It’s been awhile since we’ve shown point & figure charts of the major market indexes. So let’s do that today. One of the things that I like best about p&f charts is their simplicity. Alternate X and O columns are shown. The X column represents rising prices, while the O column shows falling prices. A buy signal is given when the last X column exceeds a previous X column. A sell signal is given when the last O column falls below a previous O column. We can vary the sensitivity of the chart by adjusting the size of each box. Smaller box sizes are suitable for shorter-term signals, while bigger boxes are better for more important signals. I’ve chosen 2% box sizes for the three indexes shown below. After failing three times to exceed overhead resistance at 8940, Chart 2 shows the Dow Industrials on a short-term sell signal. Chart 3 shows the S&P 500 in the same condition. It would have to close at 881 or higher to reverse that sell signal. Chart 4 shows the Nasdaq Composite Index in a slightly more positive position. It recently exceeded a previous X column, but has since fallen back below the breakout point. The fact that the Nasdaq is pulling back from its falling resistance (red) line is also worrisome. [P&F down trend lines are drawn at a 45 degree angle from a prior resistance peak]. An upside break of a down trend line is usually an important part of a market upturn. So far, those resistance lines have held.
Chart 2
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Chart 4
Tags: Charts, Technical Analysis