Getting to grips with the Charts

*click on chart for full resolution* 

Above we see a relatively Naked Chart of the S&P 500 Index...

Naked for the reason that there are no indicators on the chart, except for the 3CC indicator which is a candle drawing indicator...

The purpose of this is so that the analyst can focus on that which is important...

"PRICE"

Think about it... Price is the determining factor for all markets...

In a Bull Market, price goes up... But it can only go up as long at there is a Demand for higher prices...

Once that Demand has been exhausted, then we experience a excess in supply, as there are now no more people willing to pay premium prices for a stock or commodity... So then the with the drop in demand, so to is there a drop in price and we will see a correction towards a price where demand is high enough to drive prices higher again...

The inverse is true also for Supply...

If a company has a higher supply of a certain product then they are willing to sell those goods at a lower price, until the price gets so low that the excess supply gets eaten up by the consumer and then we have a return to equilibrium.

This is called the law of Demand...

What about if we just wanted to see Price on a chart...?

*click on chart for full resolution* 

So this question can be answered by creating a Point and Figure Chart...

Traditionally a very difficult chart to plot as it requires a lot of work... But fortunately there is a indicator at www.insanityindustries.net that does it for you!

The PnF chart is great because it cuts out most of the useless ranging that can go on in any market, but more so the PnF chart is great for the simple reason that it makes spotting potential Support and Resistance levels a breeze...

BUT... Surely TIME is also important...!?

*click on chart for full resolution* 

Yes we can't discount the importance of TIME as a means to establish Supply and Demand... After all, when the department stores raise the prices back to original price once the 25% sale has passed, what happens to the amount of stock sold... It lessens greatly... so by that rationale the same can be said for the market...

The Open Price is where a lot of deals are made and it is for this reason that it is a formidable support or resistance line...

TheRumpledOne from www.kreslik.com knows this and uses this logic to create a awesome little indicator called TRO_OPENS and if you just have a look at the chart... it really does work...

Think about it... If you take something like the average range of the last 10 daily / weekly / monthly candles, you could pretty much be certain of a similar reward IF you waited that long AND were on the right side of the market...