Bulkowski's Review: 9-11 and the Markets

11 September 2016, 07:25
Muhammad Elbermawi

The terrorists events of 9-11 took all of America by surprise, but how did the stock market react? This page takes a closer look.

9-11: Dow Industrials

With the focus on 9-11, it is hard to remember what year the terrorist events took place. That was in 2001, which the above chart shows as it relates to the Dow Jones Industrial Average.

In early March, an ugly double bottom occurred which confirmed in a few days as price climbed above the peak between the two valleys. Price moved up in a sweeping turn, culminating in a new calendar year high for the Dow. From there, it was downhill until July when a descending triangle chart pattern appeared. The breakout from that was downward, and less than two weeks later, the terrorists struck.

The markets never opened on 9/11 nor the next day. In fact, they were closed until 9/17. When the markets finished trading that day (9/17), the Dow was down 7%, or 685 points from the prior close. It got worse. Measured from the close on 9/10, price bottomed 17% lower on 9/21. But after that, it was up and away.

Price formed a broadening top chart pattern during October and into November. A partial decline at point B shows the way to an upward breakout.

For my own account, I feel fortunate. I sold Alaska Air Group (ALK) on 9/6, just days before the terrorists dropped price of the stock by 45%. And my brother left a meeting on floor 102 of the twin towers the day before the attack. Many of the people he met with are dead.

9-11: S & P 500 Index

The Standard and Poor's 500 Index shows a similar tale. The same ugly double bottom appears in March. Price dropped after 9/11 but it was already trending down by then. The V-shaped chart pattern in September is remarkable for its sharpness. Price dropped in a straight-line run and then shot back up in a straight-line run until October. There it formed a broadening formation, right-angled and ascending chart pattern. After that, price made a broadening top chart pattern, which led into the new year.

9-11: Nasdaq Composite

The last chart shows the Nasdaq composite on the daily scale. The chart is somewhat different from the others. Price from A to B forms a gentle rounding top, which is itself composed of a complex head-and-shoulders top. At C, price stages a downward breakout but it lasts for just one day. Price tries to move higher but gives up and makes its way lower to 9/11.

-- Thomas Bulkowski

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