DJP – our proxy for the broad commodity complex – has broken out relative to AGG – our US bond proxy – for the first time since December of 2010. A rising commodity-to-bond price ratio is inflationary and often precedes or coincides with higher interest rates. Higher rates in turn are usually a negative for stocks.
UUP – our proxy for the US dollar – has formed a bearish double bottom breakdown at 23.75 and violated bullish support dating back to August of 2014. The preliminary downside price objective is 20.50. A falling US dollar is inflationary and often precedes or coincides with higher commodity prices. Gold seems to have gotten the memo. Oil not so much…
USO – our proxy for Crude Oil – has crashed through support dating back to November of last year and formed a bearish double bottom breakdown in the process. Falling oil prices are generally deemed deflationary and, viewed alongside recent weakness in the price of Gold, should give pause to those of you considering fresh long commodity positions.
After briefly retracing mid-month following a triple top breakout, PALL – our proxy for Palladium – has just formed a fresh double top breakout, a move that P&F chartists commonly refer to as a bullish catapult. The implication here is that, while elimination of supply at the triple top level caused prices to temporarily fall back, new buyers stepped in at those lower levels, creating fresh demand which in turn is powering prices even higher.
Forget about Gold and Silver. Palladium has been absolutely crushing it of late. As the chart above shows, PALL (our proxy for the rare metal) has just notched a new 52-week high and formed a bullish triple top breakout in the process, suggesting higher prices ahead.
You may (or may not) have noticed some small changes to the Report this evening. In a nutshell, I’ve restored paid access to select content through site membership.
I know, I know. That didn’t take long! From free last week, to paid-for this week.
The truth is that, prior to all the incredibly helpful feedback I received over the past nine days, I was not very clear on how most of you were using the site. That’s on me, and I will certainly try to do a better job going forward of staying abreast of subscriber needs.
That said, I firmly believe that those of you who saw good value in the strategy-based version of the site will see even better value in the site’s new layout and introductory pricing model.
Here’s how it works. The Intermarket Outlook and Chart Alerts pages will remain freely-accessible to all readers, as they were in the past. Access to all Relative Strength rank tables, however, will now be through paid subscription.
As a way of saying thanks to those of you who have remained loyal to the site these past few years, I’ve temporarily reduced pricing on Yearly subscriptions to $100 ($8.33/month). That’s a 33% savings over the previous Yearly plan of $149. Monthly subscriptions are also available for $10.
Again, those pricing plans are for a limited time only, so please lock them in now if you’re planning to re-enlist.
That about wraps it up.
If you have any questions, concerns or feedback regarding these changes, please don’t hesitate to contact me. I’ll do my best to assist.
Barring that, I hope to see you all back on the site soon.
Hi again folks,
Pardon the weekend intrusion, but I wanted to quickly reach out again to say thank you for all of the incredibly positive feedback I’ve received over the past few days in response to my previous post.
Truth be told, I was a bit taken aback at how sorry many of you were to see the plug pulled on the strategy-based version of the Report! Your responses have been quite eye-opening and inspirational to me.
From what I’ve gathered, most of you who regularly visited the site were *not* using it to systematically implement the trading strategies, but rather were leveraging their fund ranking systems to gain insight into sector and asset class leadership for your own discretionary trading purposes.
That was very exciting news to me. So exciting, in fact, that I’ve spent the past two days relentlessly working to upgrade the site’s content and layout to better serve that purpose.
The general idea behind the new format is to provide an easy path from high-level market overview on the Home page to a detailed breakdown of sector and asset class leadership on the Groups page, while staying abreast of chart developments and trade opportunities on the Alerts page.
I’m sure you’re all busy. I know I am. But, if you get a chance to have a look, please feel free to contact me with questions, suggestions or feedback you may have. My goal is to quickly evolve this new format based on your needs and your feedback is paramount to that effort.
While I reserve the option to re-instate fee-based access to certain high-value areas of the site down the line, it’s all free for now and there for the taking. So enjoy!!
Thanks so much for your time, and good hunting!
I wanted to take a moment to thank you for your recent patronage to the Relativity Report and to share some news.
Due to the ever-increasing costs of the data required to accurately back test and present the Report’s four strategies, I have decided to move to a new, FREE site model, focused instead on the interrelated nature of financial, non-financial, domestic and international markets.
As part of this new focus, I will, on a daily basis, be publishing a high-level market overview covering price movements in the US dollar, major commodities, bonds and both domestic and foreign stocks.
Furthermore, I will continue to maintain detailed tables ranking major ETFs within their respective asset classes using both Point and Figure charting and absolute rates of return to gauge Relative Strength.
My hope is that these new presentations, taken as a whole, will prove both easy-to-digest and useful to other investors out there seeking daily, big-picture clarity (like me).
As I will no longer be charging a fee to access site content, I have gone ahead and cancelled all open, recurring PayPal payments. I have also issued pro-rated refunds to those of you whose subscriptions were initiated or renewed less than 12 months ago.
If you have concerns regarding the state of your PayPal subscription, or have suggestions or comments to offer on the site’s new format, by all means, feel free to contact me. I’d love to hear from you. But please keep it civil. Offensive, profane, or unnecessarily aggressive diatribes will be ignored with alacrity!
If, going forward, you find yourself benefiting from the information contained on the new site, please periodically consider making a donation (using the Paypal button in the site’s left-hand menu). Though we’ve managed to reduce data costs by switching providers, reader contributions are still welcomed to help pay for other ongoing infrastructural costs (such as server space and software plugins).
And that about wraps it up.
Once again, thank you very much for your support and understanding, and I hope to continue serving you down the line.
Late last year I posted an article on the basics of traditional Point and Figure trend lines. In it, I explained that bullish support lines are always drawn at rising 45° angles off of significant chart lows, and bearish resistance lines are always drawn at falling 45° angles off of significant chart highs.
Given those rules, and the inherently “square” nature of Point and Figure charting, it stands to reason that 45° trend lines should be drawn on straight trajectories until they are violated by price. This, however, is not the case. Due to a frequently overlooked but very important rule pertaining to those lines, they may on occasion shift trajectories.
In this brief article, I’ll explain that rule and provide several real-world charts that demonstrate its usage.Almost Doesn’t Count
Newcomers to P&F charting often assume that when price touches a 45° trend line the line is violated. This is incorrect. As veteran P&F chartist Tom Dorsey states in his famous book on the subject,
“…to qualify as a violation of the trend line, [price] must move through it by one box or more, not just touch it. There is no such thing as the line being a little violated. It is or it isn’t.”
In other words, as far as 45° trend lines are concerned, almost doesn’t count. Price may test a trend line by advancing or declining to it, but may only invalidate a line by moving at least one box beyond it.
Considering this, and the fact that Point and Figure squares may only be occupied by a single X, a single O, or by a trend line, how do chartists represent both price and trend line when the two intersect?
The simple (and often surprising) answer to that question is, they move the line. Let’s look at some examples.Shifting Lines
The chart below shows that PowerShares DB Silver (DBS) touched its bearish resistance line twice toward the end of 2012 but on both occasions failed to rise above it. The line was therefore never violated. However, to represent the fact that it was tested, it was in both instances shifted up one box (see red arrows), creating adjusted downward trajectories.
In similar fashion, DBS twice touched its bullish support line in early 2013 before dipping below it. On both occasions, the line was shifted down one box down, creating adjusted upward trajectories.
When price finally did fall decisively below bullish support the following month, the portion of the trend line that had been shifted down to account for the second line test was removed and the trend line itself was terminated.
So, contrary to what many P&F newcomers often assume, traditional Point and Figure trend lines are not always drawn in straight lines. In order to visually account for situations in which price touches a trend line without violating it, those lines may be shifted up or down one box, creating new trajectories.
The distinction between a failed trend line test and a successful trend line violation is a critical one. Understanding that distinction will help you avoid false trend line signals and keep you trading on the right side of the trend.
It’s no secret that trend lines are an important facet of Point and Figure charting, key to evaluating long-term chart trends. However, while much has been written on how to draw and interpret these lines, much less has been said regarding the rationale behind the rigid fashion in which they’re drawn.
I’m going to pay some service to that issue below. First though, let’s review the basics of P&F trend line creation.The How’s
Whereas trend lines on bar and line charts are drawn subjectively, at the discretion of the chartist, traditional Point and Figure trend lines are drawn in an objective fashion, using simple but strict rules. Bullish support lines are always drawn at rising 45° angles off of significant chart lows, and bearish resistance lines are always drawn at falling 45° angles off of significant chart highs.
While some subjectivity may apply to identifying “significant” chart highs and lows, long-term support lines always originate below the column immediately preceding the first bullish pattern formed below prior bullish support:
Conversely, long-term resistance lines always originate above the column immediately preceding the first bearish pattern formed above prior bearish resistance:
Charts priced above both bullish support and bearish resistance are assumed to be in strong uptrends. Similarly, charts priced below both bullish support and bearish resistance are assumed to be in strong downtrends. Violation of long-term bullish support is considered a bearish event, and violation of long-term bearish resistance is considered a bullish event.The Why’s
So far so good. Pretty simple stuff in principle really. But have you ever wondered why Point and Figure chartists are so intent on drawing these lines at fixed 45° angles, given the inherent inflexibility of that approach? If so, then consider the following.
Unlike bar and line charts, Point and Figure charts are drawn on squared grids that are (by virtue of being squared) proportionally equal in both width and height. This means that, in order to maintain a rising 45° trend line, a P&F chart must continue to form more squares up than sideways, as SPY did from April 2003 through October 2006:
Conversely, to maintain a falling 45° trend line, a chart must form more squares down than sideways, as SPY would later do from the end of 2008 through the beginning of 2009:
Recall that squares up form when prices rise, and squares down form when prices fall. Squares sideways, however, form when prices oscillate within certain ranges and fail to gain significant traction up or down. SPY began doing just that back in July of 2007:
There are two key things to bear in mind here: one, such sideways patterns frequently surface at both market tops and market bottoms; two, when left unchecked, they eventually lead to 45° trend line violations. Why are these points key? Because, taken together, they imply that 45° trend line violations can provide advanced warning of important long-term trend reversals. That is precisely why Point and Figure chartists insist on drawing them, and why they pay them such heed!
After drifting sideways and lower for roughly eight months, the chart above ultimately penetrated long-term bullish support in March of 2008, six months before the collapse of Lehman Brothers and the brutal bear market that ensued.
Soon after that support line violation, the chart entered a powerful downtrend that lasted nearly six months. Penetration of bearish resistance in late March of 2009 signalled the end of the downtrend and the beginning of a lengthy move up that is technically still in tact today (at the time of this writing):
So then, let’s review. We’ve seen that Point and Figure trend lines are easy to draw and interpret. But that much has been noted many times before.
The more subtle issue that we’ve examined is the rationale behind the rigid fashion in which these trend lines are drawn. To recap, due to the proportional nature of P&F charts, the manner in which chart squares form, and the implications and consequences of protracted sideways square formations, 45° trend lines are extremely adept at both verifying the direction of long-term trends and signaling important trend reversals.
Remember, a primary rule of investing is to trade with the trend. To do that successfully, however, you need to distinguish bull trends from bear trends and recognize when trends are ending. Traditional 45° P&F trend lines are very well suited to both of those tasks, and are thus rigorously utilized and highly valued by Point and Figure chartists.
Brought to you via Sketchy Santas: A Lighter Look at the Darker Side of St. Nick. The author explains:
… the number of Santas available and a parent’s desire to have their children see St. Nick in a timely manner, loosely determines the potential sketchiness of Santas in your area. As demand (D) increases, you can expect a corresponding increase in quantity (Q) or available Santas and the sketchiness (S) of any given Santa.
Ho, ho, ho indeed :)
Wishing you and your families a warm, wonderful holiday season!!
Courtesy of PHD Comics. Seems about right to me!
From the brilliant archives of xkcd. Have a great weekend!