Using P&F Charts as a Contrarian Indicator

The first chart depicts the S&P 500 on a Point and Figure Chart. Notice that when the column of O's reaches the bottom of page, which indicates a very oversold condition, the price has a tendency to reverse. Likewise, when a column of X's reaches the top of the page, which indicates a very overbought condition, the price has a tendency to reverse. The second chart depicts DXD (Double-inverse short on the DJIA).
Note: To enlarge, double-click inside.
Note: To enlarge, double-click inside.