I Spy … An Intriguing NYSE Composite Chart

Perhaps the most fascinating chart right now is that of the NYSE Composite. It features two developments worth exploring:

  1. Island reversal
  2. Bearish wedge

The NYSE Composite includes all stocks listed on the NYSE, about 1,900. Unlike the S&P 500 (NYSEArca: SPY) or Dow Jones (NYSEArca: DIA), the NYSE Composite actually reached a new all-time high on Thursday.

The new all-time high was short-lived and followed by a massive gap down the next morning.

Island Reversal

This gap lower created an island reversal. Some analysts consider island reversals indicative of a major trend change, but the Technical Analysis book by Edwards and Magee describes it as follows:

“The island pattern is not in itself of major significance, in the sense of denoting a long-term top or bottom, but it does as a rule send prices back for a complete retracement of the minor move which preceded it.”

It’s probably up to debate where the last minor move started, but at Friday’s low the NYSE Composite already touched minor support.

In addition, as Sunday’s Profit Radar Report pointed out, there’s an open chart gap, and the post-2009 bull market has filled every chart gap.

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Open gaps are like unfinished business, and with the gap closed this morning, the NYSE Composite doesn’t ‘have to’ move any higher.

Bearish Wedge

In fact, the NYSE Composite has formed a potentially bearish wedge formation (bold trend lines). It takes a break below the green trend line to activate lower targets, but last weeks island reversal throw-over top may be an early indication of an upcoming correction.

Trade Setup

Last week’s all-time high is important for the short term, and going short against it presents a low-risk trade setup with a favorable risk/reward ratio.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

NYSE Composite Chart is Sending Strong Message

Although not nearly as popular as the S&P 500 or Dow Jones, the NYSE Composite sports one of the most transparent technical pictures we’ve seen in quite a while. Here’s a closer look at the strong message of the NYSE Composite.

The NYSE Composite Index is not often discussed, but as one of the broadest U.S. indexes (1,868 components) it offers a unique big picture perspective, especially right now.

First off is a weekly log scale bar chart of the NYSE Composite since its March 2009 low along with some basic support/resistance levels and trend lines.

The second chart zooms in on the more recent price action.

There are a number of noteworthy developments:

There is a possible head-and shoulders top. The red line is the neckline. The projected target is 10,655, which was already reached last week.

The measured HS target at 10,655 also coincides with green trend line support.

Despite the measured HS target having been fulfilled, the August 3 Profit Radar Report predicted another leg down.

The NYSE Composite (NYSEArca: NYC) already exceeded last weeks low and the measured HS down side target. Today it broke below last week’s low and first green trend line support.

What does this mean for the NYSE Composite?

It doesn’t take a ‘chart Sherlock’ to perceive that the next leg down is underway.

While the trend is still down, the outlook is not as bleak as many expect. There is support at 10, 447 (200-day SMA) and 10,250.

From this support I expect a reaction that will surprise Wall Street and investors alike.

More details along with an actual projection for the S&P 500 are available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.