Charts Matter More Than Ever

If you're into technical analysis or chart work, then you probably understand my excitement each day I see the stock market open.  Every session is a new data point, something completely different than the prior day, week, month or year.  Ranges are different, price levels change, news influence behavior.  Yet, with all of these differences,  we see patterns that tend to repeat over and over again.  

 

We can draw conclusions from the chart and make assumptions about the future just by looking at the past.  It is human behavior that never changes, and for technicians who understand this maxim they will put the probabilities and odds on their favor.  It's not a guarantee or perfect information, but strong probabilities.  I'll take that over guessing any day of the week.  

 

Monika Jansen and I wrote a book a few years back called 'KNOW YOUR OPTIONS', which not only educates you about option trading but also is a nice starter on learning about charts and technicals.  I preach often in the media and trade shows about the benefits of reading the charts, reacting and responding to these patterns when they appear.  They are important.

 

Case in point, the Nasdaq recently fell below its weekly 200 ma.  That was a huge red flag alert, it was the first time in more than two years this big support line was penetrated.  Now, falling below the DAILY 200 ma is bad news, but below the weekly is a major concern for the long-term trend.  In fact, the longer it stays below the worse it becomes, as this level is now major resistance on rally attempts. 

 

In addition, this past week the SPX 500 made a journey below the 200 ma.  This would be another warning sign, and if there is follow-through downward this coming week it'll also cement the long-term trend downward.  

 

In the end, the charts are going to tell you where we were, but also feed you good information about the future.  If you trust the charts to give you accurate information, use them to your advantage.  They matter, especially in these volatile and uncertain times.