or directed by May 6 alone



Again the chart tells a tale of decline



Here the story started in late April and went undeterred by the flash crash.

I will need to start saving more historical charts to have more variety to show going forward, but you get the picture. Charts did not break down and continued to provide an edge in the volatile events of the last 3 weeks. Believe!

IDEAS FOR THE WEEK

ATW, CLF, DRYS, RIG as shorts, if Friday reversal does not hold. JPM, MA, MS long, if Friday was not a fake out and continues, and EL, GOOG & RIMM short irregardless. All charts and targets have been posted to chart.ly under @harmongreg

1 comment:

  1. shazzam! nice post, welcome to the blog-o-sphere!!

    ReplyDelete