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 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!

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