P&F Chart School

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Maybe its just me...but the market took the cue and is placing a significant bet on the upside starting with today. I call it the Helicopter Ben's end-run around move catching oil and dollar traders off balance...thereby lifting the market like a rocket as big investors move to equities. Appears like a powerful move up today followed by a lesser but significant lift tomorrow. See no weakness in the trading. appears more like a solid bottom being put in here.
 
Sorry, I missed commenting last night. Busy, you know?

Anyway, here we are again today. All the strength of yesterday got zapped out. I am glad that I stayed in "F" rather than trying to catch that bounce. That bounce was not caused by natural action of a wave (it would have, in another day or two, by the way, had the Fed not decided to become creative).

Instead, now that the markets have had a day to digest what the impact of that fed move is going to be (which, by the way, is NOT good for the taxpayer. It only delays the inevitable by a short bit. The market sucks 200 billion in cash pretty quick when you've got many times that amount about to go into foreclosure as people walk away.

By the way- I'll say it here, now, just to get it off my chest- the subprime is going to kill us. Bad. I'm 48 years old, and this is going to make the S&L crisis of my youth look mild in comparison. Full bore recession is directly ahead, and big time, and I don't see yet what will pull us out of it. In the Second World War, we had the Second World War to get us out. We're already at war, the war spending it going to Haliburton, Brown and Root in services contracts, not in building our manufacturing capacity- i.e. that is still being sent to China in droves- so I don't really see us coming out of this. for a LONG time.

Now, wasn't that a positive statement?


Ok- here is the chart for today:

We lost steam this afternoon. That pretty much assures us that we're going to retest that 1270 mark, and very soon. The question is will it be a third time retest, and a bottom? Or will we break through that one, and continue downward-​

Very risky business here. Once we get to the 1270 level, we're going to have to decide what we want to do.

1270 again means "third time the charm". Either we will get a nice, natural rebound wave back up to the 1310-1320 range, or, if it doesn't hold, then it's "Look out below".

A fed rate cut next week is already pretty much factored in. If it doesn't happen ( and I bet the fed is DARN worried about inflation right now, as they should be as the oil shock works it way through the system) then, well, if we break the 1270 on the downside, we next get a pause at the 1230-1240 level. Beyond that- too hazy.​

I'm sitting nicely in "F", thank you very much, where bonds get a boost from 200 billion of future broken promises backing from the FED.​



Too risky for me.​

Note: one move this month so far for me- into "F". It was a good move. I'm sticking there for a while.​
 
I don't really see us coming out of this. for a LONG time.

Now, wasn't that a positive statement?


Positive or not, thank you for posting your statements and observations. I would rather know the truth and deal with it, not stick my head in the sand.
 
Well, the good news is that things seem to have settled down a little. That Fed annoucement that they were going to soak up $200 billion in sub-prime related questionable value bonds was not on the normal schedule, so it may have thrown off my crystal ball a little. Anyway, the markets have thought about that, drifted up in the normal wave a bit (to around the 1320 level), drifted back down to retest the prior lows, and then settled up yesterday at the end.

What this means:
First, I highlighted the bearish resistance line above our current levels. Until this line is broken, we techincally are still in the bear market phase here. That line will continue to be an indicator of the longer term trend, which still points downward. Under true P&F theory, we would not re-enter stocks until that line gets broken, and we are ready to move up.​

But another factor is at play now as well. We've retested the 1270 area twice now, and yesterday almost came down for a third. when we droped to 1282 yesterday. BUt upon reaching 1282, buyers kicked in. that was a small, good sign.

I said previously that if the 1270 line is actually hit for the third time, that would be the risky time, as a breakdown below that means we could head much lower, with the next stop downward in the 1230 area.​

On the other hand, yesterday we approached that area, and then climbed back out of the hole before we reached down that far. That's a GOOD sign. It COULD mean that we have tested, and since it held, we are ready to form a base here, and may soon be ready to head north and break the bearish resistance line above.​

We'll just have to see what today, and early next week bring. Either it will be more bad news, and the downward push towards 1230, or....if we get some good news for a change, we could be almost ready to break that bad ol'e bearish resistance line on top, and reverse the general trend.​

We'll just have to wait and see.​

I'm sitting calmly in "F", and will wait it out.​
 
Wow. What a morning.

Here is the chart from about 9:50 this morning, showing the reversal and bounce up this morning. I annotated it a bit, showing where the floor was showing, and the triangle which was about to form:


My comment was going to be about how we held that 1290 level, and, with the approach of time, how that triagle that was forming was about to tell us we were going to break out, one way or the other, and very soon. I was thinking maybe Monday with a downside break, or perhaps tuesday, and that might make a good buying opportunity.

No sooner that had I finished annotating, and I looked back at the market.​

Wow. The reversal is the first time I've seen both new "X"s and a whole new row of new "O"s form in the matter of fifteen minutes:​

Pretty incredible, actually.​

Got to think about this one for a bit. Either it's about to break downward bigtime again, or it presents a unique buying opportunity. Not sure which just yet.​
 
And here comes that retest of the 1270 level again....



Will it hold at the 1270 level, in which case we may very well get the reversal, or....will we get a breakdown now, and it tumble even lower?

P&F chart has been telling us to expect 1230. It told us that two weeks ago. We are well on our way there. But it is darn hard to peg a bottom to the exact day.

Only time will tell.

We're down about 3.5 % for the month, and it's only the 14th of the month. I'll take the 3.5% advantage over the "C", and lock in the benefit.

If I can ony do this every month (3.5% X 12 months, and this is a BAD year...)= :D​
 
I would make this little note here:

This morning we got hit bad right out of the gate, as the market uncertaintly following the Bear Stearns annoucement rippled through the market.

It could have been MUCH worse than it was. And it appears now that there is substaintail resistance below us. That is a good sign, in fact one that may be signaling we've about reached the bottom, at least for now. It all depends on what happens over the next couple days. Either we head back up for the short term wave, or we break lower. The next real resistance level below is in the 1230 range- as noted.

However, the 1270 level is acting very nicely as a buffer to keep us from going lower, at least this morning it is.

Here is this morning's chart- with a single "O" added on the downside this morning when we broke below 1270, but that didn't last long, and we are making back most of the morning losses as people jump in at the opportunity.

I've marked the floor support line we're holding - and marked the P&F chart's negative price objective, which appeared back on March 4th, as a signal for a downturn to reach 1250. See this post:
http://www.tsptalk.com/mb/showpost.php?p=152651&postcount=89

Sometime a day or two later, the chart was revised to show 1230, not 1250 on the downside. I think that was because there is little substainal data in the 1270 to 1230 range. When it went up before, it went straight up through there, and didn't build any floors inbetween.

I would tend to believe now, after digesting what happened this morning, that the chances of us hitting that 1230 level are now much lower than they were yesteday- in fact I think we may see the turnaround soon- We may have hit the floor this morning in the 1265 range. Money came in from the sidelines again, stronly, when we were below 1270. That is good. I THINK we may be ready to reverse the wave, and head higher.

that's only my opinion. I'm in to win at this point. Cross your fingers.

View attachment 3559

Your mileage may vary.​
 
Nice cycle up.​

However, it's still within the continuing pattern and below the bearish resistance line. While it's a nice move today in a postive direction, the overall direction remains unbroken.

Here is the chart this morning:

The overall chart shows that we continue in the major bear market down cycle. The trend of this particular wave up shows we should peak out between 1310 and 1320. Once it is in that territory, the market has to make a decision- either jump north, and break that overhead bearish resistance line (which I really don't see any news anywhere to support that), or....and this is probably more likely, another down cycle in the very near future. This next scheduled down wave would take it down into the 1230 range. Once again, that range is what the predicted lower price objective is according to the projections made by the P&F chart back on March 4th.

I true follower of the P&F chart would still be sitting on the sidelines, after having sold on March 4th's reversal.

For me, I'm in, hoping that this one will be the wave that breaks to the upside. If not, then , well, it's too late for me to bail out anyway. Besides, now that I'm in, I am trying my best to limit my moves to stay within the 2 move limit the thrift board thinks is best for me. I know better, but that is another story for another day. Today, it's all about waiting for the entire world here to panic, so we can finally say we have capitulation in the market, and the turnaround which that panic will signal. Cool heads now will let us take most advantage. When others are falling out the window ledge, that's the time to scoop up bargains.


That's all for this morning. Cross your fingers, and let's see how the market likes (or does not like) whatever the fed does this afternoon.​
 
Note:

If I were a day trader- (which I am not), I would sell right here. We're now back above 1311, which puts it in the range of the top of a normal wave cycle. No metter what the fed does, it will be hard to close above here, I think. I think it would be worth bailing right here and wating for the next cycle.
 
OK- here we are at 1322.

In the course of the current bear market cycle, this is a significant point. Specifically, we are bumping up against the "bearish resistance line", which is just above us at 1330.

Should we cross that line, then we have a shot at having a fundemental reversal of the trend, and it would be a signal under the P&F format to make a buy.

However, should it fail to penetrate that point, it then will revserve direction again, and we resume our downward course.

Here is the chart for this afternoon- and I've marked in purple the point where we are now- right up againt (within 8 points of) the bearish resistance line:


Which way will it go? Will it break the six month trend and reverse now? Or will it tank????
The P&F chart still says "price objective 1230". Without a breakthrough, that is where we will be soon, I think.​


That is the question.​
 
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Actually a significant change this morning on the P&F chart- a buy signal--and here is why:

For the last four months, we've been on a downturn. We got a "bearish resistance line" overhead since January, and as recently as March 4th, we got another downward signal, which told us the downside price objective had been lowered to the 1250 level (and then was revised to 1230 a few days later).

I said then, when the downside price objective appeared at about 1330 headed downward, that I wasn't sure it would make it all the way down to 1250 (later 1230), but that I was selling out, then, and would buy back in around the 1270ish level on the way down. I did exactly that, making a move to F on March 3rd, and then moving back into the C fund on last Friday, as we bounced around that 1270 level.

Yesterday afternoon, I mentioned that we were bumping exactly up against that 1320 level on the bearish resistance line, and that whatever happened next would be significant.

A break upward would signal a change, if it failed to hold, then we would most likely resume the downward trend.

This morning, we broke through that line above, and registered an official breakthrough of the bearish resistance line.

Here is the chart:


Notice first of all the chart signals an official reversal in the data at the top. We've switched officially from a negative price objective of 1230, to a preliminary estimate of a postive price objective of 1510. (See #1).​


On Point #2, you see the "X" has crossed the bearish resistance line this morning, and penetrated above the red line.​

That, combined with the "higher low" rather than a "lower low" in the last cycle confirms a change in direction on the P&F chart, and resets the trend, at least according to traditional P&F chart rules.​


Point #3 shows the new "Bullish Support line" forming. Note that we only have one set of down "O"s to base it off of, so the likelyhood of a true change in direction is still a little iffy. However, it IS the first significant change we've had in a while, and is a good sign that the market has had enough. That triple whammy from the Fed seems to have had a nice effect.​

Now- what I expect from here-​

The normal cycle, if we are to believe that a bullish support line has formed, would tell us that we will have a day or two of rest here- and will gently float back down a little. If the bullish support line is for real, it will float downward to between 1280 and 1290 or so, hit that line, and start moving up again.​

And then, if that holds, the next cycle will take us northward again, this time higher than the high we hit this morning.​

So those who follow this type of chart-if you are in right now- things are looking good.​

Nice place to be.​

Note- this COULD just be a fakeout. You saw earlier this year (on the chart above) where the red bearish resistance line was penetrated by three "X"s, only to be torn down again a few days later, and the downturn resume. That's why it will be important to keep an eye on it over the next few days.​

If you are not in right now, look for a buying opportunity in the next day or two, or several days, when we are below 1290. That will be your leg in, PROVIDED that we are in a true change of direction. If that is the case, the it will be up from there. If the 1290 on the downside holds- then we're up, up and away, when the smart money figures out that the market is changing, they will come in from the sidelines and drive it up quick. We'll just have to wait and see.​


Just a theory- don't do it cause I say so- because I am just a guy, not a guru, and this is NOT investment advice.​

My 2 cents, anyway.​
 
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Very good morning this morning-

We did have a slight retracement this morning, as expected, although it didn't drop down below the 1290 level that I was thinking we would hit. We may still get there in the next day or two, because I have a feeling we're going to fill in the little blank square indicated on the chart. However, we have some good strength indicated as well, and we still have the new bullish price objective up above 1500.

Here is the chart this morning- now as we sit about 0.84% in the green this morning:

View attachment 3575

That's all this morning. Enjoy. I'm in- see you up as we near 1490-1520 range.​
 
BlueMax said:
James,
How does the resistance at 1400 play in P&F charts? Or does it?
Click to expand...


In pure P&F theory, the 1400 level really doesn't have any affect at all. Yes, we may get some slowdown in that area, but what the chart is telling us is that we won't get a full-blown reversal action again until we reach up in the 1500 range- where the 1510 takes us to a point equal to, but slightly behind, the last time we had a true change in direction, or reversal.

I've marked on here the dashed green line to show- horizontally, where we pick up the next price objective- just a hair short of the last time we got a break in the bearish resistance line (red line). We are now showing a price objective of 1510, just short of the 1520 the last time we were there.

And I've filled in some brown lines about what the chart is saying is likely in the days ahead. Perhaps some zigzag movement, but overall the trend should be postive.

Again, that is all based on hypothetical data- any good "bad news" event can throw things off. The markets are driven by outside forces, so any outside event could make all this a futile exercise.

Here is the chart with comments:

Hope that helps. Good luck, and let's cross our fingers.

I still think we'll get one more retracement back down in the 1290 area, which if we did, would be a great buying opportunity, but if not, then it looks, at least today, like we have a very nice bull run about to occur.​
 
Solid gains this morning- right on track. Remember, last week I noted the offical signal to a "buy" signal on the P&F chart-

Yes, we're going to get some action both ways in the immediate future- I doubt that today's close will hold this 1.75% gain this morning- but the trend is clear. We're on our way to a postive rebound here, thanks to pent-up demand for stocks, and the flow of money moving in from the sidelines. Unless some external factor- really bad news from somewhere, kicks in, then I am pretty much convinced the next turnaround will be up around the 1500-1510 level, as noted on the "price objective" on the P&F chart.

Here is today's action- I would also note that we crossed the 50 day moving average for the first time at the 1344 level today. More positive sign that we're bouncing back .


Point number one shows the Price Objective indicated by the P&F chart- up to the 1500+ range is indicated.​

Point number 2 is the solid Bullish Resistance line which has formed underneath- a good indicator we won't head down in the immediate future. Although we're bound to get some zig-zag action - the general trend has finally broken, and we're headed up. You have to be in to win, as they say.​

Good luck- and remember- this offer not valid in any state, your mileage may vary, I am not an investment professional, this is not investment advice, and you take only the risk that you are comfortable in taking.​

And all the other fine print, too.​
 
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I think you are doing fine job with posting tne P&F chart with your interpretation. Can you please post today's indications if possible before 12 Estern time? Thanks.
 
OK_ here is the chart for today.

We're still within the upside trading range- although we had a little of the red this morning, that's fully to be expected, as we've had a nice runup over the last week, and the market needs to take a breather.

What is interesting is how strong the market is, despite having to take a breather. Here in the chart, I've marked two points. The top one, in purple, is where we are right now- about 1348 level. We ran up to 1354 this morning- and then eased off. I expect that this little wave is going to go lower this afternoon as well, as those who have made some real money are taking their profits off the table today.


View attachment 3600

On the down side, we're due for a slight pullback. That's ok. The second point I've marked is the 1310 level, where we were the last time we were down here. The bullish support line is still solid, AND we've crossed above the 50 day moving average. That tells me that while we're likely to have a slight pullback this afternoon, overall, the trend is still for higher ahead. There appears to be lots of money on the sidelines looking to get in, so I would venture to guess that the next "low" here, in teh next couple days, will not be below the 1310-1320 range, and if it does slide down there, lots of money will pour in, and we'll retake the 1355 number again within a very short time.

I'm in, I'm staying, and let's see how it plays out. I plan to continue to hold, within "C", and expect a longer term upside here. Next exit for me will be either 1490ish, on the upside, or a stop-loss out should it turn down in a big way. My guess is the former, not the latter.

Best of luck.
 
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Today should be the day for a little breather. That's ok. We've moved up a LOT in the last five trading sessions. I just did the numbers, and we're up over 6% in five days. we got our buy signal back on March 20, and we're looking good so far. So we are due for a rest, just to consolidate the nice move north we just had.

We got our "buy signal" on the 19th. We're in for the run. A pullback today is to be expected, although based on the fact that the S fund had a LOT of money pouring in over the last few days- and gained more than the S&P500, I'd say that there continues to be a lot of money ready to jump back in. That is a real sign to me that we're going to continue higher over the next week, except for today's minor pullback expected.

What is good here is that we are now in postive territory for the month overall. If that holds, and we end the month on a postive, that will be the first time since October that we've had a green month. If you go back over the course of history in the S&P500, there are very , very few instances where we've had five months in a row go bad. This is the break that we needed to break the curse.

Here is today's pre-market chart:
I have marked as point #1 , in brown, the new trend line that we are seeing is the new direction. I expect the range on the top will fall right along that line. The chart is telling us we're headed to above 1500 before we get a faulter. I don't think we'll make it all the way there, but I DO think we'll make it much higher than here today.​

I have marked as point #2, in orange, where I expect today's market to take us- perhaps back down to the 1320 range. That will simply be a consolidation stroke, nothing more. That's fine. And then I expect it to start right back north again.​

Because it's likely we will have a lot of market action, I chose yesterday not to try and bail and take advantage of today's fall. The reason is that I think it will be either a quick snap down, and then the buyers will pour back in, meaning that our noon deadline doesn't give us a good opportunity to make a play here. I think we'll spend very little time at the 1320-1330 range before it will snap right back up into the 1350+ range, so it's not worth expending two moves to try and caputre it- my thoughts are that if it does reach down to 1320 range, it will only be for a matter of minutes or hours, not days, and that means little chance of a once-a-day move being able to hit it just right. Plus, money will flow in during the last hour, and bring it back close to today's opening level.​

Anyway, that's my thoughts. I could be completely wrong. I have been before.​

I'm sitting nicely in "C". And will continue to sit here, waiting for the month to be over, and then looking at where I need to be, to be ready for a quick-two-step in April.​

My goal these days is to only make no more than 2 moves per month, within the intent of the proposed limits- while still fighting against the limits full bore.​

If I can beat the S&P on two moves per month, strategically timed, then I have met my goal. If I can better the S&P500 (which, by the way, I am doing so far this year- by 2% per month- not bad if you ask me), then I've exceeded my goal.​
 
James,

Thanks for your input and posts! I've incorporated the P&F into my daily items to check now.

One question...The predicted upper end of the current trend, 1500+ in this case...How is that determined?

I know we halted the last decline prior to the predicted low of 1320 and I also don't expect to get all the way up to 1500, but I'm curious as to how that number is arrived at.
 
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