Professor Elam

Friday Jan 29 2010

Click on the chart for a larger view. 

The red and blue lines are exponential moving averages MAs. The red and black bars are the price ranges for stocks in a week long activity. In the summer of 2007 we got a crossover of the MAs to the downside, this is a sell signal. Note we did not get a buy signal until the winter of 2009. Share prices fell as hedge funds and others sold. The panic low went on for several months at the end of 2008. At bottom note the huge volume in the vertical bars. The red bars are net selling, the black are net buying. 

Now we have another panic. Toyota is embroiled an a hung accelerator controversy. They have recalled millions of vehicles and ceased production for the time being. Note the tall red vertical bar at the far right, bottom panel. Funds are selling Toyota shares at any price. IF this keeps up into next week, no doubt it will generate a sell signal with a crossover of the MAs to the downside. 

Now the question, is this the end of Toyota?  I doubt that.  However this may be a preview of what we will see this fall if another market wide panic ensues. We have a huge mood shift from positive to negative. Toyota is a large capitalization stock listed on many exchanges. And so this panic will help bring market averages down around the world.