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S&P 500 Target: 1,590?

point-figure1

One of the first things I look at each morning when I turn on my computer is the Point & Figure Chart of the S&P 500 Index. Point & Figure charting is a technical analysis methodology that ignore price over time, and instead focuses on direction of the trend and at specific prices.

Some of the advantages that technical analysts who have strong beliefs in Point & Figure Charts see are they:

> Eliminate the insignificant price movements that often make bar charts appear ‘noisy,’

> Remove the often misleading effects of time from the analysis process,

> Make recognizing support/resistance levels much easier,

> Make trend line recognition a ‘no-brainer’, and

> Help you stay focused on the important long-term price developments.

For purists who focus solely on trend to determine a price target, they are able to ignore the minor ups and downs that are considered noise, and invest with the trend without making (at least in their minds) premature purchases or sales.

I have only had a passing interest in Point & Figure Charts, but I like to start my day with them just to see if there are any major trend changes spotted in this technique.

At present, the Point & Figure Chart is telling us the current trend has enough momentum to move the S&P 500 Index up to 1,590, from the current 1,310 level. This represents a 21% upside target for the S&P 500 index based solely on trend analysis.

You can see on the chart the blue uptrend line and how far above it the current column is. This means we can have some serious consolidation (ie, price correction) before the current uptrend is violated.

I’m not betting the farm that we’ll see 1,590 anytime soon. But, there are some very successful investors who believe strongly in this trend analysis technique that has been around for over 100 years. So, I’m also not betting against it given the massive liquidity that the Federal Reserve has unleashed on our economy.

Mark