You might have read in the news about how AIG executives deal with stress -- they play golf, get massages and have drinks at the luxury St. Regis resort in California. The bill racked up: $440,000 of company money on a week-long getaway starting the day after the U.S. government bailed out the insurer to the tune of $85 billion.

Kathy Willens / AP

I think it's safe to say that AIG's management has a credibility problem. There's a yawning chasm between the perception AIG's executives project and the bottom line. Therein lies the credibility gap. 

The credibility gap is the difference between what a used-car salesman tells you, and the actual quality of the car you drive away in. It's the difference between what the CEO says and what the market thinks. In both cases, the credibility gap costs you money. Charting provides an effective way to define and capture the gap. If the credibility gap is too wide, then the best decision may be to avoid any involvement.

There is a narrow line between the truth, robust spin, and deceit. A chart of price activity is a very effective way to identify the differences. The credibility gap between public statements and the reality of market activity provides an important measure of honesty and spin.

Take this interview statement for example:

"We have a great future as an independent company. We’re also focused on very exciting prospects when we get things right going forward. I didn't have the time today to talk about the good things that are going on." 

CLICK CHART TO SEE IT IN FULL SIZE

Credible or incredible? A credibility gap, or a fair summary? A price chart helps provide an answer, measuring the width of the credibility gap. 

The pink line marks the day of the interview. We concentrate on measures of trend behavior because it excludes the distraction of daily price volatility. (Click the chart if you wish to find out which company we're talking about)

The daily chart uses a trend line and the Guppy Multiple Moving Averages. The group of red lines tell us how investors are thinking. The wide separation and downward slope indicates they are consistent sellers. The group of blue lines suggest that traders have little faith in the probability of a sustainable up trend breakout.

The black trend line is placed along the upper edges of price activity. This combination of indicators tells us five things.

• The long-term downtrend, shown by the trend line, is very strong
• The stock is under consistent selling pressure from investors
• There is a low probability that a rally will have sufficient strength to develop a new uptrend
• The 70 percent fall in the share price from around $52 to $14 suggests significant problems at a fundamental level
• If we use a price chart display then we see the price has dropped below several significant support levels and more recently failed to lift above resistance near $19.

At the time of the interview statement there was no compelling chart or technical evidence that supported the claims. Chart analysis delivers a message that is very different from the interview sentiment. The credibility gap is significant.

Simple credibility gap analysis kept traders out of this company's September rally and helped them to avoid the 90 percent collapse from $17 to $1.

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Here are a few other recent examples of the credibility gap measured with a chart.

Example 1: “We don’t see any pressure on our liquidity, let alone a liquidity crisis."

Example 2:  A CFO told analysts they had raised enough capital. “We took care of our full year needs at that point.”

The market price activity tells the story.  Example 1 was a statement issued by Bear Stearns  just days before it was sold for $2 a share. The trend had been down for many months. The collapse was not a surprise. The difference between the bearish market trend and the bullish statement is the credibility gap.

Example 2 comes from a Lehman Brothers spokesman, again just before the collapse. The price chart had shown a steady decline for months. The timing of the collapse may have been unexpected, but the inevitability was not a surprise.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at . We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

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