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.

Friday, September 30, 2011


Support currently at 31 on this 1x3 HL chart. The target to the upside of 46 is NOT active. It would require a 3 box reversal to the upside and for the price to take out the high of the previous colunm to activate it, in other words a move through 37.

The bears have had the ball and been advancing down-field. The target of 36 given by the first column of 0's from the high was achieved and was triggered by a triple bottom sell signal. The target of 14 was also given by a triple bottom sell signal and is active.

Need to see how the pattern develops from here as it could be a potential H&S. If so, may get support here and ultimately a move back up to 45-46.

Thursday, September 29, 2011

USA yesterday (and Hong Kong today)

The US indices are not all conforming at this time although they do all have (red) bearish resistance lines. But here is the current 'big picture'

I'm using a 100 point box size on the Dow to strip out a lot of the recent 'noise'. The initial reversal from the August sell off gave a target to the upside of 12,200, which was activated but never achieved. The index got as high as 11,700 then reversed lower. The target of 9,600 was formed by that column of 0's from the high and was activated when the index moved below 11,000 - its still active. The most recent action has been supportative to the bears, in that the index has reversed lower at lower levels and reversed higher at lower levels (ie lower highs, lower lows). See for example how it got to 11,500 before reversing down, then most recently reversed lower at 11,300. The 12,700 target to the upside is not active - we would need to see another three box reversal then for the index to move above 11,400, taking out the previous high. Finally, I have put that target of 6,700 on the chart on the basis that the previous support at 10,700 did not hold during the last sell off (the index filled the 10,600 prior to reversing - remember where you saw it first!!!)

Again, i'm using a larger box size here (ie 10 points to fill each box) to strip out the recent noise. Technically the target of 1,380 to the upside is still active as the index has not moved below its base of 1,120 yet. Note the resistance at 1,220 and as with the Dow, it can be seen that the bears have managed to come back in and reverse the index at lower levels most recently. The 990 target is active, the targets of 1,330 and 920 are not. We'd need to see the index move through 1,200 to active the 1,330 and below 1,110 to bring 920 in to play.

Unlike the Dow, the Russell (10x3) has so far found support from that large sell off in August (at the 645 level). That said, on balance this chart looks more bearish in my view. See the levels of resistance at 730, 710 and 690 - trending lower. The index found support three times at 670 but the persistance of the bears finally paid off and we got a triple bottom sell signal, activating that 550 target which remains in play. To the upside, that 790 target is not active, We would need to see the current column of 0's reverse in to a new up column of X's and for the index to pass through 700. It would then need to take out those resistance levels mentioned above to strengthen the bullish case. It can be done, we'll just have to wait and see.

The Nasdaq (20x3) is slightly harder to call because at a glance, this chart had been looking more bullish. Clear support for the index at 2,340 and the higher 2,440. The target of 2,760 remains active but has not so far been met. The bears have had success more recently, coming back in and pushing the index down from lower highs (we had an initial reversal at 2,640 and then at the lower level of 2,580. But 2,440 support is clearly a line in the sand at present that the bears will have to overcome and in doing so, activate that target to the downside of 2,040.

And as the Western world capitulates, can we look for good portfolio diversification by investing in the Far East, whose economies are surely in a relatively better state of health?

Well, the Hang Seng Index (250x3) is currently suggesting an emphatic 'no' to international diversification. The index did more than double from its 2009 low and got to 24,750 before reversing lower. That level has never been recapture nor surpassed.

The target to the downside given by that initial reversal (18,000) was recently achieved. The blue horizontal lines are all levels of support that have eventually cracked as the bears have regained control. As things currently stand, there are no obvious targets to the upside and the target of 14,000 is active.

Wednesday, September 28, 2011

Dow/Gold relationship

We often read about how the Dow peaked in 'nominal terms' back in 1999 and how since then in 'real terms' (if priced in gold for example), it has been a lost decade for the Dow. I guess its a valid point to a degree but one must not lose sight of the fact that we can 'price relative' anything we want to.

Anyway, post the recent decline in gold, this relationship appears to have put in a bottom, even if it proves to be temporary.

On this 10x3 P&F it can be seen that the ratio found some resistance at the 640 level (0r 6.4 based on the candle chart) - on no less than four occasions, but that has now been taken out, giving two targets to the upside of 780 and 750 (note the current 200 day mva on the candle chart is 7.9 (or 790 in the context of this P&F). So if this target is to be met, we can assume that one of the following will happen:

- The Dow will rise and gold will fall/stay unchanged

- Both will rise but the Dow will rise faster than gold

- Both will fall but the Dow will fall less than gold

Take your pick!

Tuesday, September 27, 2011

Dow update: low pole down, back at bearish resistance line

The column of 0's that preceeded the current column of x's gave a 'low pole', where it moved 3 boxes below the previous column of 0's. Today's rally has brought the Dow back to the (red) bearish resistance line.

There is an active target of 9,600 in place but i'd be looking for the current column of X's to reverse imminently. If it did reverse here, the current column of X's would give an (inactive) target to the upside of 12,700 - we'd then need to see a move up through 11,400 to activate it.

FTSE 100 further HS update

I should have added this weekly candle chart to the update I did yesterday. I can't rule out the possibility that the right shoulder will complete up where the (larger) left shoulder topped. If I work it out on the P&F chart, a 78.6% retrace from top (6050) to bottom (4800) comes out at 5,782, which is reasonably close.

The top of the left shoulder shows up much better on the candle chart compared to the P&F, which shows a high pole up then a very swift reversal.

The alternative would be some sort of bear flag and a move lower.

Monday, September 26, 2011

FTSE 100: H&S update

This was the FTSE 100 back in August (12) where I flagged up the potential formation of a large head and shoulders pattern.

And here is the current position. Last week's sell off formed a triple bottom sell signal and activated that target of 4,500 to the downside. But we have now had a 150 point (3 box) reversal and we have a forming column of X's which should (based on recent action) push the index back up towards 5,300 - 5,400. It can be seen that the index found support at 4,950 on two occasions in recent weeks (where the column of 0's reversed in to a new column of X's).

The target of 4,050 is currently not active - we need to see a three box reversal to the downside and a move below 4,950 to bring that in to play.

P&F charts are not time sensitive, in that the y-axis does not plot time like other charts. For example if the index rose continually for a year without reversing, it would form just one column of X's on the chart. But the numbers shown in some of the X and 0 columns denote months of the year, so it is possible to guage the time it has taken this pattern to form. It took about a year for the left shoulder to form, and so far the right shoulder has formed over just six weeks (Aug through Sept).

Incidentally, the 2,500 target to the downside (!) has not been activated but is a valid (inactive) target for now! The 6,150 target to the upside is also still active in my view, as the index has yet to fall below 4,850, the base of that column of X's. Until it does, that remains a valid target.

Friday, September 23, 2011

Thursday, September 22, 2011

SPX update

1,040 and 990 are both active targets. But note the previous support at 1,110 (saying that look at the decline that preceeded it - 23 boxes, 230 points on this chart without a reversal)

FTSE update (2) - triple bottom sell signal

That 5,050 support didn't hold for long! The break through 5,050 now brings 4,500 in to play - an active target to the downside.

The pattern still looks like a forming right shoulder to me and noting the support that the FTSE has had previously at this level, it is possible that the shoulder will continue to develop and the market will reverse higher, up to 5,300.

The other alternative is the shoulder breaks now and we get a 'hard down' progressive drop down through 4,800 (a previous level of support) through 4,500 and down towards 4,100.

FTSE - support?

Based on recent action, the FTSE should find support here (famous last words!) If it breaks below 5,050, it forms a triple bottom sell signal and 4,500 comes in to play.

Friday, September 16, 2011

Gold - potential targets

On the 10x3 H/L chart, the first target down from the recent (all time) high is 1,550. See how the price reversed lower, then on each subsequent revesal higher, the bears have come back in selling at lower levels. The move through 1,800 confirms the triple bottom sell signal and activates the target.

There is a minor bullish support line to push through. The longer term line is still very much in tact and has not been challenged since early 2011.

The 25x3 chart shows just how parabolic gold has gone the last 2 years. The recent action has given a double bottom sell signal and an active target of 1,600. I haven't labelled it but there is also an unactivated target to the upside of 2,250 but we would need to see a move above 1,900 for this to be activated.

FTSE battle lines

Here are the current lines in the sand. The FTSE reached 5,399 intra day this morning but the bulls were unable to push it through 5,400. Conversely, we know the bears are coming back in at this level, as it can clearly be seen that we have already had two reversals and sell off's down to 5,100. But the bears have not been able to get through that level.

So thats the range - 5,100 - 5,400. For this recent pattern to continue, the market should sell off from here.

Tuesday, September 13, 2011

FTSE update

A move below 5,050 activates that 4,500 target to the downside. I just wonder if the bulls and bears will continue to fight between 4,950 and 5,400 for a bit longer. If this was a forming right shoulder, i'd expect a few more columns of X's and 0's prior to breaking lower. Either way, a move through 5,050 activates the target.

Monday, September 12, 2011

SPX update

A move through 1,140 activates the 990 target.

Friday, September 9, 2011

SPX - can it hold 1,150?

This 10x3 shows the recent battle between bulls and bears. The forming triangle failed a couple of weeks ago. I still like the look of 1,040, the target given by the first column of 0's from the May high (11 x 10 x 3 = 330 points. Then 1,370 - 330 = 1,040.) Lets see.