As regards economics and markets, and when events happen around the world, one of the best things you can do is always go back to the chart, if one exists. Charts tell a story.
And if you’ve ever seen many of the examples the great trader WD Gann gives in all his books, there is one thing you will learn. And it’s the only thing that surprises a market is an earthquake. Markets know things before it is public news — always.
This is why we traders buy breaks across new highs, or short–sell breaks into new lows, especially along a line–up of past tops (or bottoms). When a share breaks into new highs, let me tell you, the market knows good news is coming. If the company has earnings, such breaks will generally run for some time and persist often for years.
So have a look at the Malaysian Airline System (MAS) charts, listed on the Malaysian stock exchange. I’ve taken one from Bloomberg and the other Yahoo.
Now MAS has been in a downtrend since the best part of 2008, and fell 18% after flight 370 went missing, March 9th. But you can see a clear break into all time new lows, Feb 19th, on substantially increased volume. In other words, markets discounting future news. The actual event itself was the low.
I find that quite significant. To give you an idea I can show you similar charts in September 2001. Somebody(s) knew 9/11 was coming as well, enough to affect the relevant parts of the markets involved.
Here’s just two examples…
The chart of MAS indicates the possibility of a prior knowledge of events to come as regards Malaysia Airline Systems; more will come out about it in due course.
We may never get to the bottom of it though, because this would involve the release of sensitive military data from one (hostile) nation to another, and this is never going to happen. Plus there will be reputations to protect.
And Malaysia is not particularly a bastion of openness. Regardless, watch developments; they will unfold in set counts from the date of the flight disappearance, March 9th, and probably the MAS chart itself.
When things happen, get into the habit of consulting your charts. You must learn how to read a chart; you will find it a very useful skill.
Phil Anderson,
Contributing Editor, Money Morning
Ed Note: The above article was originally published in The Daily Reckoning.
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