$$ More Fun with Point & Figure

So I wondered what the S&P P&F price target was back in early April 2010 before the April 26 climax.  Turns out, if you draw a daily P&F chart using 3.8 points per box, you connect the March 2009 low with the February 2010 low.  This matches the 1x1 P&F trend line to the dominant trend support line at the time.

The P&F price target was 1330.  We failed to reach that target of course, but I find it interesting that we are encountering a bunch of resistance at 1330 recently.

$$ Fun with Point & Figure Price Targets

I'm experimenting with Point & Figure charts.  I have long been interested in them for their graphical depiction of support and resistance, as well as their price targeting.

However, there are so many different ways to set up a P&F chart that I am often left confused.  Should I use traditional settings?  Percentage settings?  Should I use Average True Range settings?  If so, what ATR period should I use?  To confound matters, each of these different settings seems to produce a different price target.

So I have come up with an idea I am trying out with respect to price targeting.  I experiment with the "User Defined" settings until I come up with a box size and a time period that allows me to match the dominant trend line on a normal chart to the 1x1 trend line on a P&F chart. 

For example, on a normal S&P 500 chart the dominant trend line connects the March 2009 low with the August 2010 low.  In order for me to construct a daily P&F chart that has a 1x1 trend line which correlates, I have to use a box size of 2.15 points.  When I do, I get a bullish price objective for the entire move since March 2009 of 1369.55:

But wait, there's more.  In order for me to construct a P&F chart whose 1x1 trend line matches a normal chart connecting the late August 2010 and late November 2010 lows, I have to go to a 60 minute setting with a box size of 4.0 points.  When I do, I get a price objective of 1348.0:

Finally, if I choose 1.141 points per box on a 30 minute chart, I can construct a P&F chart whose 1x1 trend line connects the late November 2010 and late January 2011 lows.  When I do, I get a price objective of 1352.09:

What does all this mean?  Like I said, I'm experimenting so who the hell knows.  But here's a guess:  the current move in the S&P tops out at (or perhaps fails to achieve) 1348-52, we get a correction, and the next move (which is expected to top in late May or early June per the 14-week cycle) culminates at 1369.55.

We'll revisit this post in the future and see how it turns out.  In the meantime, if there are any P&F experts out there, please feel free to chime in.