In early December 2016, we published an article with the heading “Upside Target” in which we explained the horizontal count method in point and figure (P&F) charting and then applied it to the S&P500 index – which had just broken upwards out of a two-year sideways market.
In this article, we intend to apply the same idea to our JSE Overall index, which has similarly just broken up out of a sideways market. The JSE Overall index has been moving sideways since February 2015 – about two-and-a-half years. Consider the chart:
Now, finally, in the last week, it has broken convincingly up out of that sideways pattern, making it possible to do a horizontal count.
Consider the P&F chart of the same data on the JSE Overall index:
This chart uses a box size of 1100 index points. Using this box size, we can identify a horizontal count of 9 and the chart has a reversal of 3. The low point in the sideways market was 46330 on 20th January 2016. So the horizontal count works out to:
(1100 X 3 X 9) + 46330 = 76030
The JSE Overall index was at 55207 on the day of the upside break. So this horizontal count suggests that it will rise by 20823 points to reach 76030.
This is a rise of 37,72%.
Unfortunately, the P&F horizontal count does not give any indication of how long it will take to reach this level, but historically such predictions are about 70% accurate.
In our previous article (“Upside Target”) we suggested that the S&P500 would rise 38% from its level in December 2016 of 2193 to reach 3027. It is well on its way to that level having touched a record intra-day high of 2490 on Tuesday this week.
We drew your attention to the island formation in the JSE Overall index in our article two weeks ago entitled “The JSE’s Island Formation” (Click here) and suggested that in all likelihood, the JSE Overall would break on the upside and then play “catch up” with other world stock markets. We believe that this is now happening.
As a private investor, you should be fairly fully invested in this market.