What a Key Technical Indicator is Saying About Market Risk Today

I will admit that “Point and Figure” (P&F) charting is not something I have spent years studying.  I do know that according to Investopedia and other sources I have read recently, it is gaining followers.  P&F charts tend to be longer-term in their view, and they project and name an actual price “target” for the stock or index you are tracking.

But this article is not a dissertation on P&F.  It is about a recent perusal of the major markets by my team and me, simply asking what P&F charts are saying about the potential for a second helping of the market decline we saw earlier this month.  Here is a summary of what we found, using ETFs as a surrogate for some of the major market benchmarks, and P&F price targets which appeared on Stockcharts.com as of 10/28/14:

Point and Go Figure

Sungarden Investment Research 2014

Is this a forecast?  No.  But it does look like the type of picture we’d expect to see if the brutal middle of October was more of a warning shot than a quick, investor spasm on the way to glorious new highs.  The S&P 500 Index has outperformed the Dow Jones Industrial Average handily this year, and that is suspicious, since they often roll up and down together.  Small cap stocks, currently down for 2014 as of 10/28/14, are still likely to be considered a logical source of capital if big money portfolio captains decide to sell things off before too long.  And Europe is reminding us that in the current era, it is they who catch a cold when the U.S. sneezes.

© Sungarden Investment Research

www.sungardenresearch.com

Read more commentaries by Sungarden Investment Research