Coincidence or not?

Is it realistic to believe, as some commentators claimed, that regional Asian markets toppled from seven-week highs last week because of weak US consumer data? This is a confusion of cause and effect. Weak US consumer data is hardy a surprise so it seems a little unfair to attribute market falls to this factor when the probability of a market retreat is already signaled by the patterns of existing price behavior.

Charting analysis is very useful for defining the potential limits of behavior. It is particularly useful when it is used to assess the probabilities of one behavior developing when compared with the probability of another behavioral outcome.

For the past few months the US market DOW index has been moving in a sideways pattern. This pattern started in November 2009. The lower edge of the trading band has support near 9,900 while the upper edge of the trading has resistance near 10,750. This is not advanced charting analysis because these support and resistance levels are well defined.