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It's The Chart Stupid

03/26/04 10:57:21 AM
by Arthur Hill

The media attributed the decline in U.S. stocks during the month of March to "security" issues. However, a look at Turkey and Pakistan suggests that the terrorist threat has little to do with stock prices.

Security:   XU100
Position:   N/A

Figure 1: Turkey ISE National 100.
Graphic provided by: MetaStock.
In Turkey, the HSBC building and British Embassy were targeted on November 20th when terrorists blew them up with explosive laden trucks. As a direct result of the terrorist attack, the Istanbul ISE National 100 declined over 1000 points (-7.3%) in one day (green arrow). However, the index bounced back when trading resumed on December 1st with an even larger gain and the uptrend was never in jeopardy. The index is currently up over 25% since the bombing, remains in a strong uptrend, and recently recorded a new high above 20000.

Figure 2: Pakistan's Karachi 100 index.

Pakistan has been a key U.S. ally in the Afghan war and the ongoing hunt for Al Qaeda operatives, both in Pakistan and Afghanistan. The war in Afghanistan began in early October 2001 and coincided with a significant bottom in the Karachi 100 (1071 or green arrow). With the war in Afghanistan, Pakistan became home to a number of Al Qaeda and Taliban "refugees." However, somebody forgot to tell the stock market. Over the last two and a half years, the index is up over 3900 points for a spectacular gain in excess of 350%. More importantly, the uptrend was never seriously challenged and remains intact.

These two countries were the most affected by recent U.S. military campaigns: Pakistan by the campaign in Afghanistan and Turkey by the campaign in Iraq. Despite the upheavals, terrorist threats and terrorist strikes, the stock markets in both countries have been and remain in strong uptrends. Overbought, maybe, but uptrends nonetheless. While the media may be blaming current weakness in U.S. stocks on the terrorist threat or security issues, technicians would be better off keeping an eye on the chart. It's the chart stupid!

Arthur Hill

Arthur Hill is currently editor of, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for and the main contributor to the ChartSchool.

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