All Charts Lie

March 17, 2010

 

 

TLT vs. 200 MDA

 

Or take moving averages. I actually appreciate moving averages and what they try to accomplish, which is simply to give people a way to measure recent relative performance in an ETF. But the trouble, again, is that the numbers most people use to calculate moving averages are flawed. You see a lot of charts like this one, showing that the iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) ETF bumping its head against its 200-day moving average.

See, the chartists say, TLT is completely unable to break its 200-day cap.

 

TLT: Breaking its Cap?

 

But in reality—which is to say, if you include interest income—TLT has been playing hokey-pokey with its 200-day moving average for most of the past month: It goes over, it goes under, it goes over, it goes under.

 

200 DMA?

 

Which 200-day moving average is the real 200-day moving average?

There are a lot of problems with technical analysis, but they start with this: The numbers used to drive the charts are meaningless.

I just checked on Register.com and www.totalreturncharts.com is still available. Will somebody please buy that URL and take charting into the 21st century?

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