I was playing around with the SPX daily chart today (Wednesday) and found something very interesting. I was looking at the very strong resistance line that has turned the SPX back down all six times that it has been hit since September, and I traced it back to find that it extended back to the October 2008 low.

I then tried to see whether there was a line parallel to it that would form a channel and I found one that extended back to the November 2008 low. Here's the result with the new channel in red:

Looking at it there is little doubt in my mind that this has been the primary channel that the SPX has been trading in since August, and if we should make a new high from here, it seems likely both that the upper trendline would be the main target, and that the next touch of that trendline would most likely mark the next top.

This new channel's not altogether good news from a bear standpoint, as I was expecting that a break of the lower trendline of the blue rising channel at 1140 SPX would be confirmation of a significant change in trend, and it seems that we would need to break 1100 SPX as well, but it does give us a very solid target for a significant retracement and, when broken, would be likely to open the way to further downside.

We may just have made a very significant top this time though. I was watching the Vix carefully today to see whether it would close back within the bollinger band on the daily, that being the required second day of the three day Vix buy signal for equities, and we closed above it so there will be no buy signal this time, or not this week at least:

By the usual standards today's rally after the trend day yesterday seemed uncertain and weak. Perhaps change is in the air.

I have simplistic charts because I have simplistic methods.  I want to share with you a trade technique that I use that I've found to be very successful.   One way to look at the complexion of a chart is to utilize volume by price bars. Before launching into more narrative, let me put up a chart:

A few key points:

• The stock has made a significant relative high
• The stock has traded in a 2-month range with very high volume during this time frame.
• It has a 6% short float over the past couple of months.

When I look at this chart, I see instability in the current price range.  If the chart were flipped, I would find that long volume by price bar as being very stable, and I've enclosed an example of that for you. At its current price range, this chart looks very top heavy to my eye.  The short VbP bars are like an air pocket–a vacuum if you will.  This stock price could hit that air pocket and fall to the $43 area quickly.

This might be a stock that you might consider putting on a watch list as it might be at or approaching an intermediate level to short.  My point is not to recommend this stock as a short, but rather to demonstrate how looking at volume by price bars can give you a dimension of information that is not otherwise readily apparent.  

Here's another chart, COST, that has another promising (VbP) configuration:

Remember, this set up works on the long side too. Here's a chart of FTWR, as stock that I have a long position in.  

I want to share one last chart with you.  It is a Renko chart.  I posted a link to this chart back when I originally created it in September, 2009 of the NYSE composite.  I believed the lack of VbP air pocket above would suck the price upward. (I note that I could have easily been wrong, but this chart was part of my 'weight of evidence.'

There are no sure things when we look at charts, but VbP information adds a dimension to your chart review that may help you see opportunities and/or hurdles that you might have missed without the volume profile

Position:  long FTWR.