Market movements around August (Sept 11th warning)

For quite some time, folks have claimed the financial markets acted funny before September 11th. This has largely been dismissed as "conspiracy theory."

The problem is, there has been no firm date from which to draw trends.

Now that we have a dated memo (Aug 06), I was surprised to note what appear to be significant chart reversals in several airline company stock prices, and large multinationals, which seem to have high correspondence with the August 06 date--they reversed on that date.

Is anyone an expert on stock chart analyis, including with volume? I would like to see if their is statistical significance to chart reversals which coincided with the memo date.

If anyone would like to work with me on this, and we find statistically significant trends, it would be a great basis for a story.

Thanks!

Dan

[loftycity]

1. Go to FTW

The first article about Condi and the 9/11 lists resources. www.FTW.com

[swag]

2. Important to understand these movements in the context of time

Worldcom accounting scandal (and general unease with corporate accounting) compounding heavily at this time. Big sell-off in progress.

3. Enron didn't come out until right after Sept 11th

August 06 does look to be a reversal date, regardless of other goings-on.

WorldCom didn't come out until 2002...

http://www.pcworldmalta.com/specials/worldcom/chronology.htm

How it evolved

By PC World Malta Staff

06/25/2002 - Telecommunications and Internet service provider WorldCom Inc. announces it will restate its financial results for 2001 and the first quarter of 2002 as a result of accounting irregularities and has terminated its chief financial officer, Scott Sullivan. It will also continue with its previously announced plans to reduce its workforce by 17,000, beginning Friday.

***

Ebbers buys some time in October 2001 by reporting third-quarter results that meet expectations. But Ebbers throws cold water on investors' hopes that a merger with a Baby Bell might soon be announced. It will happen eventually, he says, but due to regulatory hurdles, "I don't believe it's doable in the next year and a half."

Foul Ball: In late January 2002, WorldCom shares are hit hard by the fallout from Global Crossing's bankruptcy filing and also by investors' concern that Ebbers might have to sell millions of his own WorldCom shares to repay personal loans--some from WorldCom itself. The firm's exposure to Ebbers' financial situation may not be material to its financial performance. But with the Enron scandal still festering, investors suddenly are skittish about possibly "aggressive" accounting practices at growth-stock firms--especially those led by executives who make mysterious side deals with their own companies. WorldCom shares fall under $10.

http://www.forbes.com/2002/02/06/0206ebberstrike.html

***

So I don't agree financial problems were known about and were hitting the market between August 06 and September 11th 2001.

Instead, I think the Bush memo was leaked to the private sector.

[swag]

4. delete

[swag]

5. You had greater or equal "reversals", as you call them

hitting the market in each of the five preceding months. Symptomatic of a volatile bear market in which risk fough with reward (or "fear" fought with "greed" as some like to say).

Recall that the "bubble" peaked in March 2000. Bear market was well established at this point.

6. All other things aside the chances

That there would be a reversal on that day (as opposed to any other) in the month were one in 30.

[swag]

7. I don't find the stat particularly meaningful,

but no month has 30 trading days. August 2001 had 23 trading days.

"Reversal" is a term of the so-called "technical analysis" which has been soundly trashed in several academic studies.

8. That's right

You could say 30 days or 23 trading days.

I do believe you could look at certain trends in the period immediately prior, and immediately subsequent, and determine within certain degrees of freedom the significance.

A proper trend would have to be identified. I will work on that next week....

That is, the stocks reversed, but there are certain other measures too, such as moving averages, weighted, money flow, etc....

[54anickel]

9. You broke my heart with that comment :-(

"technical analysis" which has been soundly trashed in several academic studies.

They have changed meaning in this new "day-trader" atmosphere, but I still believe in them and use them.

[swag]

10. sorry, no disrespect intended

[specimenfred1984]

11. I've Been Trading since 91, I don't see anything

I looked at Northwest, Southwest and Continental's volume in weeks prior to August 01 and don't see anything different in any of their volumes.

My guess, before I researched these 3 was that any illegal trading would have gone on behind closed doors anyway, and that would not show up on any charts. Floor traders, specialists and large firms might have handled big trades like that, if they existed. They wouldn't be dumb enough to let something like that show up on a chart.

These illegal dealings go way, way back. I first read about them in Richard Ney's 1970 book "The Wall Street Jungle", it's still a very pertinent look at corruption.

If you tell me exactly which companies to look at with their symbols, so I don't have to look them up, I'd be happy to look at them with all of the indicators I use to see if I see anything unusual. My guess is I won't.

14. Halliburton reversed on August 7

Along with the airlines.

Look at the DAILY CLOSING PRICES....NOT the charts.

[rapier]

12. notes

I've seen no such claims.

In broad terms the market averages reached their peak in March of 2000. They pulled back and tried to go higher but rolled over and began a significant decline in Sept. 00.

A steep downtrend on the monthly charts is obvious with a very bad plunge in March 01. That low held with a little bounce till May, when the downtrend resumed.


We were right at the area of the March lows on the S&P Index on 9/11. The subsequent panic made a low two weeks or so later. In April 02 that low was violated on the way to the ultimate low in Oct. 02.

Wish I knew how to display a chart. I've done it before, can't now. Heres one.

http://futures.tradingcharts.com/chart/SW/M

The point is there is nothing unusual looking at this chart. The downtrend was well established pre 9/11 and continued on for a year after.


News, even horrific news, nor rumors of news don't move the stock market. Stocks move up when there is a lot of excess money flowing around in the system and fall when that money dries up. The stock market is simply a measure of liquidity. I know this is the worst sort of heresy. So it goes. The stock market is used to describe almost everything and everything is used to describe why it moves. It is given all sorts of powers, like the one which says it predicts things or 'discounts' all information to give a rational 'price'. It's all BS.

With enough contorsions I'm sure a nice story relating the breifing paper to the market can be made. It's fun to tell such stories and it lies in human nature to find links between coincident events and call them causal. Fun but logically flawed. I know every day your whole life you have been given a story that 'the market rose <or fell> today becasue of blah blah blah.' It is very hard to fight against that conditioning and realize what a load of crap it all is.

[rapier]

13. notes

As an experiment let's ask a different question. Did Osama time the 9/11 attact to do the maximum damage to the stock market?

Looking at the monthly S&P chart linked again here
http://futures.tradingcharts.com/chart/SW/M
(Note you can click on a line to see the date and data for each month in the box above the chart)

A case can be made that he did. As I said the market was very near the spring lows in early September. Violating those lows brought the likelyhood of a steeper decline. Sure enough, that is what happend.

The post 9/11 low however only got down to the next obvious support level, the sub 1000 of Oct. 98. Damaging yes, but not the market apocalypse. Osama the market timer should have waited perhaps till we were down to those levels to strike.

In July of 02 when those Oct 98 lows were violated we had a sell off as bad as Sept 01.

I guess I don't make much of a case for Osama the market timer. A silly experiment in any case. The chart however is very instructive. Showing clearly how 'support' seems to develop at old lows. (Just as resistance, resistance to rising prices that is, often forms at previous highs)

The idea of technical analysis is to sweep away any ideas of why the market may move. Why on a fundamental basis that is. Fundamental meaning rising 'earnings' or Fed policy or the employment number or those millions of reasons always given as to why the market moves and instead just look at the patterns of price itself and how they seem to repeat.

Of course the mind ends up asking why those numbers seem to follow such patterns. Beyond the one fundamental that matters, that being the amount of excess money floating around the economy for speculation which defines the trend of the market, the patterns of support and resistance end up working because of behaviour of crowds.

Included in that are those areas of support and resistance are points where speculators, (and all stock buyers are speculators) are areas where large numbers of trades are at a profit or loss. Old highs are places were people tend to think it's a good time to take profit and old lows are areas where people tend to think it might be a good time to buy more since the price is 'low'.

One has to understand that there is an upward bias to stocks based upon the relentless increase in money that the modern credit based economy generates. In other words stocks tend to inflate. Certainly that is the trend over the last 100 years.