The word "Kagi" comes from the Japanese art of woodblock printing. A kagi or "key" is the L-shaped guide in a woodblock that a printer used to line up the paper for printing. Kagi charts are price charts with thick and thin vertical lines connected by short horizontal lines. Kagi charts only add a new vertical line when prices have reversed enough to cancel the current uptrend or downtrend. Until such a reversal occurs, a Kagi chart will only move up (or down) in its current column. The thickness of the Kagi line changes depending on price action.The Kagi line will continue to move up (or down) until prices reverse by a specified amount. When that happens, a short horizontal line is added as well as a new vertical line which extends to the new closing price. There are several ways to specify the reversal amount - in absolute points, as a percentage, or by using the Average True Range of recent price.
The top chart demonstrates 5 completed complex tops in the past two years. Each tops consists of 1st segment, which is up in black, a 2nd segment, which is down in red, & then the last segment which is up in black). Each vertical yellow line signifies the completion of a top, and is followed by a leg down in the $SPX (red line). The bottom chart demonstrates the same 5 tops using Kagi. We are undergoing a sixth top that is similar to the third complex top. The maximum NASI value achieved in the 1st up segment of the 3rd top (to the left of the 1st green arrow) didn't exceed the maximum value of the 1st and 3rd segments of the prior NASI top. This was followed by the big drop in October 2008 (long red line). Are we in for another biggie?
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