2011 was a quite an exciting year for the stock market, with gut-wrenching moves up and down with disturbing frequency. If you’re a chart-watcher or a fan of technical analysis, it was perhaps the most memorable year for charts in a long time.
But if you believe pictures are worth a thousand words, you might want to take a gander at some of the most compelling charts of 2011 as compiled by some of InvestorPlace.com’s very best journalists and technical analysts. Not only will this show you some jaw-dropping facts about the year that has passed, but this group of charts also should help you make sense of the market as we forge ahead into 2012.
Here are the seven most compelling charts of the year:
Expect Anything in This Volatile Market
Here’s my contribution: a simply staggering chart of the S&P and its Bollinger Bands across this year. You can read more about Bollinger Bands here and how to use them in trading — but in a nutshell, this indicator is meant to show (generally and, yes, imperfectly) the range you can expect an investment to trade within.
Check out how fat the Bollinger Bands for the SPDR S&P 500 ETF (NYSE:SPY) have gotten since this summer — showing how big a range investments can move in before breaking the Bollinger pattern. Most noteworthy is a simply amazing range of about 108 to 142 for the fund as the market went haywire in August. What’s the point of having a predictive indicator at all if your prediction is that the market might move up 20%, down 20% or anything in between?
Don’t Forget About China
InvestorPlace contributor Daniel Putnam is one of our best chart watchers. (Get his great take on what December’s falling VIX means for you here as just one example.) His chart of the year comes courtesy of Northern Trust Global Economic Research — and has big implications for 2012. The topic: the real estate crash that finally has come to China.
“The story here is that while we’re all focused on Europe, the situation also has been deteriorating elsewhere in the world,” Daniel writes. He says unless this data changes in a hurry, “We might be in for trouble regardless of what happens in Europe.”
Treasuries Not So Sleepy These Days
Longtime market watcher Jim Woods points out that, while it might defy logic, the charts continue to show just how great U.S. Treasury securities are these days.
“One huge development in the market this year was the tremendous surge in Treasury bonds,” Jim writes. “The fiscal turmoil in Europe weighed heavily on global equity markets, and that caused a massive capital shift into what traditionally has been the premier flight-to-quality trade — U.S. Treasury bonds. Sure, we have our fiscal issues here at home, and our balance sheet isn’t exactly pristine. However, we are the dog with the fewest fleas right now, hence the nearly 30% year-to-date surge in the iShares Barclays 20+ Year Treasury Bond (NYSE:TLT).”
Euro Zone Debt Is Simply Staggering
When Charles Sizemore, editor of the The Sizemore Investment Letter, sent me this chart about euro zone debt, I knew it was a keeper. But it originally omitted the scale. Like a good editor, I asked what we were talking about — millions? Tens of millions?
“No way, man — try trillions,” Charles responded. “This is central bank money we’re talking about!”
In case you’re curious, 2.5 trillion euros is $3.2 trillion U.S. dollars — or roughly the entire 2011 GDP of EU member Germany.
The News Tells the Story
InvestorPlace.com Chief Technical Analyst Sam Collins is a veteran chart watcher. But the funny thing is, Sam’s most interesting chart of the year involves the fact that news — not technical indicators — moved the market most.
“The most dominant feature of 2011 has been the headline-driven, high volatility of the market,” Sam writes. And considering the year we had — including the Japanese earthquake and tsunami, the debt supercommittee’s failure and the European debt crisis that had seemingly every trader’s immediate attention — should we really be surprised?
High Fliers Flame Out Spectacularly
One of the most-respected chartists out there via his newsletter, The Steady Trader, InvestorPlace.com contributor Serge Berger couldn’t help but point out the painful memories of momentum stock investors in 2011 — and what it means for the new year.
“High-flier or beta-chaser stocks like Netflix (NASDAQ:NFLX), First Solar (NASDAQ:FSLR) and Sina.com (NASDAQ:SINA) came to a hard landing as global economic slowdown and Europe debt crisis fears became front-page news,” Serge writes. “As a result, many trend-follower funds had a very difficult year. At the peak this year, all of these stocks gave off a strong odor of ‘bubble.’”
What the Dollar Means for ‘Risk Assets’ in 2012
Like a good trader, Serge wasn’t content just looking in the rear-view mirror. Serge focused on profit potential in the new year by offering up this second chart about the dollar index.
“The story this year has been the continued inverse relationship between the dollar and risk assets,” Serge writes. “After selling off in the early part of the year, the dollar has overcome significant headwinds and showed resilient strength that looks promising for further continuation upward. The dollar has gone nowhere in 2011 if we look where it was in January and where it is today, but the intrayear improvement has been remarkable. The dollar served as the ultimate clue to risk assets all year.”
Check out InvestorPlace.com’s other looks back at 2011 and ahead to 2012 here.