Skynet Panic Poisoned Technical Tools

Arguably, any technical indicator that uses trailing daily price lows was poisoned for the next few weeks by Thursday's computer-driven Skynet Panic (named after the intelligent computer in the Terminator series that destroyed human civilization).

Whether the cause was a typo -- "billion" substituted for "million" -- as reported yesterday, or a sudden crush of speculative orders that triggered a cascade, as NuWave Investment Management is reported saying.

Not all stocks were part of the panic. Among the exchange-traded funds I use as indicators, SPY, TLT, JNK, VIX and EEM were part of the panic.

USO may have been to a lesser extent and GLD not at all.

EUR/USD traded yesterday seems to have escaped the panic, but USD/JPY did not.

Here's an assessment of which technical tools were poisoned, and to what extent:

Parabolic sar, in a complex calculation, uses daily extremes, although it is front-weighted, meaning the poison will dissipate quickly.

Person's Proprietary Signal is a black box -- I don't know what's in it -- but it tracks the psar quite closely, and so I'll bet that it has also been poisoned.

The Macd uses moving averages of daily price closes, and any moving average has been poisoned to the extent that the panic affected the closing price.

In the case of the Skynet Panic, the price  recovered within minutes, so I don't think the impact on the closing price was huge.

For a simple moving average, the poison will remain at a constant level until the end of the average period (20 trading days, for example, in the case of a 20-day simple moving average).
Exponential moving averages, such as those used in the Macd, give greater weight to the more recent prices, and so the poison will dissipate more quickly. At any rate, the Macd will be entirely clear within nine trading days.

The Stochastic oscillator on my charts uses the highest high and lowest low for a 10-day trading period. So it will be hugely affected by the Skynet Panic for 10 trading days.

The average directional index is based on the closing prices, and so will be unaffectected by the Skynet Panic, except to the extent that the closing price was impacted. The adx covers 14 trading days.

Any pivot system that uses the May 6 figure will be poisoned. Person's pivots, which I use in forex analysis, are based on a month's worth of data, so they're poisoned until around June 6.

The DeMark pivots, which I track in the Almanac, use one-day data. So they're poisoned today, but not on Monday.

So, somewhat arbitrarily, as we all roam through the smoking rubble, here's how I propose to handle the situation in my own analysis:

If the lower wick on a stock's May 6 candle is less than width of the candle body, then I'll use all of my analytical tools, even the poisoned ones, but with suspicion.

If the lower wick is as long or longer than the body, then I'll only use the
Macd and the Adx.

I'll bring the Psar, Pps and Stochastic back into play on May 15.

Person's pivots don't come back until June 7.

Brutal.

See a 133-tick chart of the panic.

Indicator Exchange-Traded Fund Symbols:
EEM - emerging markets
EUR/USD - euro/dollar currency pair
GLD - gold
JNK - high-yield corporate bonds
SPY - blue-chip stocks
TLT - Treasury long-term bonds
USD/JPY - dollar/yen currency pair
USO - crude oil
VIX - fear index