Below is a chart of the of the NYSE Composite over a 20 year period. The chart type is Renko, and I've include the volume by price bars. I find Renko charts useful in looking at longer periods of time, as I believe such charts confer perspective.
As you can see, we are approaching a long price bar indicative of a consolidation of transactions in this area for this time period.
Some of you may not be familiar with the NYSE Composite Index. Here is an explanation.
Index Description
The NYSE Composite Index is designed to measure the performance of all common stocks listed on the NYSE, including ADRs, REITs and tracking stocks. In January 2003 the NYSE reintroduced the NYSE Composite Index under a new methodology that is fully transparent and rule-based. Under the new methodology, all closed-end funds, ETFs, limited partnerships and derivatives are excluded from the index. As of year-end 2004, the NYSE Composite consists of over 2,000 U.S. and non-U.S. stocks. It is a measure of the changes in aggregate market value of all NYSE-listed common stocks, adjusted to eliminate the effects of capitalization changes, new listings and delistings. The index is weighted using free-float market capitalization and calculated on both price and total return basis.
Here's the same chart using the $COMPQ
What is actionable from these charts? I see not action from these charts, but rather, understanding. These price and volume profiles, to my mind anyway, suggest important inflection points that may not be readily discernible from traditionally derived pivot points constructed on shorter term data. If anything these views are a larger terrain map.
Below is a chart (09/06/09) that I presented in the comments section here and on my blog. This chart kept me from getting short when many were vociferously calling for THE top in the bear market rally. This chart was met dismissively by some who had other, supposedly superior methods of analyzing the market. I don't have fancy charts nor fancy methods. I hope I never do. But I do know the power of price vacuums in the fossil record of charts, and I do understand the powerful motivation of under performing money managers–it is a brand of fear that moves markets upwards. I credit Rev Shark (James DePorre) with cultivating that understanding of that uniquely powerful fear and its robust effect on market movements.
As I present this chart, I acknowledge that I could have easily been wrong. So don't believe for a minute that I'm crowing or ascribing that this chart has any prescience beyond the two weights of evidence (vacuum/fear) that I believed improved the probabilities of upward price movement back in September 2009. The current dynamic, both in price and emotion is likely the obverse of September 2009, though it is likely that the market will come to that realization violently.
There is no exclusivity in gaining entrance to Club Wrong–just make sure that your ticket fee is not exorbitant.
