Lady Market and Intangibles – October 27, 2011

[Pierre Brodeur]

Only price counts to make money.
A topping pattern will take time to form.
As of now, big money does not chase this gap, but it could chase it in the next days.

In other words, do not chase this up, but do not short either.

Pascal

I have been using P&F charts for over 30 years, a subject which is not discussed here very often. I believe in this approach to identify intermediate and long term trends. I would suggest that people take a look at most if not all recent P&F charts of North American indices Dow,S&P, Rut, NASDAQ, TSX and you will notice that the bearish resistance line has been BROKE UP which essentially means that the trend is now UP and thus shorting is not a very good idea as mentionned by Pascal.

IMHO, buying the forth coming pullback is therefore the less risky trading plan.

Pierre Brodeur

[grems8544]

Pierre,

I see it, but could you please post the charts for all to see? Do you have good experience that the breaking upward on the P&F will not whipsaw?

Thanks,

pgd

[lulzasaur]

Pascal,

I thought something of interest was that on your charts, SKF appears to have been attracting a lot of buy interest especially after the dip. Could this be an indication of what's to come?

[Pascal]

Pascal,

I thought something of interest was that on your charts, SKF appears to have been attracting a lot of buy interest especially after the dip. Could this be an indication of what's to come?

It could, but you'd need many of these, especially in critical inversed ETFs (FXP for China, SMN for materials, SCO for oil)

Pascal

[adam ali]

Paul,

In regards to the P&F charts, they are easily accessed for free at www.stockcharts.com.

In my experience, the point and figure methodology relies on a progression of indicators to tell its tale. There are short-term indicators (Hi-Lo, 10-Week measurements) and longer 30-week indicators. As each turns, the advice is to push more chips on to the table. In this respect, the methodology is similar to yours, and it becomes a weight of the evidence call. The more oversold/overbought the body of indicators, the greater confidence one has that once a preponderance of indicators do turn in the opposite direction, the reversal can be relied upon.

I have not seen a quantitative study that specifies how often a turn up/down in the short-term indicators is reversed before the long-term indicators have an opportunity to turn as well (i.e., a whipsaw).

[grems8544]

Thanks Adam.

I have P&F charts up, and TradeStation makes viewing these easy too.

I was simply asking for the charts that Pierre was looking at so that we could see his box size, etc. It's always good to see a graph of what others are commenting on, simply to reinforce understandings/setups/conclusions. I'm in agreement with everything you wrote -- thanks again!

Regards,

Paul

[Pierre Brodeur]

Pierre,

I see it, but could you please post the charts for all to see? Do you have good experience that the breaking upward on the P&F will not whipsaw?

Thanks,

pgd

First of all sorry for the delay.
It is the first time I upload a file to this web site. Hope I did this well.

There is no guarantee of a whipsaw back down towards lover levels. I "specialize" in the Canadian market and thus I can only speak about that market as an "expert" trader in that market. If you look at the TSX chart, during the last bear phase you will notice at least two (2) bull traps. Typically on the traditional Box and REV, whipsaws will be after 1 or 2 "X"s after the breakout. This is not the case right now thus my conviction of a new opposite trend upwards.

I believe another person compared P&F with your system. I don't get the comparison; nor do I get the point that it uses (or is a function) of other indicators. Yours is a MA and derivative MA system while P&F is a Support and Resistance identification system. The philosophies behind their design is IMHO dramatically different I believe. P&F is a breakout/ breakdown trade system and therefore is imperfect on its own. It allows for target projections which if done well can be helpful. One needs to add its own indicators to confirm "trade targets" which are not the standard double top or double bottom break out/downs. I have been using cycle analysis to complement my P&F trading decisions with what I call channel support and resistance points. And I keep it very simple.

Hope this anwers your question

Pierre Brodeur

[grems8544]

Hope this anwers your question
Pierre Brodeur

Outstanding. Thank you.

[adam ali]

I believe another person compared P&F with your system. I don't get the comparison; nor do I get the point that it uses (or is a function) of other indicators. Yours is a MA and derivative MA system while P&F is a Support and Resistance identification system. The philosophies behind their design is IMHO dramatically different I believe.

In regards to using other indicators, what I was referring to is how Tom Dorsey, of Dorsey Wright, a major proponent of P&F analysis, uses P&F indicators. As mentioned earlier, he identifies certain P&F charts (10-Wk BP, HiLo, etc.) as more sensitive to short-term changes in market behavior; other charts such as 30-Wk BP are longer term in nature and will take longer to turn. My point, which I should have made clearer, is the P&F system can be used as a timing tool to manage market exposure. However, all "indicators" are merely different P&F chart measurements.

In regards to P&F and MA, simply put, how one measures something can be quite different than what one measures. For instance, MA can certainly be used to identify support and resistance levels, just as P&F does. And to the degree Paul is using moving averages (slope and slope of the slope) over different timescales to gauge market behavior, one can use P&F charts (e.g., an increase in the number of individal stocks' P&F bullish percentage) to effectively "see" the same behavior.

To me, it's opposite sides of the same coin.