MCO Watch

Today's New York Times has an disturbing read about Moody's (MCO) and what happened after the SEC gave notice it was investigating the credit rating company.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
MCO $21.75

At 10:58 a.m. Eastern

Although the SEC Wells Notice was first publicized on Monday, the SEC actually provided notice to the company on March 18, nearly two months ago.

In the week or so after the company received the notice, well before it was made public, the company's CEO sold or exercised more than $4 million worth of options. And Warren Buffett's Berkshire Hathaway sold more than $30 million in shares.

The CEO's options transactions were on March 18, the Times says, and Berkshire Hathaway sold shares on March 19, 24 and 26.

The parabolic sar technical indicator switched to bear phase on March 31, four days after the stock hit a peak on the three-month daily chart. The close on March 31 was down 4.2% from the chart high. The stock at it's low on Monday was 33.9% below that high.

So, two lessons:

• The technical signals worked and if heeded would have gotten a trader out of an MCO bull position in time to avoid huge losses.
• A private trader, ultimately, is at the mercy of events about which he or she can have no knowledge. The trader's only advantage is to be nimble both entering and exiting positions.

I'll have nothing to say about the morality or ethics of those massive transactions before the SEC notice was made public. The easy rejoinder is that morality has nothing to do with capitalism, whose markets are supposed to act as automatons in attaining, ultimately, the public good.

I shall say, however, that it isn't a level playing field. And any traders who fail to recognize that had best remove their funds from their brokerage accounts, and run (not walk) to the bank to buy U.S. Savings Bonds, where the risks are at least more transparent.

---

The Investor's Guide to Active Asset Allocation: Using Technical Analysis and ETFs to Trade the Markets

Martin Pring's detailed deconstruction of the economic cycle: What sorts stocks to look for at each stage of the recovery. A masterful analysis.

---

Skynet Panic of May 6
Panic Looks Like This
Skynet Panic Poisons Technical Tools

Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.

New to Private Trader? Check out the Reader's Guide.

New to private trading? Here's a look at How to Become a Private Trader.