APPLYING POINT & FIGURE SIGNALS TO MAJOR STOCK INDICES -- UPTRENDS ARE STILL INTACT -- HOLDING ON WITH PROTECTIVE STOPS
P&F CHART OF NASDAQ 100 ... The main benefit of point & figure charts is that they give precise buy and sell signals. A buy signal occurs when a column of x's exceeds a previous x column. A sell doesn't occur until a column of o's falls below a previous o column. The x column represents rising prices; the o column shows falling prices. P&F charts are not time sensitive. A new x or o is only added when prices change. If no price change takes place, the chart is left untouched. That leaves a pure price picture that's relatively simple to track and trade. Buy (or add to a winning position) when an x column exceeds a previous x column. Hold as long as a pre-existing buy signal is still intact. (Aggressive traders often add positions on each buy signal. Conservative investors can simply treat repeat buys as an opportunity to raise a sell stop to a higher level). Chart 1 shows a p&f chart of the Nasdaq 100 Shares (QQQQ) with a box size of .25 points. The last buy signal was given at 39.50. That means the QQQQ is now a hold. A price drop to 38.25 is needed to issue a sell signal.
Chart 1
Chart 2
Chart 3
S&P 500 SPDR AND DOW DIAMOND SIGNALS... Charts 2 and 3 show the p&f charts for the S&P 500 SPDRS and the Dow Diamonds. Both are still in uptrends (the x column). The S&P SPDR (SPY) has issued four buy signals since August with the last one occurring this week at 119.50. That makes the SPDR a hold. It would have to fall to 117 to give a p&f sell signal. The Dow Diamonds issued a recent buy at 105.75. It's still a hold. The DIA would have to drop to 104 to issue a sell signal. The red numbers and letters refer to the start of calendar months. Numbers one through nine identify January through September. The letters A through C mark the start of October, November, and December. The last red letter on each chart is C which means the price took place since the start of December. That means they took place since Wednesday of this week.
