Welcome to EV's point and figures. This blog is dedicated to the use of point and figure charts in technical analysis.

Although P&F first appeared in charts in the 1930's, it is an often overlooked techique for analysing stocks and charts. A poor relation compared to line and bar charts and their range of momentum indicators. Yet few charts provide a clearer picture of the daily battle between bulls and bears for market control.

Like most methods, it should not be used in isolation. It should form part of an analysts 'tool box' and be used with other techniques to help form an overall view.

The charts that appear on this blog and any accompanying comments are purely for information purposes only - my own personal take on where the prices may be heading. They do not constitute investment advice.

Tuesday, September 28, 2010

Goldman Sachs: still triangle-ish!

I've been keeping an eye on Goldman Sachs, which I flagged up in early September as a possible forming triangle.

At first glance, (although the long and short term bullish support lines are undeniably in tact) this chart does not look particularly bullish. GS is nowhere near its pre-flash crash level of $182.5 and since that decline in April, the bulls efforts to push the share price back up have been thwarted on two occasions now. We had reversals at $155 and more recently at $152.5.

Its not a perfect forming triangle but we are reaching a point where the price should move out of this area. To the downside, look for support at $137.5 and $132.5. If these levels are taken out, that target of $102.5 comes in to play. The mega bearish price target of $32.5 is unactivated and will only become active if the price falls below the bottom of the column of 20 0's (ie filling a box below the $132.5 level). That sort of level sits more comfortably with the Prechter doomsday view of Dow Jones 1,000-3,000. As i've said before, these are just targets that may be achieved, You never know!!

To the upside, we have an unactivated upside target of $182.5. For this to be activated, we need to see the $155 box get filled, which would give a higher column of X's than the previous column of X's.

This was the previous observation on 13th Sept. Note that the shares got beaten down at the previous level of resistance, as denoted by the red oval.

And this from 7th Sept, when the idea of a possible forming triangle was flagged up.

Friday, September 24, 2010

Dow Jones: on the up!

I would not normally use 100x3 charts, as the 100 point box size strips out a lot of noise. They are good for big picture but clearly loads can happen in between.

This is the current picture on the Dow. All looks very positive. We need to see a break above that 11,200 line to give those upside targets a bit more credibility. Bears can take heart that that previous high has not been taken out.

What a difference 2 months makes. Back in July, this same 100x3 chart showed that on balance the risks were to the downside. The 50x3 and 25x3 charts are better for providing shorter term indications.

US Existing Home sales

Tuesday, September 21, 2010

Antofag vs FTSE 100

A stunning performance from Antofag since the lows of 2008 (see how the FTSE bottomed 3 months later). On a price relative basis, its rarely looked more expensive vs FTSE (or FTSE cheap, heaven forbid!)

AAII Bullish Sentiment Index - looking toppy!

Sourced from Bloomers, this is the American Association of Individual Investors Bullish Sentiment Index, overlaying the SPX (apologies for the quality) from 2005. It measures the percentage of individual investors who are bullish, bearish or neutral on the stock market for the next six months. Not sure how many members are polled each week.

And here is the survey on its own.

Monday, September 20, 2010

SPX: possible inverse head and shoulders?

One potential scenario. Neckline at 1,130, recent low (head) at 1,010, upside to c 1,250, giving something closer to a double top? Momentum indicators may suggest overbought but some better than expected economic data this week and comforting words by the Fed might move it higher.

Friday, September 17, 2010

FTSE 100; 50 day mva crosses 200 day mva but....

This is a 3 year (anaemic looking!) daily chart of the FTSE 100, log scale. See in this latest move up the weighted 50 day MVA has crossed up back over the 200 day weighted mva, which itself is pointing upwards. Ordinarily a bullish sign.

But see also how a similar pattern played out in May-July 2008, the only difference being the 200 day WMVA was not pointing upwards in the quite the same way.

If the bear market is to re-asset itself, we need to see a hard down on the FTSE 100 soon.

Wednesday, September 15, 2010

Nikkei boosted by currency intervention

The Bank of Japan intervened in the currency markets for the first time since 2004, to weaken the yen and stem its appreciation against the US dollar......

Not sure how successful this will be in the long term. Currency intervention is a fairly blunt weapon and in the past it was often undertaken on a co-ordinated basis between central banks. In the current climate I suspect all central banks would like weaker currencies to boost their own country's/region's exports, so will self interest take over?

Either way, it provided the Nikkei with a major shot of adrenalin. Clear support at 8,890 and an activated upside target of 10,200. It needs to overcome resistance at 9,750 and could potentially do so if the US dollar suddenly perks up. But I can't see currency intervention providing anything more than a temporary boost and the yen is regarded by many as a safe haven currency.

I wonder if the BOJ bought US Treasuries with their newly acquired dollars??!

Tuesday, September 14, 2010

USA Yesterday - markets update

These US indices do not appear to be conforming. So what do the P&F charts point to? These are all daily closing charts so the targets are only giving general direction. Unfortunately I don't subscribe to hourly P&F charts, which can be used for short term trading.

We live in a world where markets are being 'juiced' by central banks, and I guess one must keep that in mind when looking at these and other charts. Its certainly playing havoc with bond yields and distorting post QE economic data (IMO).

Before looking at this indices, this is a follow up to a previous posting on Goldman. It looked like there was a forming triangle but the triangle pattern no longer appears viable. Upcoming resistance at $155.

A 25 point box value on the Dow Jones makes this chart quite noisy but it was worth showing, as it is currently pointing to an almost perfect double top at 11,225. That target is active, as the most recent column of X's has given a double top buy signal, having taken out 10,450. To the downside, there is a target of 9,200 but this will fall away if the Dow pushes on through 10,675.

Funnily enough, the 50x3 closing chart on the Dow is more muddled and shows the continuing battle between bulls and bears. More clarity is required here, ie to confirm the bullish target the current or next column of X's really needs to take out the previous high at 10,650.

Until recently the Nasdaq was clearly tending down, as evidenced by a continuing pattern of lower lows (or lower columns of 0's if you like). The bulls and bears have now locked horns, with stiff resistance at 2,275-2,300 and support at 2,125. Could go either way this one and may be driven by what happens in the other US indices. I'm not sure a 25 point box is best for the Nasdaq but decided to go with it in light of the recent strong price action.

The Russell 2,000 Small Cap as a similar shape, with clear resistance and support and a bloody battle for control taking place in between.

And finally the 10x3 SPX is at an interesting juncture. Short term bullish support (narrow blue line), pointing upwards but this is the third go at pushing through 1,130. Will the bulls be able to take this level out this time? Again until very recently this chart was bearish, with progrssive lower column's of 0's.

In summary it appears for now at least that the bulls have the ball and are advancing up the park. But we have seen as recently as July/Aug that these markets can turn on a sixpence. The battle being played out between both parties is most evident in the SPX, RUT and Nasdaq. The Dow is harder to call but is currently suggesting a double top rendezvous up at 11,225. We'll see!

Monday, September 13, 2010

FTSE 100: Possible target 5,590

I'll be the first to admit i'm a dog with EWT (woof woof!) but he's a target for the FTSE. It looks like a minor (minutte) five wave up to me. A 76.4% retrace of the April high to the July low gives a target of 5,590, which is just outside the upper resistance line. The slo sto suggests this rally has limited upside but the FTSE slavishly follows the US markets so may get a further shot of adrenalin from the Dow and SPX.

Anyway, that's my guestimate! If it pushes on, a double top scenario seems most likely, as alluded to in a previous P&F previous post (see July: FTSE 100: the wicker man)

Friday, September 10, 2010

A quick trawl round Asia

Now as we all know. Asia is cited by many as our great hope for the future, the driver of future global economic growth. So how are the local markets shaping up? Some brief comments and observations below:

The Australian ASX is at an interesting juncture. Once of the first markets to recover from the initial credit crisis in 07, buoyed by its rich mineral base and exports to China. Interest rates are ticking up down under. And their cricket team is in transition. Strong resistance at current levels, which if broken through suggest a bullish move higher. There is support at 4,300. A decisive break below that level will activate a downside target of 2,900. Will resolve very soon.

We could have a potential flag formation here to the downside but it can be seen that the ASX need only close above 4,650 to activate the upside target.

The Hang Seng has recovered well. The last column of X's created a double top buy signal but note the recent resistance at and around these levels. Is this index topping?

Indonesia, not a market I follow but one which has now pretty much recovered its post credit crisis lows. Recent price action is bullish but note the horizontal resistance line from the last multi year high. No obvious downside targets at this time.

The South Korean Kopsi Index has hit short term resistance but an evidently strong bullish trend, as evidenced by the blue bullish support line If it can break this resistance further upside beckons. In the context of the ongoing friction with North Korea the market is clearly climbing the wall of worry in classic style. Short term support at 1,730.
Alas poor Nikkei I knew her well.........
Japan needs a weak yen. The yen remains strong. The market is hurting but fair play, it has recovered in recent weeks. In fact, we have support at 8,850 and an unactivated upside target of 10,200 (the current column of 0's needs to reverse, and the next column of X's push above 9,350 to activate. But some caution is required here. Look at where the most recent support was - below those levels seen previously (note the horizontal blue lines). That suggests bearishness to me.
A slightly fragmented chart of the Shanghai Composite, using a 20x3 close. This market was back in official bear market territorty but is trying to recover. There is an activated upside target of 3,220, which will have more credibility if the current resistance can be overcome and the markets pushes up to the interim target of 2,880.

And finally, the wonderful country of Singapore (well worth visiting). Similar recovery to that seen in Indonesia. A very bullish uptrend and again, a breack of current short term resistance suggests further upside. No obvious downside targets with this chart.

Wednesday, September 8, 2010

Goldman Sachs: potential forming triangle

Here is the 2.5x3 (ie 7 points) closing P&F on Goldman Sachs. The long term blue bullish support line remains in tact for now but recent action suggests (IMO) that the stock is going to trend lower.

We have a potential forming triangle on this chart. To qualify as a triangle, the pattern must have 5 columns - there are currently four.

Usually a stock in an UPTREND will resolve the triangle to the upside and vice versa. According to P&F guru Tom Dorsey, breakouts from a triangle formation typically result in explosive moves.

The most recent column of 0's was reversed by the latest column of 3 x's and has left an unactivated downside target of $102.5. It will be activated if Goldman's share price falls below $135, filling the $135 box. A fall below $130 would take out the previous level of support and would lend strength to the bearish case/lower target.

To the upside, a move up beyond $157.5 would give a double top buy signal and a price target of $200. But in the absence of a Fed inspired major dose of QE2, its hard to see what other catalyst could propel GS's price to that level in what remains a generally poor economic climate.