Enantiodromia

GCN pt 15

2012-01-28T03:08:00.000+11:00

More Development of the pattern !

What pattern ?

The pattern of PRICE , TIME , VOLUME , WORK & ACTIVITY

Line of Seven .04s now !

:"A friend to whom I have given some points in Tape Reading once asked if I had my rules all down so fine that I knew just which to use at certain moments. I answered him this way: “When you cross a street where the traffic is heavy, do you stop to consult a set of rules showing when to run ahead of a trolley car or when not to dodge a wagon?

No. You take a look both ways and at the proper moment you walk across. Your mind may be on something else but your judgment tells you when to start and how fast to walk. That is the position of the trained Tape Reader”. The difference between the Mechanical Player and the Tape Reader is therefore about as wide as between day and night." RDW ( Adapted )

"The lights dim, a spotlight reveals a lovely oil painting center stage,

and the auctioneer begins his rhythmic pitter-patter banter. The excitement

in the room is palpable. “We start the bidding for this remarkable landscape

at nine hundred,” he says, “nine hundred . . . nine hundred? Do I have nine

hundred for this beautiful work?”

You stare at the painting and think it might make a nice addition to

your living room. No one has yet bid, and so the auctioneer lowers the

price, looking for that first paddle to rise: “Now eight fifty . . . eight fifty? Do

I have eight fifty for this unique oil painting—I have eight fifty. Do I have

nine? . . . .”

Because no one responded to the initial price, the auctioneer quickly

lowered the bid until he found a level at which participants began to respond.

Now that the ice is broken and the auction is underway, the bid

quickly exceeds the initial, unaccepted $900 bid: “I’m bid nine hundred. . .

now nine and a quarter nine and a quarter. I’m bid nine and a quarter . . .

now nine fifty, nine fifty, I’m bid nine seventy-five.”

The bid races to a thousand dollars, and you feel your adrenaline surge,

as you really like the painting. You lift your paddle and the auctioneer nods

and his patter speeds on, the price ratcheting rapidly higher as he creates

excitement with the intensity of his voice.

Once bidding gets underway,

it’s quite common to have bidding begin to build. Just like in the financial

markets, very few individuals want to accept the risk of being first and

being wrong, which might be seen as foolish by peers.

The price of the painting climbs past $1,500, and you decide the green

of the fields might actually clash with your living-room rug. The auctioneer’s

rapid-fire delivery continues unabated, sustaining the excitement in the room.

But being a careful listener, you note that he is beginning to add

quite a lot of “filler” to his patter to make it appear that the auction is still

proceeding higher. This process continues until the last bidder bids, and

the rant is capped with a hearty: “SOLD at eighteen seventy-five!” You’re

glad you didn’t get caught up in the hype, and you turn your attention to

the next piece being unveiled on stage.

In the preceding example, there was only one item to be auctioned.

If this were the everflowing process of a financial market, however, the

auction would have begun again in the opposite direction once the upward

auction had discovered the last bidder. From the price at which the auction

finally got under way—$850—there was only a brief price/time relationship

because price moved quickly. As price began to climb steadily higher,

a congestion area was established as multiple bidders actively

engaged in the auction at prices they believed to be fair.

At the level where the price advance began

to slow, and the auctioneer began to pad his banter in order to make

it seem as if the auction were still healthy, an extended price/time relationship

developed; bidders in the top quadrant of the price range were most

probably engaged in an overreaction to the momentum of the auction.

In the art auction, there was a lone bidder at the bottom and a lone buyer at the top,

and of course the highest number of bidders in the middle; volume was high

in this range because the auction process revealed an area where differences of opinion were greatest ( think about it )

Our art auction example, of course, doesn’t represent the complexity

of the auction process in financial markets. Daily markets are comprised

of several continuous two-way auctions that establish a range for the day,

including a high and low ( where Differences of Opinion were at a minimum - again think about it ! ) .

These indications do not occur in any

particular order—the high for the day can be established at the opening

bell, right at close, or anywhere in between—and are not fully defined until

the day’s trading is concluded .

However,with enough training, concentration, and practice, you will be able to

visualize these patterns as they develop. James Dalton ( Adapted )

You take a look both ways and at the proper moment you walk across.

with your judgement telling you when to start and how fast to walk.

We need a clear understanding of the reality of the MARKET

But we need DOING as WELL

This is the ONLY way of developing EFFECTIVE SKILL.

One without the other is simply UNREAL.

Can you hear the pitter-patter banter ?

The changing price/time relationships ?

Consider this quote carefully

"This is how you detect the change. In a down move, it happens when the buying waves begin to increase in time and distance, or the selling waves shorten.
Either or both will be an indication of the change in the immediate trend." RDW

Time and Distance

The and is very important !

CHANGE of BEHAVIOR

EASE of MOVEMENT

what are JUDGED

Relationships !

Motorway

GCN pt 14

2012-01-26T02:17:00.002+11:00

The chart yesterday

The chart close of today

"AS the whole object of these studies is to learn to read what the tape says, I will now explain a point which should be known and understood before we proceed, otherwise the explanations cannot be made clear.

First of all, we must recognize that the market for any stock - at whatever level it may be - is composed of two sides, represented by the bid and the asking price. Remember that the "last sale" is something entirely different from the "market price." If Steel has just sold at 50, this figure represents what has happened. It's history. The market price of Steel is either 49 1/8@50 or 50@50 1/8. The bid and asked prices combined form the market price. This market price is like a pair of scales, and the volume of stock thrown out by sellers and reached for by purchasers, shows toward which side the preponderance of weight has momentarily shifted." RDW

The second test at .038 was ONE trade of 41,080 shares.

"This two-way auction process enables all market participants to express their opinions—no
matter how those opinions were obtained—with real money; the auctions
effectively establish a fair price where business can be conducted at any
given time. This expression of the market’s collective will results in a constant
flow of objective market-generated information."

"Auctions are made up of three fundamental elements: price, time, and volume.

As the market’s two-way auction process

unfolds, there is an ongoing search for information between buyers and

sellers"

How important to be very clear what the market reality IS

Now something to think about !

The markets is a TWO way AUCTION.

BUYING and SELLING waves.

That gather FOLLOWINGS !

Why does a wave end ?

or - When does an auction end ?

What happens ?

The bidding or offering STOPS

Consider this answer

"An excess high or low occurs on light or low volume. Most of

the investing world, however, thinks the opposite is true. For example,

many investors believe that capitulation at the end of a downward

auction—when all the sellers finally sell—occurs on heavy volume. But

this would go against all the principles of auctions."

For example, a market may experience a period of healthy volume as the stragglers

(Gladwell’s “late majority” or “laggards”) get rid of their inventory, but the

final prices, manifest in the excess spike, are not made on heavy volume.

The volume most people incorrectly ascribe to capitulation is actually a

result of the action in the other direction, when buyers show up in force

and the price spike down is quickly rejected. Confusion occurs due to the

fact that after the excess high or low is in place, there is often a dramatic

pickup in volume as part of the counterauction."

"The most common true end to a trend—which also signals when a bracket

begins—occurs as a result of both a reduction in volume in the direction

of the trend and an excess high or low. The ending of an auction offers

the moment of greatest opportunity, as well as the moment of greatest

risk; both risk and reward are asymmetric at this pivotal point. If the trend

is downward and an auction low has been established, the investor who

correctly recognizes the low and buys has a low risk/high reward position." ( these quotes are from JAMES DALTON )

The Auction Ends when the Bidding is EXHAUSTED

RDW==>

"Every upward or downward swing in the market, whether it amounts to

many points, only a few points, or fractions of a point, consists of numerous buying

and selling waves. These have a certain duration; they run just so long as they

can attract a following. When this following is exhausted for the time being, that

wave comes to an end and a contrary wave sets in. The latter may attract more of

a following than the former. By studying the relationships between these upward

and downward waves, their duration, speed and extent, and comparing them with

each other, we are able to judge the relative strength of the bulls and bears as the

price movement progresses."

"Take your positions as close as you can to the

danger points, as shown on your charts or on the tape."

Now look at the chart again

Take note of the line of six 5s

The seven .043s

and now especially the double line of four .04s and four .039s

Notice the pattern.

"This gives the appearance of a wedge.

The appearance of the wedge, apex, or dead center, is made very clear

by drawing a line from the

(last top) and from the (low). Past experience

tells us that the stock, as a result of having come to a dead center, is preparing

for an immediate sharp move which is likely to be (in the opposite direction in which the) volume

shrinks" ( adapted ) RDW.

Motorway

GCN pt 13-2

2012-01-25T01:42:00.000+11:00

Consider the importance and function of a "mid pattern rally"

"THE PRICE PATH CHARACTERISTICS

In studying the movements of stocks, it is well to have in mind the old saying,

"Stocks must fluctuate.""

"In a speculative market, where the laws of supply and demand are operative, we

must have fluctuations in prices. These fluctuations are due mostly to differences

of opinion which cause what is technically known as the bid and asked spread.

Experience has taught us that a great number of fluctuations in a congestion area usually

indicates either accumulation or distribution.

When stock is offered for sale at the

market, we must take the nearest bid price; and when one is anxious to purchase

a stock and offers to take it at the market, he must pay the nearest asked price. The

price changes of a stock, as it moves from one price to another, are caused by the

difference of opinions of those who are buying and selling."

"The most vital

signals given by this Method are those occurring in the trading ranges, the congestion

areas, either at the termination of moves at bottoms and tops, or in the

consolidation areas, during the advance or decline.

A trading range is the zone in which a stock backs and fills, i.e. fluctuates

above the level of support where sufficient buying is encountered to absorb all

offerings and the resistance level above where the demand is unable to absorb

the supply. A trading range is sometimes called a "line movement"

" A study of the stock market means a study in the forces above and below the present level of prices. Each movement has its period of preparation, execution and termination, and the most substantial of movements are those that make long preparation. Without this preparation and gathering of force, a movement is not likely to be sustained.

forces above and below the present level of prices

This is why it is a Study of Responses and tests.

This is the importance of the mid pattern rally and it's test

"WATCH FOR CHANGES IN ACTIVITY

You will observe from your charts that stocks fluctuate narrowly during periods

of major accumulation. Soon thereafter, activity, sharp advances and equally

sharp technical declines follow.

This is usually a sign of the beginning of an

extended move. Watch carefully for it. When a stock alters its most recent fluctuating

habits, it is wise to be on the alert, for it is a sign of either accumulation

or distribution."

Expansion and Contraction

Cause and effect

acceleration and deceleration

Changes in Activity

Absorption and Emission

Price Volume and Time

SPEEDING UP AND SLOWING DOWN

TURNING POINTS

ALL is Expansion and Contraction

With GCN a chart of the most recent action

displaying Mid pattern rally.

Test Through support

forming a possible "Recoil Pattern"

Important "lines"

At .04 ( The four 0s )

and at .043

The one X at .038

is the Higher Low seen on the other charts

It is the last point of SUPPORT

What do Fluctuations achieve ?

What does the mid pattern rally facilitate ?

The way ahead

For price to go UP sellers need to SELL

For prices to go down BUYERS need to BUY.

Only Then.

Look for a move UP from the close at .04 ( The last Purple 0 )

Look for Expansion in Price and Volume

Look carefully at .043 ( The move past the X at .042 )

Then LOOK for Resistance at .048 ( remember--RESISTANCE IS ALWAYS MET UP AHEAD )

esp LOOK for a "JUMP"

IE The recoil = The back-up

A Danger Point is .038

FMTJan 22, 2012 03:46 PM

I'm going to have a punt Motorway - looks to me like those 44 and 45 lines are established as 'value' at the moment, more so the 44 line. There is plenty of work being done above 44, especially since the yellow box. BUT - the most recent work is being done below 44 ... I place more weight on the recent work and it gives me a bull bias on this stock.

The move to 48 on Friday was rejected, and since that high 44 is forming resistance, with value built at 43 since the high. On a candle chart Friday's action would show the close below the open after a run up to test the recent highs. It is not a bullish candle. But your chart here reveals so much more than a candle reveals ... getting Friday's close at the low, and having the candle look like it does, may very well be a deliberate action and i would not trust this bearish candle over what I see as bullish action on the figure chart. Any sell-off from here would, I believe, be shallow and would provide a good buying opportunity.

How'm I doing so far?

Very Good ! The big picture helps !

Your comments regarding Candles ( BARS ) versus The "FIGURES" are important and worthy

of further discussion.

Not just Individual slices of tIME . But combinations ( patterns ) of them and anything built from

them. eg. Indicators (OBV ? MACD ? RSI ? ) miss what is important.

Because they are not in the universe of the COMPLETELY REAL like AVERAGES ! They

Moving or otherwise JUST DO NOT EXIST.

Anything is still possible.

FEEDBACK and the STUDY of RESPONSES is what matters

Not PREDICTING... But FORECASTING

Motorway

GCN pt 13

2012-01-24T18:26:00.002+11:00

Consider Carefully what I said in the last post ==>

Consider the importance and function of a "mid pattern rally"
Question is the move on Friday ( The action between the most recent Purple Boxes )
Such a pattern ? ( Time to Review De Villiers and Taylor ! )
Long lines at .044 and .045
("It’s where new moves start. New moves come

out of the middle." Charles Cochrane ---> Often after a TEST )

Charts

Where are we ! ( never forget where you are ! )

Again 5 Reversal chart ( course of sale ) to highlight the behaviour of those three significant lows

( The green line above )

(The inverted APEX !)

and ?

1x.001 Course of sale up to todays Close

mid pattern rally ?

New moves come out of the middle ?

( or maybe better confirmed out of the middle )

Often after a TEST.

GCN 13-2 to follow with more explanation

charts and points to ponder till then.

ALSO FMT's comment in 12-2

Motorway

GCN pt 12-2

2012-01-22T23:18:00.003+11:00

There are three time frames in any marketplace: the market imposed time frame, defined by the operating hours of the exchange; the participant time frame, which is the individual trader’s time frame for buying or selling; and the opportunity time frame.
The opportunity time frame is a moment in the market that forces a participant to act because of the favorable price opportunity it offers. J. Peter Steidlmayer

Consider the very last BOX

The last Purple X

It was all the closing auction on Friday.

It is a Significant Box.

It is two of the Time Horizons ( better word imo ) described above.

Also note the Yellow Box.

Consider the importance and function of a "mid pattern rally"

Question is the move on Friday ( The action between the most recent Purple Boxes )

Such a pattern ? ( Time to Review De Villiers and Taylor ! )

Long lines at .044 and .045

("It’s where new moves start. New moves come

out of the middle." Charles Cochrane ---> Often after a TEST )

Resistance was at .048

Strong Support was at .042 ( Not withstanding the three boxes at .041 )

Time to watch the Tape ?

The "Yellow Box" counts back 100 million shares.

Remember the relationship of Price and Volume.

They are always arriving together ! ( and when they do ? )

Expansion and Contraction

TREND and TECHNICAL POSITION.

The Playing Field and The Goal lines ( & Half way points ) are very clearly in view.

Note there were 31 Boxes ( Work ) in that last day.

"On the other hand, the figure chart may show many fluctuations on the

full figures, while the verticals are unchanged" RDW

Question to consider What price in that Day Was the most important to be aware of and take note of ?

The open ? The Low ? The High ? The Close ?

IE: What you would see with a candle or a bar in a Time Frame ?

Any real P&F Practitioners would know the answer !

As would any Market Profile ones !

Motorway

gcn PT 12

2012-01-20T21:04:00.000+11:00

Remember to click and expand the chart !

Compare the current action with the reversal formation at the bottom

VERY much in the same "space"

Just posting this chart ( On a Friday Night ! ) more commentary to follow :-)

Motorway

GCN pt 11

2012-01-19T21:10:00.001+11:00

Note the close at .043 .

There was low volume but it became more active today.

A good time to re-read STUDIES IN TAPE READING.

Activity EXPANDS and CONTRACTS and ?

Also note the lines at .044 and .045 !

"Markets are complex, self-regulating, and driven by feedback. The message is clear: Decipher the feedback to understand your market.
How can you understand the market? With feedback. What is feedback? Feedback is market response. For instance, heavy demand leads to increased market activity; feedback is apparent as more ticks, more volume, increased volatility, and higher prices. You already know this, but how can you interpret this data? Most technical indicators are not adequately coupled to the market because markets are dynamic and changing.

Decoding feedback requires a market-attuned approach, something flexible enough to keep up with changes in the feedback itself. An important characteristic of feedback is that it takes time to develop a signal. A market acts, for example, and price jumps. All traders receive the information at about the same time. You consider the new information and then react to it in your own way at your own pace, and other traders do the same.

The sum of all traders’ actions creates the total feedback reaction to the initial market movement.
This takes time, since each trader’s response time frame is different. Ultimately, there is a new feedback message to which you and other traders may respond. This feedback-reaction-feedback cycle continues as long as the market trades" Donald L. Jones

Very perceptive more on Donald L. Jones to follow

Motorway

GCN pt 10

2012-01-17T21:34:00.000+11:00

Purple Xs are the closes

Time to watch closely

0 = round numbers like .05 or .04

5 = levels like .045 or .035

The Red color = High Volume

Test - Response

Tomorrow might well be important.

A lot could be said about the features of this chart.

Motorway

GCN pt 9

2012-01-10T01:58:00.002+11:00

Note the Three closes at .045. The Three most recent !

( always remember to click the chart to expand it ! )

Consider the buying that occurs above and below that "ROW" in those last three days !
Consider also time in one of its aspects We have three .045s
But one is a before and one is after. Consider before and after what !

Also consider Cause and Effect ..

Now we can measure Cause and We can Infer Effect.

We in doing so IDENTIFY ACCUMULATION , DISTRIBUTION or NOTHING.

Now How do we Know the SMART MONEY IS SMART ?

All things tend to flow TWO WAYS

Cause<=====>Effect

What is Cause and Effect ?

Consider these quotes

When new buying or selling prices occur in the markets, the new capital will cause certain chain-reactions that eventually will lead the markets' movements to certain "Image-Price" levels. This phenomenon can be seen as the equivalent of the "Pair Production Effect" in Quantum Physics

Ok What is he getting at ....Some info on Pair production==> Pair production is the formation or materialization of two electrons, one negative and the other positive (positron), from a single pulse of electromagnetic energy.

The ONE THING produces a DUAL EFFECT.

This might help ?

In liquid financial markets, up to 98% of all the trading can be based on speculative
positions and the hedging of those positions.

These positions, being speculative, are temporary, and any opening trade will need to be closed. The closing trade has the effect of inducing a price reversal. Due to the duality of the opening and the closing trade, the price movements are never
fully one sided. At some stage, sooner or later, positions will be closed
and then the (opposite ) price rebounds ( may ) will occur.

Due to the duality of the opening and the closing trade, price movements are never

fully one sided.

The ONE THING produces a DUAL EFFECT.

This is really important ! First Are they all saying the same thing ?

Now how about ==> Cause and effect ... same thing again ? Only Wyckoff says it it three words !

Now look at the chart , note the relationship between the Horizontal and the Vertical .

And think-- We can measure cause to infer effect YES. But we can also measure the effect and hence qualify the cause.

IE We can ask was the money SMART !

If the answer is NO --> Then we need to think Do We want to be HERE !

It is Also why I can say that GCN is not in markup but still in accumulation !

Think of the slopes of the S curve in terms of Cause and Effect at the stages of adoption and following ! Early in the Curve , in the middle and then at the END...

Note How Intrinsic Time. Shrinks and Expands . We need tIME as a Measure of Duration . We also need tIME for other reasons as well..

Something to think about are the 6 Xs into any close more revealing than those prior ? ( if there is not 6 . Then the you have to count into the previous day or how ever many days ! )

More to follow :-)

If Smart MONEY is SMART

THEN we have a certain DYNAMIC that will UNFOLD and we will want to be THERE.

Remember when our P&F chart MOVES it is always an EVENT always SOMETHING

It is "WORK" and Work done is always Energy transferred !

Motorway

The Evolving Nature of Markets-- or maybe not !

2012-01-09T00:10:00.001+11:00

J. Peter Steidlmayer: In step with the markets ==>

The Evolving Nature of Markets

The evolving nature of markets
In the 60s Steidlmayer noticed that markets tended to form bell-shaped curves each day as they found an efficient price by the closing bell. He profited from selling daily highs and buying daily lows in anticipation of an intraday trend reversal.
However, this "responsive" behavior shifted in the late 60s as commodity funds formed and their managers began buying high and (hopefully) selling higher in anticipation of a continuing trend. Steidlmayer altered his trading style to adapt to the changing environment, a shift that taught him to focus on the present tense as opposed to using historical patterns to predict the future.
Steidlmayer says today markets don't actively form profiles each day because "imbalances," or directional moves, are now so overwhelming the market can't integrate them and form an efficient price by day's end as it did 40 years ago.
"The market's basically changed to where we have selling followed by buying," he says. According to Steidlmayer, the market used to move sideways to integrate the imbalances (as it formed a bell-shaped curve), but it now moves down and back up in two separate phases. This means the basic tenets of Market Profile such as the five daily classifications and the four steps of market activity don't work as well as they did in the past."

If your strategies don't measure Time - - you don't have much of a chance.

" AT: Similar to the way point-and-figure charts shift toward market time as opposed to chronological time?

JPS: Yes. When I started trading, point-and-figure charts were my introduction to Market Profile. It's an outgrowth of (that methodology). Point-and-figure charts can move a trader forward in terms of understanding the market - not necessarily in terms of making trading decisions. Instead of making mechanical decisions based on pure technical analysis, if you use point and figure, you've gained a better understanding of the market. This wakes up your brain a little bit vs. other chart styles.

AT: How do you compare Market Profile to traditional price based technical analysis?

JPS: Market Profile does not use chronological time. And if time is your biggest cost, you'd better have a "market time." Everyone else uses chronological time and price-to-price relationships. Price has very little or no value as a data point.

AT: Why?

JPS: Because there's a buyer and seller at each price. Time only defines price in the past tense. Assume a new contract began trading at 10. There's nothing you can say about it. But you'll have some reference if it traded at 4 last month.

Take a look at the trading industry. It's not using the database as an asset, and it's toiling instead of working. Technical analysis uses price against price, and price itself is not a data point. Moving averages don't exist in the real world.

Market Profile has survived even though the market's changed dramatically in terms of how it's used. It differs from technical analysis because you are now closer to being a part of the market rather than just making observations. There's a big difference there.

AT: What's wrong with back testing trading ideas against historical price data? Doesn't that have some value?

JPS: Well, the markets have changed a lot so you're comparing apples to oranges. First, you don't have a constant. If you're not testing the market, what are you really testing?

AT: The probability of whether a trade idea might be profitable.

JPS: No, you're testing how your tolerance works. Back-tests miss all the ingredients that may have been good.

AT: Such as?

JPS: When you look to the past for references, you're going to be late (making trading decisions) because you don't know a high or low has occurred until it's in the past. So you're looking for one scenario and the market's doing something else. Market Profile, however, shows development that you won't see in a back-test; they only show how good your external parameters are and these (variables) dominate the results. "

----

Manipulation is a valid concept.

But " Smart Money is not the same as Wyckoff's COMPOSITE OPERATOR . This Explains why the "Smart money" maybe is not always seen to be so smart.. The composite operator outsmarts every particular everybody because he is EVERY-EVERYBODY.

What TOOL reveals if SMART MONEY is SMART !
The same TOOL that suggests MARK-UP is not started YET with GCN.

Think what RDW used the P&F chart PARTICULARLY for ..

Also note J. Peter Steidlmayer on the subject of back testing in the above .
links to My blog Post==>

Probabilities- mechanical - discretionary

Now--> The Evolving Nature of Markets . The markets that Evolve away from you . Evolve away in tIME.
In The universe of the COMPLETELY UNREAL.

In the Universe of the COMPLETELY REAL ?
There is and always has been .. "Accumulation , Distribution or.... NOTHING." RDW

Motorway

GCN pt 8

2012-01-08T15:10:00.001+11:00

3 Rev Chart note the OBVIOUS ZONE of RESISTANCE

that price pushed into !

Obvious does nor mean it will be real resistance .

Real resistance is always met UP ahead.

Real effective resistance is actual Selling .

Selling has to come from someone

This links to EXPECTATIONS and The Technical Position.

This is not in a Mark-Up Phase as YET in my opinion

So it is then still an Accumulation Zone

Note the very clear Stair Steps on the MOVE UP from the ultimate bottom

Vs The Zig Zag tendency on the WAY down .

( stair steps relate to the Wyckoff --CAUSE AND EFFECT )

These Patterns are produced by the shifts and rotations of DEMAND and SUPPLY.

The pattern UP is a very POSITIVE.

What about the last DAY ? ( a little Zig Zag ? )

( Between the last two purple Xs on the 1 Reversal Chart. ( A proper Wyckoff 1 reversal chart too:-) )

Positive or Negative ?

The chart did not have to HUNT as much.

It was able to PARK.

"shifts and rotations of DEMAND and SUPPLY"

" shifts in Populations of Interest and their information sets "

CONSOLIDATION or REVERSAL ?

I would say atm clearly CONSOLIDATION

Another look here below

Look at these horizontal lines and what they are linking UP.

Notice how the Price action is in a bit of a no mans zone atm.

Motorway

GCN pt 7

2012-01-06T01:18:00.003+11:00

A 3 Rev Chart

Notice the Position in the Boxes

We might expect a change of behavior in Support and Resistance Now.

And an equivalent of a 1 Reversal Chart

Outlining the behavior of Support and Resistance so far.

A point to ponder==> A P&F chart can PARK or HUNT.

Intrinsic time can contract and expand.

This is related to changes in the population of interest.

Changes in the population of interest is an often overlooked dynamic.

Wyckoff tells us that the Buying and Selling waves gather followings.

The concept of intrinsic time ( THE WORK ) => Expanding and Contracting is VERY IMPORTANT.

When our P&F charts HUNT "On the other hand, the figure chart may show many fluctuations"

we should take very careful note of the direction and pattern.

The Expansion and Contraction.

Also note the extra clarity in coordinating and using both 1 and 3 Box Reversal Charts

Motorway

GCN pt 6 ... The Technical Position.

2012-01-04T21:54:00.002+11:00

ABSORPTION ... What a key CONCEPT...

Today there was a battle at .039 and .040

which continued on from yesterday

NINE columns in ALL on a One Box Reversal Wyckoff Chart

ABSORPTION

and then ?

There is still a little resistance to the left.

But VOLUME , TIME and PRICE all EXPANDED

Which resulted in the Break of the Channel ( "HOW THE MOVE STARTS" )

It Turned on ~ 100 mil shares. Which confirms this move down as a correction in my opinion.

It could have turned on 200 mil .

What is the Significance of 100 mil Vs 200 mil

Multiple !

But remember the Young Wyckoff and his Boss dealing with the hardware man !

The Lesson of the TECHNICAL POSITION !

Which I tend to put like this.

It won't go up until AFTER you sell and it won't go down until AFTER you buy !

If you do not know who YOU is. Then Be careful it is NOT YOU ! :-)

A quote from RDW-->

Next in importance to knowing what to buy is the question as to when it should be done.
I was discussing this matter with an investor today. He referred to the assets and earning power of a big corporation whose securities had recently suffered a very material decline. He could not understand why the stock should go down in the face of such a showing of commercial and financial strength.

My answer was this:

“You have an automobile — it consists of a lot of steel, wood, rubber, brass, leather and other material. It requires gasoline, water, air and lubricating oil. Also knowledge as to how to adjust the whole piece of complicated machinery so that all the parts will work harmoniously. The smallest thing about your automobile is the spark. Without it the whole mass becomes junk. With the spark at least you can get the machinery to go, and you might plug along. But: Unless your spark is timed to fire at the exact moment when the piston reaches a certain point of elevation in the cylinder, you might as well get out and walk.

“It is the same way with the stock which you just mentioned. The company has ample working capital, high class management, big earning power, wonderful prospects. It is probably in a better and stronger position than when its stock sold thirty points higher. In this case the ‘spark’ is represented by the technical position. At 140 the spark was not properly adjusted. At 110 the adjustment has improved, but a study of the technical position of this stock will eventually point out the exact moment when it should be bought; so get all your other factors lined up ready for the first time when the technical position shows that it is time to buy.”

Never underestimate the importance of the Technical Position.

Richard D Wyckoff

Motorway

And remember==> The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices.

They are OBSERVATIONS for the sole purpose of LEARNING ,DISCUSSION and GENERAL INTEREST.
Motorway

GCN pt 5

2012-01-03T23:22:00.000+11:00

This chart could be called -->Why am I here !

Notice the HUGE VOLUME

Notice the CORRECTION in progress

NOW !

Be clear a P&F chart being woven from PRICE VOLUME & TIME will reveal all we need to know.

(In time-- that is it reveals in real time )

Richard D Wyckoff in one of the last things he wrote . Made special emphasis --> That we would do better by allowing the "FIGURE CHART" to filter out the NOISE FROM SIGNAL.

And who could disagree ? Especially anyone who really has understanding ?

The Figure Chart will adapt to the flow of effective--> VOLUME & TIME

and reveal through THE PRICE what we need to KNOW ( that is the price that is transacted. Not just price. The Figure chart is not just a chart of just price !).

A Figure chart just needs to have a sensible scale ( more on this soon )

Hint . RDW dealt with a market in Eighths of a Point

We are in a decimal age .. A MAJOR difference to be BEWARE OF.

MAJOR ! ( see eg the new book in the reading list at the bottom )

So we will often do better --> BUT .. If we do want to drill down to the Molecular or Atomic level

It is then that looking at the individual dimensions of market activity will often reward .

Wyckoff tools applicable for this purpose are THE TAPE READING CHART and THE WAVE CHART !

This chart below is a 3 box reversal course of sales chart of just the correction from .059

JUST The last eight columns of the chart above.

The Boxes represent Zones of Volume

The green Box= 200 mil shares

The Gold box = 100 mil shares

The Red Box = 50 mil shares

VOLUME IS FOLLOWING PRICE DOWN

In to the TURNING POINT.

Compare how these zones have changed since the last chart !

Also remember that EVERY BOX is both a RESPONSE ( to the Box PREVIOUS ) and a TEST ( To the Box that follows ) ...TEST RESPONSE<++>RESPONSE TEST.

It is through this process of testing and responding that we are able to define ACCUMULATIVE and DISTRIBUTIVE.

That is so with any P&F CHART ( This is a very important point .It is the Difference between Appearance and Character )

This is TAPE READING ! THE STUDY OF RESPONSES !

Another book in the reading list==> Value in Time , By Pascal Willain

Again some worthwhile exposition on a number of Wyckoff related THEMES.

Some very important .

Motorway

GCN pt 4

2011-12-30T23:59:00.002+11:00

"TIME is the most important factor of all and not until sufficient TIME has expired does any big move start up or down. When TIME is up, price movement will start and large volume will begin, either up or down."
W.D Gann

When Time is up !
Of course , when the time is up ----It is just not saying much is it ?
When something's time is up ----naturally..
Bull turns to bear / bear turns to bull
Births happen & deaths too.

When the Time is UP ! It is UP !

--> Now change this to Work .

"Work is the most important factor of all and not until sufficient WORK has been done does any big move start up or down. When the Work is completed, price movement will start and large volume will begin, either up or down."Motorway .

Markets have more than one dimension . They are multidimensional . Work can be done in different ways

There is work being done in terms of PRICE , VOLUME & ACTIVITY measured in relation to what we call Time .

Price, Volume & Activity are mutually interdependent==> Each only exists because of mutually interdependent relationships. It is not so simple as for example, Price follows Volume. No -> Price follows Volume, which followed Price... Which followed volume........etc.............

In a Selling Climax .. Price and Volume expand TOGETHER.. Volume expands because Price Moves Down. Price Moves Down because ;-)

A bit like this Charlie Chaplin Clip . It is easy to forget who is chasing Who . Which one is volume which one is price. They are chasing their Tails !

When the Work is completed, price movement will start and large volume will begin, either up or down.

Work can be done in any of the Dimensions of The Market . For example , Price and Volume are joined by an elastic link. They are always in the process of arriving together but at any one time they can be going in different directions or catching up or returning in turn.

When the Work is Completed PRICE MOVEMENT WILL START or VOLUME WILL BEGIN .

Price Volume and Activity .. Also have Dimensions of their own.

A Horizontal Dimension , a Vertical Dimension and a POINT Dimension.

On Our "Figure Charts" -. Across the ROWS , In The COLUMNS and in a BOX.

For a BOX to be filled on our charts . it has to fill with PRICE, VOLUME ( hence activity ) & Time.
A box is woven out of various mixtures of all of these. ALL being the KEY.

Time is Duration and in some ways this Time Element , Wyckoff considered most important of ALL.

There is NO reason to ignore any of the Markets Dimensions nor in turn the individual dimensions.
Work is DONE where it is being DONE .. PRICE VOLUME ACTIVITY & TIME.

What will matter is always what we are Not looking at ( what else ? )

Motorway

Re: GCN - Goconnect Limited pt 3

2011-12-28T19:02:00.000+11:00

When you are looking for an opportunity to buy, watch for the down waves

in the market and in your stock. RDW

Motorway

S Curves

2011-12-27T18:56:00.002+11:00

When ever we have competition ( or the opposite ) for a limited resource . We have Floors and Ceilings. We have S curves.

Competition for a Limited Resource. Unfolds as a Cycle . It is a process with beginnings and ends. It has a Life Cycle.

Some observations

A process that unfolds with no self awareness

is a pure S curve.

A system with awareness.. So The participants are getting cues from each other..

IS a S curve ... With precursor-catching up and delayed ending overshoot features. This could easily be a EW 5 wave cycle ( or it might not ) .. The smooth S is pushed out of shape by positive and negative feed backs which create overbought and oversold of different types ( esp different at the toddler and the geriatric stages of the cycle..Both have unsteady steps but different )

Looking a bit like a Stock Chart ? Here we have Waves that Gather Followings !

The S curve is the accumulation markup distribution --to a -->bifurcation point, a fork in the road that leads to either re accumulation or markdown...

Note Especially the deep pullback ( weakness ) in the early trend and the false strength ( The over shoot ) in the ending trend.

There are also cycles in cycles

A growth cycle without awareness ( bacteria in a petri dish ) is a pure S curve.
A growth cycle with awareness ( a liquid market without manipulation ) some sort of Elliot Wave pattern ( possibly)..

However liquid markets beyond manipulation do not exist except on time scales that are of generations..( eventually it is true everything does come to the end of times and then can be seen for what it really was).

The next stage up is a real market with smarter money causing manipulation ( along with everybody else ) ( manipulation is the OPPOSITE of RANDOM ).

In a manipulated market... Methodologies only work if it is in someones interest that they do work...And they stop working when it is in someones interest that they do stop working..

So on practical time scales

What matters is what the smarter money is doing
and practically nothing else.....

Everything is a tool for manipulation either for accumulation, markup, distribution or markdown..

A tool is most useful if the opportunity cost of using it is minimal..

Following the Smarter Money has zero opportunity cost...

With correct principles It then is only a matter of skillful application..

A manipulated Market is characterized especially by TRADING RANGES ...BY Support and Resistance.

Support and Resistance will DAMP or EXPAND the "normal excursions" seen on the Precursor/ overshoot Curve. It will tend to keep you out and lock you in JUST AT THE WRONG TIMES.

So --> Competiton and Limited Resource. QUESTION--> Who or what competes - For who or what on the markets and HOW ?

The most useful Definition of Smarter Money is this --> They tend to Buy and prices go up after they have finished and they tend to sell and prices go down again after they have finished.

The after they have finished is IMPORTANT.

Also it follows from the definition that we do not have to know who they are or even if they are real people . We just have to measure==> Price , Volume , Time in the Context of POSITION and SCALE. ( The COMPOSITE OPERATOR )

S Curves :-) or --. Why Theodore Modis is in the reading list.

Motorway

What is the study of technical analysis?

2011-12-26T14:41:00.000+11:00

What is the study of technical analysis?

At it's core is the concept that there are many differences between mkt participants..

This is a very old and a very new concept (For a long time in the middle everyone was assumed to have the same time frame and the same Knowledge
and the same resources. It was called efficient Market Hypothesis.. And was supposed to mean that all analysis was void = An Index Fund).

Some of the most significant differences are that there are the more informed and the less informed.. And that there are stronger hands and weaker hands..

Other differences are time frames and the size of ones wallet.. etc etc
Risk tolerance etc..

Most importantly is the recognition that all markets are manipulated.

Everyone is withdrawing demand and supply at various times.

There is demand and supply and contingent demand and supply (IMPORTANT).

One of the most valuable groups to follow is those who can move the markets with both their Knowledge base and their financial resources.

"That those who know more about it than the observer cannot but conceal their future intentions regarding it. Their plans will be revealed in time by the stock's subsequent action. "
1930 Victor De Villiers

At it's core is the recognising of accumulation and distribution ( And now consider the Life Cycle of Crowds and "Following" (again important differences)).

Everyone is trying to sell without pushing the price down while they are doing it... Everyone is trying to buy without pushing the price up while they are doing it..

Accumulating and distributing...selling and buying RISK.. under the cover of Return ( REWARD )...

Trading ranges are about change of ownership and the building of contingent demand (just look at the volume when price leaves a trading range !).

Trends build a following because Why are you going to sell something that is going up?

However those who know more are always revealing their intentions by their buying and selling. So trends end in ranges and ranges are the start of trends.

Across all SCALES ...

so what to measure BY ;-)

Motorway

THE TECHNICAL POSITION and TURNING POINTS

2011-12-26T14:20:00.000+11:00

IT IS IMPORTANT TO UNDERSTAND-- The relation of The technical position to the trend and
The difference between the technical position and the trend. So as a small help , some quotes that circle around this issue which I hope will give an all round ( but not exhaustive ) view, suggestive of ways to proceed.

It is how turning points are identified and confirmed that is key . Such clear understanding will also help reveal HOW and WHAT to MEASURE and WHEN ( in turn).

Successful tape reading is a study of force; it requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing, just as in the life of a business or of an individual. At these junctures it seems as though a feather's weight on either side would determine the immediate critical trend. Any one who can spot these points has much to win and little to lose, for he can always play with a stop placed close behind the turning point or "point of resistance".(RDW)

THE TECHNICAL POSITION is a STUDY of HISTORY. It is "The markets latent ability to withstand change" . TREND is for the FORECASTER and is "meaningless unless qualified as to TYPE.

Position is defined in terms of Strong and Weak hands. ( more on this later )

To all lines of business YOU MUST buy cheap(er) and sell dear(er) ..Then I remembered how my former employer had got his start. he was a travelling salesman, and in jumping from town to town occasionally ran across concerns which were in financial difficulties. They simply had to have money.

His first opportunity came when a small dealer whose stock of hardware inventoried at $3,000 offered to sell out for $1,500 cash. "The boss" bid him $1,000 , wired east for a loan of that amount, got it, bought out the hardware man, and within a week turned the stock over to another for $1,800.

He bought while the hardware man was in a state of panic RDW

He bought When the TIME HORIZON was almost "YESTERDAY" , When the TECHNICAL POSITION was WEAK . He sold When the TECHNICAL POSITION WAS STRONG and THE TIME HORIZON had become LONG.

The CHANGE OF HANDS, of WEAK to STRONG, -->ALONE, CHANGED EVERYTHING.

THE TECHNICAL POSITION is a STUDY of HISTORY. It is "The markets latent ability to withstand change" .

This is why the great body of opinion appears to be bullish at the top and bearish at the bottom. The multitude of small traders must be, as a plain necessity, long when prices are at the top, and short or out of the market at the bottom. G C Seldon

(consider that carefully ...It must be so . They are the SAME THINGS..)

It starts with a common sense idea that when the total number of shareholders change then the new share holders bring different expectations to market activity. This can lead to powerful changes in the direction of the trend. ( Float Analysis- Steve Woods, He relates this to Gann , But it is really Wyckoff. note the New Book in the Reading list ! very good for some ideas ;-) )

To be able to say when these turning points are occurring at the bottom of a bear market, or at any important rallying point on the way down to the bottom, or at the top of a bull market, or at any important reactionary point on the way up, is a mark of ability in an investor as well as a trader.

Remember: The market itself tells us everything we need to know about its
probable future action.

Every significant change in supply or demand is registered
on the tape. When you have learned to analyze the market by its own action, as
recorded on the tape or on your charts, then you will be proficient in the art of
operating in stocks.

Of all the things that are most desirable to know about the stock market,
these two are the most important:

(1) First, to be able to determine the final top of a bull market; and
second, to determine the top of the intermediate swings, and finally
the top of the minor moves

(2) To be able to determine the final low in a bear market; the bottom of
the intermediate swings, and the end of the minor moves.
Master this branch of the subject thoroughly, it is vital. (RDW)

Technical Position. A market (or a stock) is said to be in a weak technical
position on the bull side when the buying power has been exhausted, either in a
small or a large way. A campaign of distribution exhausts buying power in a
large way because much of the floating supply of stocks is then in the hands of
traders and the public. Sponsors and large operators have sold. Those of the
public who still hold these stocks are potentially bearish factors because, having
bought, they must sooner or later sell, and their selling will bring pressure upon
the market.

A strong technical position develops when liquidation has run its course,
either for the time being or more lastingly. Those who could be induced to sell or
were obliged to do so, have sold. The majority of stocks are in the hands of
experienced investors, bankers, sponsors, syndicates and large operators. The
sellers are weak; the buyers are strong; that -is, able to carry what they have
bought through whatever further declines occur. Such a condition usually prevails
at the end of a big decline, a panic or depression. Sometimes in
the finishing-up stages of a decline the weak holdings being sold to strong
buyers may require many months. (RDW).

There is PRICE , VOLUME and TIME .. These have more than one attribute. They are all important and they are all to be measured. But relevantly in the context of Position . This means a particular How and Why

and this relates to WAVES and INTRINSIC TIME

Motorway

Re: GCN - Goconnect Limited pt 2

2011-12-25T12:23:00.007+11:00

Re: GCN - Goconnect Limited

2011-12-21T11:46:00.000+11:00

GOLD Vs S&P

2011-09-13T13:33:00.002+10:00

" The defined science of determining from the tape the immediate trend of prices. It is a method of forecasting, from what appears on the tape now in the moment, what is likely to appear in the immediate future. Tape Reading is rapid-fire common sense. Its object is to determine whether stocks are being accumulated or distributed, marked up or down, or whether they are being neglected by the large investors."

Dynamic -->Remember what is NOW is always a Becoming .This NOW is Both --> Structure and Process.

REMEMBER TREND AND POSITION..

( remember to click and expand these charts :-) )

Now we forecast by ???

"( It ) is a study of force; it requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing, just as in the life of a business or of an individual. At these junctures it seems as though a feather's weight on either side would determine the immediate critical trend. Any one who can spot these points has much to win and little to lose, for he can always play with a stop placed close behind the turning point or "point of resistance". .............. This study of ‘responses’ to stimulation or outside influences on stocks is one of the most valuable in the Tape Reader's education. It is an almost unerring guide to the technical position of the market."

"It is a matter of indifference as to who or what produces these tests, or critical periods. They constantly appear and disappear; ( We ) must make ( Our ) diagnosis and act accordingly. If a stock is being manipulated higher, the movement will seldom be continued unless other stocks follow and support the advance. Barring certain specific developments affecting a stock, the other issues should be watched to see whether large operators are unloading on the strong spots. Should a stock fail to break on bad news, it means that insiders have anticipated the decline and stand ready to buy."

Other Stocks in this context here means GOLD== I would be VERY alert for a break in GOLD . Of course UP or DOWN :-) ---> But ESPECIALLY DOWN ....

"It requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side" ( All quotes are from Studies in Tape reading )

Never get stuck in the moment .. You can not grasp NOW , You can only Live it.

STRUCTURE and PROCESS .. POSITION and TREND

ALWAYS a DYNAMIC EQUILIBRIUM

and a STUDY IN RESPONSES ..

A CRITICAL JUNCTURE===>

Motorway

XAO==> Reading a Chart part 2

2011-08-04T18:13:00.001+10:00

Remember this ? from XAO==> Reading a Chart part 1 ?

and the comment ?

"XAO has to fire if rally ( In All markets ) is "good buying" XAO is right at a nice support where there has been "absence of supply" previous..

needs to now play catch up. It has been the end of the financial year so we see.

XAO led mkts down

COMPARATIVE STRENGTH AND WEAKNESS ( SO IMPORTANT )

A "STUDY OF RESPONSES"

D is at the moment much weaker than C

If XAO MOVES UP from here. It makes a BULLISH STATEMENT

Remember TEST==> RESPONSE==> TEST ==>RESPONSE

EVERYTHING ( BOX, COLUMN, PHASE ) is BOTH a RESPONSE and A TEST.
A DIALECTIC.. Important ==>

What happened ?

The chart above was poised at the green 7

Do not underestimate the importance of the BIG PICTURE

Motorway

XAO

2011-08-04T13:51:00.000+10:00

"Some people regard a stock (or the market) in this (springboard) position only when it breaks through an old line of resistance or support into a higher or lower field. I claim that the beginning of the springboard move is at the bottom of a range of accumulation, or in the upper levels of a range of distribution."

R D Wyckoff

Consider can it be as simple as this ? YES ..IF You want it to be and if the chart and line are both kept sensitive

Consider that it is the 45 degree movement / Vector that is KEY

What does Sensitive involve......Relative Signs of Weakness & Signs of Strength , Behavior and Change of Behavior ... Ease of MOVEMENT..........And importantly EMPTY SPACES versus TIGHT FORMATIONS... and especially on small scale charts ==> discontinuities/gaps

Point and Figure...The chart.. The Point and Figure CHART ( movement/Intrinsic time ) is whatmakes the Diagonal........This is very important to realize and understand...

Motorway

The bottom of a range of accumulation, or in the upper levels of a range of distribution.

This is what makes the top of each column of Xs and the bottom of each column of Os ---So Significant....It is where Supply overcame Demand . IS where Demand overcame Supply

Always ask at least two questions .. Look at your charts from the argument of DEMAND . But then also look at your charts from the Argument of SUPPLY .. ( flipping & reversing charts was an old P&F trick to aid in this ) and ALWAYS look at context . Dynamic HISTORY .. The Where From..

First chart is the 1 box reversal .. What are the Bullish and Bearish STATEMENTS ?

Second is the 3 box reversal .. One of it's tasks is to bring what is separated closer together . IE To remove the Horizontal Spaces .. To Emphasize TRENDING .. To Highlight and increase clarity , by giving you less .

The Horizontal Line I have drawn before it was broken is what I call Obvious Support . It is Obvious , but not Necessarily Support or Necessary Support..

Now however it has become a very important line to use ... It is often referred to as old support that has become new resistance.. ( also concepts of ICE and CREEK )..

I tend to think it is the most important Horizontal Line we can draw on our charts ( and of course the converse of old resistance becoming new support )..

However REMEMBER ... Only the chart Itself reveals the TRUE TREND

The CHART itself is always the MOST IMPORTANT OF ALL...

Huge Topic :-)

Motorway

Signs of Strength & Weakness ---Looking For Springboards

2011-07-03T13:53:00.002+10:00

And to GAUGE the changes and changing in those Probabilities , ONE just has to count .

SYSTEMATICALLY and OBJECTIVELY

(1) The Price movement
(2) The Time elapsed in each movement

(3) The Comparative lifting power or pressure

etc.

Hoyle ~1896 , Klein ~ 1904

RICHARD WYCKOFF ~ 1931

and OLSEN TRADING TOOLS 2011

http://tools.olseninvest.com/ois/web/heatmap/

http://tools.olseninvest.com/ois/web/signal/

All these==> Are of the Universe of the Completely real

For our Purposes==>

Directional Change Threshold = Box Size

Overshoot = Number of BOXES in a Column in Excess of the Reversal Size &

Strength of the Trend = Length of Column

ETC

We coordinate charts of Different resolutions

Looking for the "Springboard"

Identifying Signs Of Strength & Weakness

And The RESPONSE ( test/response) .. The Last Points of Support and Supply.

Points of Optimal Risk and Reward.

Read and Enjoy the Links..Look for connection . Keep P&F and Intrinsic Time the central focus

Something Moves or it doesn't.

"Some people regard a stock (or the market) in this (springboard) position only when it breaks through an old line of resistance or support into a higher or lower field. I claim that the beginning of the springboard move is at the bottom of a range of accumulation, or in the upper levels of a range of distribution."

R D Wyckoff

Integration of Charts of Various resolutions==> Reveal zones of Oversold and Overbought

and suggest Scaling laws involving...The rate of Fluctuation in terms of Duration and Scales.

"On the other hand, the figure chart may show many fluctuations" (RDW)

Consider this ''On the Other Hand" as it relates to Charts of different resolutions and to time

( as Duration ).

Consider How behavior might change at major and minor turning points in the market.

Motorway

XAO==> Reading a Chart part 1

2011-07-02T23:19:00.003+10:00

And to GAUGE the changes and changing in those Probabilities , ONE just has to count .

SYSTEMATICALLY and OBJECTIVELY

(1) The Price movement
(2) The Time elapsed in each movement

(3) The Comparative lifting power or pressure

etc.

ARE WE COUNTING ?

EXAMPLE.....1 vs 2 ( how many Boxes )

3 vs 4 ( and so on )

3 compared to 1 & 4 compared to 2 ( and so on )

Signs of Relative Strength and Weakness

Price movement

How much "NEW GROUND GAINED"

The Comparative lifting power or pressure

and AGAIN

A vs B

C vs D

C compared to A

D compared to B

SYSTEMATICALLY and OBJECTIVELY

See how we "read the chart"

Empty Spaces ( eg where the Black B sits ); Absence of ? ;-) Well, what is the context ?

what is the Dynamic History ?

My comment==> "XAO has to fire if rally ( In All markets ) is "good buying" XAO is right at a nice support where there has been "absence of supply" previous..

needs to now play catch up. It has been the end of the financial year so we see.

XAO led mkts down

COMPARATIVE STRENGTH AND WEAKNESS ( SO IMPORTANT )

A "STUDY OF RESPONSES"

D is at the moment much weaker than C

If XAO MOVES UP from here. It makes a BULLISH STATEMENT

Remember TEST==> RESPONSE==> TEST ==>RESPONSE

EVERYTHING ( BOX, COLUMN, PHASE ) is BOTH a RESPONSE and A TEST.
A DIALECTIC.. Important ==>

A DIALECTIC.. Important ==>

Enantiodromia

Thesis<--->Antithesis

But Never a FINAL SYNTHESIS

Just the DANCE of DEMAND and SUPPLY

TESTING and RESPONDING

Motorway

TURNING POINTS

2011-07-02T15:00:00.001+10:00

THE CHANGE TO AN UP TREND (?)

After a period of decline in a bull market, a turning point from down trend to up

trend usually develops in the following manner:

1. The number of full figure changes dries up (lessens) on the declines.

2. The number of full figure changes increases on the rallies.

develops after a down trend has been halted and the price

path builds up a pattern which moves across and over in the trend channel

Our charts reveal. They display--> supply overcoming demand

supply being met/ matched by demand.

An equilibrium -->

Supply being seen to be overcome demand

Demand overcoming supply

Consider that all this in INTRINSIC TIME creates the DIAGONALS.

WHICH ( important ) are an AVERAGE.

Charts of Demand and Supply in Intrinsic Time... Precision Instruments..

Question what then of Volume..

What relation Price to Volume ?

Hint==>

Price, Volume ,Scaling LAWS ....How to read a Chart ! All start with this Observation-->

In studying the movements of stocks, it is well to have in mind the old saying,

"Stocks must fluctuate."

In a speculative market, where the laws of supply and demand are operative, we

must have fluctuations in prices. These fluctuations are due mostly to differences

of opinion which cause what is technically known as the bid and asked spread.

( this is also the Outside Spread )

Now consider that these Fluctuations ( Like maybe ALL such Fluctuations in SYSTEMS )

Tend to be "Rather than going somewhere slowly, usually are going nowhere fast."

"Usually" here is a KEY to understanding

Turning Points-->Bottle Necks

TRENDS

Motorway

Probabilities--> Mechanical/Discretionary SYSTEMATIC part 2

2011-06-25T12:59:00.001+10:00

Now look at these charts and consider PROBABILITIES . Consider is it as simple as this ?

That ABOVE the Blue Line the Probability of a move UP is greater than a Move DOWN and that UNDER The Red Line the Probability of a move DOWN is greater than a Move UP !

And to GAUGE the changes and changing in those Probabilities , ONE just has to count .

SYSTEMATICALLY and OBJECTIVELY

(1) The Price movement
(2) The Time elapsed in each movement

(3) The Comparative lifting power or pressure

etc.

WHAT MEANING THEN

Mechanical/Discretionary ?

Consider is it as simple as this ? .Consider How the Diagonal on a P&F chart with a meaningful scale ( scaling laws ) ..Defines something very special and unique ..How unlike any lagging indicator ?...That these Diagonals are drawn ahead of time. That they project FORWARDS always from a NOW .

They are what make the Discretionary/Mechanical dichotomy of less import ( in the UNIVERSE of the COMPLETELY REAL )..

The Diagonals in a very real sense are ALL Possible Scaling LAWs combined... The Diagonals are in a very special sense... Counting for us. Counting even what we maybe do not even realize should be counted. ( unknown Scaling LAWS )

How sensitive the Diagonal LINE .How close the action conforms .. reveals something about the usefulness of and relative correctness of a particular resolution...

Consider can it be as simple as this ? YES ..IF You want it to be and if the chart and line are both kept sensitive

Consider that it is the 45 degree movement / Vector that is KEY

Point and Figure...The chart.. The Point and Figure CHART ( movement/Intrinsic time ) is what makes the Diagonal........This is very important to realize and understand...

Motorway

Probabilities--> Mechanical/Discretionary SYSTEMATIC

2011-05-26T00:15:00.003+10:00

Nothing much to say at the moment on current charts

SOON but remember here we are in the P&F world
where things move only if they really DO !

What we want to be is SYSTEMATIC and OBJECTIVE

The usual Discretionary/Mechanical dichotomy is of less import in the UNIVERSE of the COMPLETELY REAL and more to do with the other three universes that other methods are concerned with ( can you work them out and name them ? )

A P&F chart is what it is ... It draws itself and interprets itself and is understood through "counting"

A P&F chart is OBJECTIVE

And what is counted ...are the various attributes of the "FLUCTUATIONS"

UP versus DOWN -- is another way of looking at --Horizontal versus the Vertical..

( what is UP what is DOWN,, What moves the chart HORIZONTALLY :-) )

Now consider what a DIAGONAL LINE does ... WHAT does it do for US ?

It "COUNTS" . It keeps Count :-) ... And in projecting forward ..It provides a valuable definition ... IT IS ALSO OBJECTIVE.

COUNTING

(1) The Price movement
(2) The Time elapsed in each movement

(3) The Comparative lifting power or pressure

Just these three considerations are a FULL study...

consider this chart ...LOOK at this chart and .... COUNT

Compare ... Thrusts ( of columns and of the diagonal lines ) ==>This is ground gained on each movement !

1) Moves in the same direction eg each BLUE DIAGONAL to EACH BLUE DIAGONAL ( and RED to EACH RED )

2) REACTIONS ... Ground GIVEN BACK eg on this chart after a BLUE DIAGONAL how much ground is given back with/after the appearance of the RED ?

And (3) EVERYTHING in reference to the HALFWAY POINTS ( the actual geometric points on the actual chart The Logarithmic Half Way Points )..

Price movement is NUMBER OF BOXES . Time is DURATION , But also Number of reversals ( Intrinsic time = Work ) and LIFTING POWER ? Lifting Power is comparative it is HOW MUCH more or less than before...

Discretionary/Mechanical dichotomy is of less import in the UNIVERSE of the COMPLETELY REAL

Now look at this chart and consider PROBABILITIES . Consider is it as simple as this ?

That ABOVE the Blue Line the Probability of a move UP is greater than a Move DOWN and that UNDER The Red Line the Probability of a move DOWN is greater than a Move UP !

And to GAUGE the changes and changing in those Probabilities , ONE just has to count .

SYSTEMATICALLY and OBJECTIVELY

(1) The Price movement
(2) The Time elapsed in each movement

(3) The Comparative lifting power or pressure

etc.

WHAT MEANING THEN

Mechanical/Discretionary ?

The number of things to consider in the Universe of the REAL is enough ! And though So many . How much smaller than compared to the Universe of the UNREAL !

THE P&F is DIGITALIZED REALITY.

XAO right now is tracking Under a RED DIAGONAL ( same one you can see in the chart previously posted at this resolution ) Consider what that means in the context of that CHART .

SIMPLE does not mean lacking profundity .

This again is a revealing comparison to the action now.. But all I have said applies to BOTH then and now.

Points==>

All Trend Lines ( yes there are others besides these ) are still just TOOLS

They need to be kept sensitive. (important)

Important to keep in mind is that==>

There are TRUE TRENDS ( The action of the fluctuations themselves )

and then there is action conforming to TREND LINES and COUNTS

TOOLS.

Tools are very useful. Good tools are very powerful and profound. But they are not the reality the work itself.

Motorway

XAO

2011-05-15T15:14:00.002+10:00

XAO using 61.8% as the "SEED" ...A valid chart is a chart that represents a Full MARKET CYCLE..

The XAO represents a "BIRD'S EYE" view of the STOCK MARKET...It is a already a COMPOSITE VIEW of many securities moving in a great number of "PRICE CYCLES".. But The XAO itself has PRICE CYCLES.

They Spring from TIME HORIZONS .... BUT how many CYCLES are there ? From the immediacy of the BID ASK SPREAD and High Frequency Trading .. To the Rise and Fall of Civilizations ( and maybe beyond :-) )

Remember the INFORMATION that is Important will be DIFFERENT and So will concepts of Fair PRICE

From short-term speculators to institutional investors and market makers to central bankers, different players bring different expectations, investment time horizons, and dealing frequencies. To anticipate is to create an imbalance between buyers and sellers (discontinuities in liquidity and, therefore, pricing), the likely responses of these different players to price changes and other events must be analyzed discretely.

All of the investors trading in the market simultaneously have different investment horizons. We can also say that the information that is important at each investment horizon is different. Thus, the source of liquidity is investors with different investment horizons, different information sets, and consequently, different concepts of "fair price."

Richard Olsen==>At one end is the BREAKDOWN of PERMANCE "One of the problems of data collected over very long periods is the question, whether they really refer to
the same phenomenon. Stock Indices for example change their composition
through time due to mergers or the demise of companies.

When analyzing the price history of stock indices, the impact of these changes in composition are not obvious. We call this phenomenon the “breakdown of the the permanence hypothesis”. It is very difficult to assess the quality of any inference as the underlying process is not stationary over decades or centuries At the other end "of the frequency spectrum, i.e. with high frequency data,we are confronted with the details of the price generation process " THE NOISE AT THE BID ASK SPREAD.

So When looking at charts at different resolutions. We should keep this in mind and We do need to look at charts at different resolutions ... Guided By Scaling LAWS and seeking where INFORMATION DENSITY is MIGRATING ( HORIZONS ARE NOT FRAMES REMEMBER THIS ).

Richard Wyckoff describes Four ''CYCLES" that are of most interest and usefulness to the TRADER/INVESTOR... John Durand gives them names of THE INVESTMENT CYCLE ( Bull Bear markets ~ YEARS ) , THE SPEC INVESTMENT CYCLE (Also he calls this the MANIPULATIVE CYCLE ~ WEEKS to MONTHS ) and then the SPECULATIVE CYCLE ( DAYS to WEEKS )

(..The Fourth sits under the Speculative cycle and is concerned with INTRA DAY ==>

The small buying and selling waves which occur during every stock market
session run so many minutes. They are caused largely
by the restlessness of active professional traders, much like the ripples
produced by the wind upon the ocean. Traders must have activity; they make their
livelihood by trading on fluctuations. Therefore, they engage in a ceaseless tug of
war, trying to put prices up whenever the condition of the market is favorable, or
drive them down when they find that the bulls are weak or have overextended
themselves. The degree of success or failure attending their efforts enables us
determine whether the market is growing stronger or weaker RDW. )

The charts that will FOLLOW use 61.8% as a "SEED" Box Size...

They will be a 128 Step chart , a 64 step , a 32 step and a 16 step ......The only thing that limits how far Up or DOWN in resolution is HOW MUCH DATA ...IE: How many Boxes can we draw ( we need a minimum.) and Guidance from scaling laws..

When looking at these charts keep Richard Wyckoff's method in mind. We should be OBSERVING

.(1) The Price movement — number of BOXES in each advance or decline.
(2) The Time elapsed in each movement — up or down.
(3) The Comparative lifting power or pressure
and I would add (4) The Shape ! Are moves Corrected or Uncorrected ( tested )

We should also take note of "HALFWAY POINTS" and areas of CONGESTIONS ( LINES/ ROWS )
As Potential Points of SUPPORT and RESISTANCE and CONTINGENCY ( The CAUSE )... We should also make use of the DIAGONAL LINES they define something important ( and their definitions PROJECT FORWARD )...

The First CHART reveals something important about the move up from the Japan influenced sell off ( note I say influenced )
The Second Chart reveals something Important about the action right NOW ( remember look for information density )

Because that second chart is so important (at the moment ) . the Three reversal chart can bring some clarity at this resolution ( what a Three Box reversal chart does-> by removing something )....

Part 2 will continue with the analysis.

The larger charts are important too.. Remember Information Migrates..And we need to judge the market's present position in relation to the Trend, In order to Identify the TREND . THE LINE OF LEAST RESISTANCE...

Motorway

'

Structure and Process , Configurations.

2011-05-12T12:08:00.000+10:00

Structure and Process. Configurations and Lines of Least Resistance. Do you see ?

All these are the same.. All these are different aspects of NOWS of Configurations.

The Grand Ultimate

The state of Your BODY , MIND , RELATIONSHIPS ,FINANCES, HEALTH etc etc...Are all CONFIGURATIONS ..They ALL have POSITION and TREND. They all have a FORM which has both STATIC and DYNAMIC aspects.They all have a LINE OF LEAST RESISTANCE.

Consider this IMAGE above . It is Both a DUALITY , TWO POLES and a UNITY , The ENERGY or FLOW Between them..

POSITION and TREND

Can not have One without the other

They arise simultaneously

Moving Left Moving Right

Breathing out , Breathing In

Moving UP moving DOWN

Do you see ?

These define both POSITIONS and MOVEMENTS

We call them BEFORE and AFTER.

POSITION ==> POTENTIAL==> FLOW==>POTENTIAL==> POSITION

This quote sums this up quite well and also gives a clear difference Between

FORECASTING and PREDICTING

http://pespmc1.vub.ac.be/DIREVOL.html

Consider a rock that rolls down from the top of a steep mountain. Given that the slightest irregularity in the terrain may be sufficient to make the rock fall either into the one or the other of a host of downward slopes or valleys, the exact path of the rock will be virtually impossible to predict. Repeated experiments are likely to produce final resting positions that are miles apart. Yet, one thing will be certain: the final position will be lower than the initial position at the top. Although we cannot know the direction of movement in the horizontal dimensions, we do know that there is only one possible sense in which it can move along the vertical dimension: downward.

The Rock has a POSITION a POTENTIAL BUT it also has a LINE of LEAST RESISTANCE .
It is the DOWNHILL . This POSITION and THIS LINE exist in the PRESENT MOMENT.

We do not want to or need to PREDICT anything about the FUTURE The "Although we cannot know the direction of movement in the horizontal dimensions" .. All we need to do is to IDENTIFY now RIGHT NOW.... POSITION and TREND .. THE TREND and the POSITION IN THE TREND (RDW )..

This is Forecasting NOT PREDICTION.. This is about Identifying and acting in the PRESENT,
To act In HARMONY, to use SKILLFUL MEANS to ""PROFIT" from change and FLUCTUATION

To IDENTIFY the TURNING POINTS ==> To make ourselves available for good things to happen OPPORTUNITY... and to minimize EXPOSURE to the less good to LOSS.

ALWAYS IDENTIFYING WHERE is DOWN HILL... ( And then deciding is that the DOWNHILL I WANT TO PARTICIPATE IN ;-) )

The Image ( THE GRAND ULTIMATE ) is an IMAGE OF TIME . TIME as it IS..LIKE ON a P&F CHART... ( and it is RELENTLESS )

Only The whole "UNIVERSE" can be the PERFECT CLOCK and what do we use a clock for ? To TIME !
So as to act .... To IDENTIFY... CONFIGURATIONS of OPPORTUNITY and act in harmony with them.

THE LINE OF LEAST RESISTANCE.

The one point figure changes, as they register on your charts, reflect all of the
buying and selling. When such price changes have completed the pattern, the
picture thus formed is the best sort of inside information, since it may be indicative
of an impending up move or down move, as the case may be.

When your three point charts confirm the conclusions reached by a study of your one point
charts, you will then have corroborative proof, and your judgment is thereupon
confirmed. Should the implications of your one point charts be confirmed by the
three point and also by the five point charts of the same stock, then you may consider
your knowledge absolute and definite, and you must act accordingly.

Be ever alert and study at all times. Remember, the patterns which are traced on your charts result from the action of individuals. Your chart discloses the balance of all influences. It tells you what is taking place and when to prepare for the move as well as how to take advantage of that information.

-
Today it is as easy to alter BOX size as to change REVERSAL ( A SUBJECT ! )

In studying the movements of stocks, it is well to have in mind the old saying,
"Stocks must fluctuate."

EVERYTHING MUST FLUCTUATE or there is NO POSITION ( This POSITION I am talking about is DYNAMIC.. It is as an example RDW's TECHNICAL POSITION .. It is LIFE )..

This must Fluctuate is also a subject.... A healthy Heart beats with a healthy mixture of determinism and randomness ... A healthy heart is not a METRONOME.. Nor is a HEALTHY LIFE...Nor for that matter a healthy TREND in a STOCK or Index!

The most important formation, in which we will be interested, is the congestion
area or trading range. The congestion area is created on our charts when a stock
fluctuates up and down in a trading area. These congestion areas on the one
point charts develop to be either zones of accumulation or of distribution.

We are concerned with the relative strength or weakness of the rallies and
declines as they develop and with the resultant congestion areas as they build up.

We look at our charts to identify THE TREND and THE POSITION in THE TREND .
To IDENTIFY , TURNING POINTS and THE LINE of LEAST RESISTANCE..

ALL THIS is the ONE THING and has NOTHING TO DO WITH PREDICTION
It is asking YOURSELF...WHERE IS DOWNHILL :-) .

MOTORWAY (some charts next time )

Information Flows

2011-05-08T23:35:00.001+10:00

Information flows from long to short time HORIZONS.

A cascade model.

We find asymmetry in the information flow:
Coarse volatility predicts fine volatility better
than the other way around.
(Wolfgang Breymann
RiskEye and Olsen & Associates)

We can not use BAR CHARTS with 200 day MOVING AVERAGE representing "INVESTORS"
and a 10 or 20 day MOVING AVERAGE (or 1 or 3 or 5 day ) Representing "TRADERS"

IT DOES NOR WORK LIKE THAT

We can not also use a 3.053123% P&F chart to = INVESTORS
or a 0.754694% chart to = TRADERS

IT DOES NOR WORK LIKE THAT..

These two observations link to Richard Olsen's Heterogeneous Markets and to Edgar Peter's Fractal market Hypothesis...

Market participants come in all shapes and sizes.

From short-term speculators to institutional investors and market makers to central bankers, different players bring different expectations, investment time horizons, and dealing frequencies. To anticipate is to create an imbalance between buyers and sellers (discontinuities in liquidity and, therefore, pricing), the likely responses of these different players to price changes and other events must be analyzed discretely.

All of the investors trading in the market simultaneously have different investment horizons. We can also say that the information that is important at each investment horizon is different. Thus, the source of liquidity is investors with different investment horizons, different information sets, and consequently, different concepts of "fair price."

Important Point and Distinction I would make is this

A time frame is a backward looking distorted view of reality.

A time horizon is a Forward looking Likelihood of expectation..

IT WORKS LIKE THIS

Information flows from long to short time HORIZONS.

A cascade model.

We find asymmetry in the information flow: Coarse volatility predicts fine volatility better than the other way around.

Now consider these these two charts CAREFULLY.. Yes there are four trends because there are different Time Horizons. But these Time Horizons always trade in the present moment--- Can only trade in the present moment.

We can not associate monthy charts and long term moving averages with "Investors" and short term traders with Tic Charts and Oscillators....

Someone Buying XYZ with the expectation of a 50 year time Horizon could well be Buying from someone who held for 50 seconds....They are not acting in different "TIME FRAMES" one on a monthy chart and the other on a 10 second BAR .

They Both act always as they have to, in a present moment . In a NOW...

They operate with "different information sets, and consequently, different concepts of "fair price."

So Our scales do not segregate various "Participants" activity . But are accurate measures of this activity all the way up till the present moment....

How do we KNOW that TIME HORIZONS ARE EXPANDING ? BY the action of the large scale chart or the action on the smallest scale ? BY THE ACTION OF THE SMALLER===> Information flows from long to short time HORIZONS. Coarse volatility predicts fine volatility.... Compare these charts to charts of the current action...

In 2003/2005 The Time Horizons were EXPANDING and the action of INVESTORS were CONSTRAINING the actions of TRADERS ... Their activities were contained.. THE OUTSIDE SPREAD NARROWED and THE COMPOSITE MAN supported the MARKET in a way that invited participation.

YES we need to look at the large scale charts , YES they are in the NOW and are a DYNAMIC HISTORY. But The real story is seen in the charts of the smallest resolution ;- ) . Especially at the edges . THE TURNING POINTS..

Notice the absence of EMPTY SPACES . Notice the nice TRENDING ACTION

CONTRAST with the ACTION at PRESENT...ALWAYS consider the COMPOSITE MAN and the OUTSIDE SPREAD.

Motorway

Killing Time

2011-05-08T22:42:00.002+10:00

All There is a POSITION ( A NOW ) , a TECHNICAL POSITION ==> "The markets latent ability to withstand change"... A configuration ( The POSITION of the INSTRUMENT to ITSELF and a POSITION in RELATION to EVERY other INSTRUMENTS POSITION in the same UNIVERSE ) ...

Such a CONFIGURATION a POSITION also has it's "DYNAMIC CHARACTER" which is the LINE OF LEAST RESISTANCE ( TREND ).

TECHNICAL POSITION <=====> LINE OF LEAST RESISTANCE

STRUCTURE=======>PROCESS

Welcome to the world of reality

POINT and FIGURE

British physicist Julian Barbour says that Time does not exist, and that most of an investors troubles arise from assuming that it does exist. We have no evidence of the past other than our memory of it. We have no evidence of the future other than our belief in it.

Let's take a simple model; suppose there were just three stocks and nothing else. In some instant they would be in certain positions relative to each other and would form some configuration. Newton claimed that this configuration has in addition some position in absolute space and that it's changing in time. What I'm saying is that there isn't any of that external framework of space and time, there's just the possible configuration that the stocks can form. The configurations do not occur somewhere in absolute space at some instant of time, some Now. The configuration are the Nows. You are forced to some view like this if the invisible framework is denied. If there a million stocks there would be some relative configuration of those million stocks and nothing else. That would form one Now, and all the different ways you could arrange all the million stocks would make all the different possible Nows.

And each Configuration ? IS also a LINE OF LEAST RESISTANCE ( I have significantly adapted this from

Julian Barbour's

The End of Time )

TREND AND TECHNICAL POSITION

NEVER UNDERESTIMATE THEIR IMPORTANCE.

Motorway

Some "Silver Key" Quotes

2011-05-08T17:41:00.001+10:00

Kermit Zieg and Heinrich Weber

A year with little price move action takes little room on a chart and a year like 1987 or 2001 with a lot of movement takes considerably more room; and that is what we believe is the correct representation of a market. Like in a history book where the era of the Neanderthals should occupy fewer pages than the 20th Century. In the bar-chart world, the 20th Century would be described in the same number of pages as 100 years of our ancestors fighting the sabre-tooth tigers and catching mammoths!

http://www.jstor.org/pss/2279780

Richard Olsen

The consequence of using such a scale is to expand periods of high volatility and contract those of low volatility,thus better capturing the relative importance of events to the market. .............................................................dynamically adapting its range to market events. Therefore a forecasting model based on this scale has a dynamic memory of the price history.

To be GOOD FORECASTERS We need to be GOOD HISTORIANS.

remember ==>

THE TECHNICAL POSITION is a STUDY of HISTORY. It is "The markets latent ability to withstand change" . TREND is for the FORECASTER and is "meaningless unless qualified as to TYPE ( TIME HORIZONS ).

It does not mean "the direction prices are NOW moving, but which THEY ARE GOING TO MOVE.

TREND is for the FORECASTER ( John DURAND ) , NOT the HISTORIAN...

But to IDENTIFY TREND We need to give each EVENT it's intrinsic WEIGHT..We need A DYNAMIC MEMORY....

and then there is TIME

Motorway

The Why of LOG CHARTS

2011-05-03T00:44:00.001+10:00

Why we should love logarithms

The tendency of 'uneducated' people to compress the number scale for big numbers is actually an admirable way of measuring the world

http://www.nature.com/news/2008/080529/full/news.2008.866.html

just about all magnitude scales are most meaningful when expressed logarithmically.

Why ? Because nature builds with Logarithms and Minds are made to think in terms of them..

Consider===> That every situation where the growth-rate of a quantity is proportional to its present level can only be described by such an exponential function.

FIBONACCI "Numbers" ( really a ratio , an Exponential Growth Rate ) are a good example ( for TWO REASONS ;-) )

0,1,1, 2, ,3, 5, 8, 13, 21, 34, 55, 89, 144, 233 etc was a solution to "The Rabbit problem"

"A pair of rabbits are put in a field and, if rabbits take a month to become mature and then produce a new pair every month after that, how many pairs will there be in twelve months time?"

Given his (unreal ) assumptions the answer he arrived at was 233 ==> That every situation where the growth-rate of a quantity is proportional to its present level can only be described by such an exponential function.

This sequence is derived by continuously adding the last two numbers to generate the next number (starting with 0 and 1).

Now you could add the last Three Numbers and derive another Such Sequence (exponential function).
Or the last Four , Five , SIX etc ......Until You arrive at a Sequence where you add ALL THE NUMBERS.

0, 1, 1, 2, 4, 8, 16, 32 , 64, 128, 256, 512, 1024, 2048 etc

The Fib series approaches a Growth rate of 61.8%

The sequence where ALL the Numbers are added has a Growth Rate of 100%

Now by changing the Step Sizes We can make any of these sequences equate to any Growth rate.

As they stand ( STEP SIZE ONE ) We have Growth Rates of 61.8% and 100% respectively.
Two Step Sizes ? 27.200629% and 41.421356% respectively ( and so on )..

Using LOG charts makes things WORK --TRENDS , RETRACEMENTS and (esp) COUNTS & IMPLICATIONS ( every situation where the growth-rate of a quantity is proportional to its present level ! )..

LOG charts are the stuff of NATURE as are NOT A NUMBER OF (in the main ) HISTORIC DEAD ENDS==> Square root and various other PARABOLIC SCALINGS ( 3/4 Root . 1/4 Root etc ).

Log Charts also allow Wonderful COMPARISONS ( Rel STRENGTH included )
As these series of 100% ( 24step ) LOG charts will show...

Log charts also open up to us the Modern Science of fractals and it's Tool Kits
( Which always in a sense have always been the P&F TOOL KITS )

Notice the relationship of Horizontal to Vertical.

Notice the different POSITIONS these markets are in.

Notice Significant "LINES".

and Notice the ABSENCE OF MANY EMPTY SPACES.

Motorway

XAO ==>The Composite Man and the OUTSIDE SPREAD

2011-04-30T13:36:00.001+10:00

The PRICES where the Composite MAN is WILLING TO TRADE ( important )
DEFINES the OUTSIDE SPREAD... Time to review ==> THE OUTSIDE SPREAD

XAO is interesting It would appear to me when the CM WANTS TO MARK UP.HE WANTS TO CREATE CONFIDENCE and so THE OUTSIDE SPREAD SHRINKS and there is firm ground seemingly beneath the publics feet ).
At other times the spread widens and the market is left to its own fears and hopes
or it is actively and violently shaken either by design or necessity (IMPORTANT ).
This ties directly to My two box scaling law ...

Here are some charts to look at. Notice how very different the Behavior . How would you trade these PHASES ? ( Hint by using scaling laws to move up or down in terms of resolution )

These charts all have the same scale. First is the move into the bull market of 2003 notice the behavior before the trending period ( hint But maybe there are always profitable trends at the correct resolutions ) and then the behavior in the newly born Bull MARKET !

Then over the period 2006 /2007 ( Remember these are all same BOX size )

Now the most recent up till the close on Friday the 29 April -->

And remember to click and expand :-)

From Scaling PT 1 ==> Consider REGIME changes... Earthquakes , Tropical Storms . Bull Bear MOVES

They can be OBSERVED and identified by watching how behavior changes and becomes more variable .

VARIANCE ==> VOLATILITY...

Our P&F CHARTS are superior maps of Volatility...

Some more charts on the XAO to follow soon ( before back to SPX ) looking more closely at the recent action.

Notice this Blog is very much in Intrinsic Time ;-)

With these charts also observe the EMPTY SPACES. They are an important factor and pointer and also

feed into scaling laws . Note the range in 2006/2007 compared to now in terms of these empty spaces

( The Topography if you like that the P&F CHART, The BOXES are FLOWING THROUGH )

Motorway

Fractal Time ---Scaling Pt 4

2011-03-31T16:01:00.004+11:00

This is the fifth chart . 100% was the first in the series. 100% means that each BOX UP was a move of 100%.
The next in the series was the 41.42% ( correct to two decimals ). 41.42% means that we now need to have two boxes up to have a move of 100%..

Aha ! Not 50% ! But 41.42%... Because of COMPOUNDING..

With the 18.92% chart it took four boxes to make a move of 100% and with a Chart at a resolution of 9.05% We need eight to make a move of 100%.

The Chart above is now at a resolution of 4.43% We now need to see 16 boxes to make a move of 100%

This series of Charts are NESTING within each other on the VERTICAL SCALE.. I am here using a factor of TWO...

Now Consider a quote from the Fractal Literature like this one

Any discussion of fractals would be incomplete without an in-depth examination of
fractal time. In fractal time randomness and determinism coexist. The human lung is an example. The lung has global structure and local randomness. If you view any number of lungs, they all have a similar global structure that identifies them as lungs.
Although the lungs resemble each other, they also have local randomness or subtle
qualities that make each one different. Natural systems appear to prefer coexisting randomness and determinism because it forms the basis of efficient evolution. Erik Long

And now a Quote from John DURAND ~1926

Manipulation determines and guides the main trend of price movements; but the minor details of what happens along the journey seem to be fashioned by chance.

The Bold Italics are mine and for very good reason..From the perspective of a particular Resolution we can identify a Form. A Form which appears to be made up of smaller units displaying a certain randomness .

Consider you are viewing a great river from a great height as if you were in an aircraft , maybe a helicopter..

The river is a Determined Form (A Non Random = A MANIPULATED FORM )
But if you drill down and look at the surging water that makes up the river you will see what appears to be Randomness , happenstance and CHANCE But maybe only from the perspective at the Resolution of "The RIVER"

Or consider filling a Mold with aggregate of some kind. At the level of individual components ( eg small stones , gravel ) There is again seemingly Randomness. Never the same twice as Heraclitus ( Maybe an original Philosopher for P&F practitioners) would have said.

They do not step into the same rivers . It is other and still other waters that are flowing. You cannot step twice into the same river, for other waters and yet others go ever flowing on. They go forward and back again.

It is in changing that things find repose.Time is a child moving counters in a game; the royal power is a child's.

What do our P&F charts consist of ? What do they reveal ?.How does Randomness and Determinism
( Manipulated = Determined ) Coexist ? And what is the application ! Hopefully with the next few Blog Posts we will see :-) .

We are now at a resolution where we can see a determined Form .. Why ? Well at least Two possible reasons. We can also start analyzing ..

We now can see True Trends , 45 lines and Columns of Fluctuations .

Motorway

Scaling part 3

2011-03-24T15:11:00.000+11:00

The question of scaling deals with many necessary aspects depending on our purpose.

Adaptive versus Universal Scales ( how would we scan a data base for opportunities ? ) and then there is also the nature of a particular Scale as to TYPE.

Traditionally We see THREE types at least discussed if not always used..... First an Arithmetic , a fixed point scale ( the earliest scale used ) then , Logarithmic and other Formula scales...

The two later types concern an age old question. How do Fluctuations vary with Price Levels.

But even from the very early texts there was the observation that different prices required different BOX sizes. Even when using fixed Arithmetic Box values...

J M Klein in 1904 suggested The use of half point charts for low priced issues and two and three point charts for high... ( he also brings up an important factor.. That I refer to as Hunting Versus Parking )

It is a small step to altering the Point Values in such a manner ..To then seeking some formula that will result in an objective adjusting of the BOX size to price level ( And We will find here a mainly (interesting) forgotten body of work )

One method is the use of Log Box Sizes ( which at this stage if we allow for an important limitation ) I think is the most promising. I will make mention of other possibilities and will also suggest a connection between
Fibonacci , Logarithms and Half way points. Also what happens as we have charts near the Bid/Ask Spread.

So for the moment on with the next few charts to look at...

But first We must have an answer to an important question

what is the HALFWAY point and where do we find it ?

When we deal with Logarithms and Percentages.

IN effect where is halfway when We deal with COMPOUND INTEREST ?

Next few charts are correct to two decimal places and should reveal my answer to this Question..
I want charts that "NEST" and I want charts that "HUNT" and not "PARK" ( more on this later :-) )

The Charts are are from Stockcharts and I recommend that people go to the site and explore for themselves.

A very good and accessible site for anyone learning and exploring Point and Figure.

Motorway

Scaling part 2

2011-03-15T23:42:00.002+11:00

Following on from http://enantiodromian.blogspot.com/2011/02/scaling-part-1.html.

Part 1 looked at one aspect of scaling related to the Vertical Dimension of our P&F charts.

Our whole P&F toolbox should be built from within the reality of INTRINSIC TIME and the dimensions of our charts.

Here we will add an aspect related to the Horizontal Dimension. What I term the "Informational Density" of the chart. We want our charts to have the highest informational density that is possible.. We can give this a number by calculating the Fractal Information Density Ratio.

( The Motorway ) Event Ratio

A relative measure of the informational fractal density of a point and figure chart . The event ratio is computed by dividing the number of reversals ( events ) of a smaller magnitude scale chart by the number of reversals on a larger magnitude scale chart (over the same phase / time horizon ), and then normalizing this value by dividing it by the ratio of the larger scale to the smaller scale .

We should use a chart scale ( BOX SIZE ) that has the HIGHEST INFORMATIONAL DENSITY...
We could think of using nested scales with a factor of Two for simplicity ( though finer optimization would be possible and maybe necessary for intra day/session trading )

And We have to be aware of Boundary CONDITIONS
At the upper Boundary ==>The Breakdown of PERMANENCE
At the lower ===> The dynamic of the BID ASK SPREAD as a possible breakdown point threshold...

What protects us from danger of boundary conditions is the use of the scaling rule from part 1

We want a chart that reveals the maximum amount of information. But also has the number of BOXES DIVIDED BY THE REVERSALS MOST CLOSEST TO EQUALING TWO.

Example If we have a chart with a certain Box Size lets say "10" and we count the number of reversals in a particular phase of interest. We might count 25 reversals..

Now ! If we then change the BOX size to "5" and again count the reversals there might well be 50..

So lets compute the Event Ratio

(50 divided by 25 ) Divided by 2 = 1

The 1 tell us that we have not increased the amount of information revealed in our chart. We have made the chart twice as high yes ( columns twice as high ) and we have made it twice as wide ( reversals twice as many )

But we do not have a useful FRACTAL STRUCTURE

A Fractal Dimension is in essence, a scaling rule comparing how a pattern's detail changes with the scale at which it is considered - this is what is meant by complexity.

This relationship here is between , the number of Reversals and the scale used that produces those reversals.

We know that whenever we change the magnification at which we are viewing something,that often the number of pieces will always stay the same and that only the size changes. But the question here we are asking ourselves is did the number of pieces change? Detail is what we mean when we say the number of pieces and detail here means the NUMBER OF REVERSALS

If in our example when we changed the Box Size to "5" We now found 100 reversals Then our event ratio becomes

(100 divided by 25 ) divided by 2 = 2

This example has twice the Detail (4 x The Reversals instead of just 2 x ) .. While the chart will be again twice as high . It is not just twice has wide as before ( and as with a coin flip chart ) but it is Four times as wide.. whenever we change the magnification at which we are viewing something, often the number of pieces will always stay the same and that only the size changes. But the question here we are asking ourselves is did the DETAIL change?

Yes the same information just did not get seen more magnified, We actually revealed MORE INFORMATION

Here we have a useful FRACTAL STRUCTURE.. And here we have reason to be looking at the chart with the smaller box size..

So part 1 gives us a scaling rule related to the vertical dimension. Part 2 gives us a scaling rule related to the Horizontal.. ( There are other dimensions we can consider as well ! )

Part 1 helps keeps us within useful boundaries . Part 2 helps reveal where within those boundaries the most information is.

We will then have a chart that matches the resolution of the "Information Flow"

IMPORTANT..

There are other aspects to these scaling dimensions and there are other dimensions to consider.

And there are total other aspects to scaling in general..

So lets look at a chart . The S&P500 using a LOG BOX size of 100% and with a One Box reversal .

We will start our exploration from such a height...

To be continued :-)

Motorway

Richard Wyckoff and His Method

2011-03-15T16:46:00.004+11:00

Lots happening.. Terrible Earthquake in Japan , varying worldwide news. etc etc

But how much really of what is happening on markets (or NOT happeneing ) can ever be attributed to such news and how much to the existing TECHNICAL POSITION markets are in ?

A key point is to be found in the way Richard Wyckoff defined the TREND

The Trend is the Line of Least Resistance

Time to review

Trend-vs-Technical-position

So What is "Wyckoff Method"

Let's let RDW speak for himself.

BUYING AND SELLING WAVES

Every upward or downward swing in the market, whether it amounts to

many points, only a few points, or fractions of a point, consists of numerous buying

and selling waves. These have a certain duration; they run just so long as they

can attract a following. When this following is exhausted for the time being, that

wave comes to an end and a contrary wave sets in.

The latter may attract more of

a following than the former. By studying the relationships between these upward

and downward waves, their duration, speed and extent, and comparing them with

each other, we are able to judge the relative strength of the bulls and bears as the

price movement progresses.

All stock market movements, however large or small, are made up of

buying and selling waves. The market does not rise and fall like the water in a

tank which is being filled or emptied. It moves to a higher or lower level by a series

of surges — a good deal like an incoming or outgoing tide, with successive

waves higher or lower than those preceding........................................

You can easily confirm the above by examining any chart. It is important

that you do this so as to impress upon your mind these numerous waves of various

sizes, inasmuch as this will help you to understand the market.

You will thereafter think in waves

When you are looking for an opportunity to buy, watch for the down waves

in the market and in your stock. After you have bought, you sit through a number

of small, medium and good-sized waves, until finally you observe that it is about

flood tide in that stock. Then watch for an especially strong up-wave and give your

broker an order to sell your stock at the market.

The waves of the market furnish a clear insight into changes in supply and

demand. By learning to judge all sizes of market waves, you will gradually learn to

spot the time when a rising market or a rally, and the time when a declining

market or a reaction has halted and is about to reverse. These are the turning

points.

To be able to say when these turning points are occurring — at the bottom

of a bear market, or at any important rallying point on the way down to the

bottom, or at the top of a bull market, or at any important reactionary point on

the way up, — is a mark of ability in an investor as well as a trader.

Remember: The market itself tells us everything we need to know about its

probable future action. Every significant change in supply or demand is registered

on the tape. When you have learned to analyze the market by its own action, as

recorded on the tape or on your charts, then you will be proficient in the art of

operating in stocks. Richard D Wyckoff

We look at the market in terms of buying and selling waves.
We compare these waves with each other in the one instrument and Importantly across instruments.

We identify The line of least resistance and act in harmony with it..

Whatever you use as long as it brings you closer to this market reality. Then maybe use it... But Much that is not Wyckoff will remove you from this reality.

The Trend instead of being The Line of Least Resistance becomes something else. Something Historical.

This is where most indicators will take you because they look back in a certain way that removes from view the reality of those Buying and Selling Waves and then you can no longer do "Wyckoff".

This is the reality that Wyckoff wanted to act in harmony with and become proficient in dealing with.

He makes simple observations of (in part )

Demand and Supply

Comparing Thrust with Thrust . Reaction with Reaction, and each with the other.

Cause and effect

How The Horizontal dimension changes perceptions ( of among things Value )
and changes the technical Position itself and hence the TREND.

Effort and Result

Volume and Activity. Conviction and Participation , Demand & Supply entering and leaving.

==> To constantly identify the LINE OF LEAST RESISTANCE.

Of all the things that are most desirable to know about the stock market,
these two are the most important:
(1) First, to be able to determine the final top of a bull market; and
second, to determine the top of the intermediate swings, and finally
the top of the minor moves.
(2) To be able to determine the final low in a bear market; the bottom of
the intermediate swings, and the end of the minor moves.
Master this branch of the subject thoroughly, it is vital.
But there is one step more: Your education will not be complete until you
can cover all your shorts and go long at the bottom of a panic, a depression or of
an intermediate swing, and sell out all long stocks and go short at the top of a
boom or an intermediate bull movement.
This will be the result of practice,
training, and experience. It requires great flexibility of mind and absolute control
of your emotions. You can learn to do it if you will study and faithfully practice
this Method.
Richard D Wyckoff

Important ... No where does he say Predict Turning Points.. He uses the word Determine. He wants to Identify and if he is proved wrong ? Well He will change his mind and act accordingly.

Thrusts and Halfway Points are a good starting place for beginners

The Technical Position is highly impacted by this fact==> "speculative positions impact the market twice:
first when a trade is opened and then again when the position is closed." Richard Olsen.

How I trade and invest in stocks and bonds : being some methods evolved and adopted during my thirty-three years experience in Wall street (1922)

This book has some very good sections on the TECHNICAL POSITION

Available here

http://www.archive.org/details/cu31924031269552

Motorway

The hardest cause to identify is the one that is universally present

2011-03-09T22:30:00.001+11:00

Some resources ! The first has MASSIVE application to nearly all fields..
It is about Epidemiology and the name of the paper is "Sick individuals and sick populations".
So what is the deal ?

The hardest cause to identify is the one that is universally present, for then it has no influence on the distribution of disease.

From the paper-->

If everyone smoked 20 cigarettes a day, then clinical, case-control and cohort studies alike would lead us to conclude that lung cancer was a genetic disease; and in one sense that would be true, since if everyone is exposed to the necessary agent, then the distribution of cases is wholly determined by individual susceptibility.

Now just change the word disease to anything that might be of interest to you. Investing , trading. Why there are Bull Bear markets.. Why A particular stock went Up or Down .. ANYTHING !

http://ije.oxfordjournals.org/content/30/3/427.full.pdf

Again==>

I find it increasingly helpful to distinguish two kinds of aetiological question. The first seeks the causes of cases, and the second seeks the causes of incidence.

Such a universal cause when it comes to market movements is Leverage ( DEBT & MARGIN ).

So two very good reads the first.

LEVERAGE CAUSES FAT TAILS AND CLUSTERED VOLATILITY
By Stefan Thurner, J. Doyne Farmer and John Geanakoplos

http://cowles.econ.yale.edu/P/cd/d17a/d1745.pdf

And the second can be found here to download ( note some of the comments )

http://www.olsenblog.com/2010/07/think-about-press-how-to-trade/

A universal cause is like the water fish swim in. The air people breath. It is like the nose between your eyes.

WE TEND TO NOT NOTICE IT... Because it is all pervasive ===>

The hardest cause to identify is the one that is universally present, for then it has no influence on the distribution. ( Full stop , The Distribution... ).

The connection of these to Wyckoff and The Composite Man should be obvious.
Good reading :-)

Motorway

Couple New Links

2011-03-08T00:04:00.000+11:00

A couple of new links to some blogs .

First someone who knows his P&F and brings Reality , His P&F eyes to the news flow.

http://financialmarketstrading.wordpress.com/

And http://thefigurist.blogspot.com/ A young guy, who maybe is just starting out and learning. But already displays some good insight and if he keeps going we will soon be learning something from him I am sure.

Motorway

The Silver Key part 1

2011-03-07T23:34:00.006+11:00

Before we move on with Scaling. I think it is good to just think about how powerful a tool a Point and Figure is .Just as it is.

Simply it is connected to reality .. It is reality.

What did I mean by this below ?

Also consider the word INTRINSIC... It's relevance is this .. While we can look at the data generating our chart. We do not need to ( and It may not be optimal to do so ).Because everything we need to know can be gleaned from the chart itself . Everything that matters is INTRINSIC to the chart itself

The Boxes on out P&F charts are containers. Containers of reality !

Of a price movement , of a certain amount of volume , of tics . NEWS , Fundamentals etc etc

EVENTS ! What is news, real news ? What are fundamentals that matter ? How much volume matters ?
What ever is contained inside the Boxes on the P&F chart is what matters !

Think about news ? How much news can you remember over the last 12 months ?
Everyday a NEWSPAPER is printed. At 5.00pm the news hour on television is broadcast . At breakfast some of us might listen to the morning news ON THE HOUR etc.

Question ? How is this unlike a bar chart made up of slices of time ? Bars being pushed across the screen by the tic tic tic of a foreign body ==> Clock Time ... It is NO DIFFERENT.

Reality fills the BOXES on the P&F chart as it does. EVENTS in intrinsic time.

Richard Olsen. conventional time series analysis, focusing exclusively on a time series of regularly spaced observations, is far removed from both the fractal viewpoint and the real nature of the raw data to put it a bit drastically - when you think about real life. In our normal lives, physical time is a foreign body.

OBLIVION and DISTRACTION ... Clocks instead of RULERS.. Real News is an EVENT not empty commentary to fill a slice of time .. Real News is real and is contained in our BOXES regardless of whether a Slice of Time makes a commentary on it...

But it’s important to
realise that that the fractal element is only one part
of the solution. The other is the intrinsic-time
concept. Without that concept, you can’t arrive at
the right solution.
Intrinsic time is a key concept And if you build that in too, it makes everything even more fractal. The world only seems less fractal than it is because we operatewith physical time. But if we replace it by intrinsic time, the world becomes much more fractal.

Everything we need to consider or might choose to consider is contained inside the BOXES of our charts and is INTRINSIC to the chart.. This is the SILVER KEY..

Whatever we choose to analyze .. We ( News FA or TA ) will do better to not draw away from reality by embedding it into empty slices of time ... That is NOISE.

I recommend Nassim Taleb's Book FOOLED by RANDOMNESS on this point read esp THE BLOOMBERG EXPLANATIONS & Filtering Methods. Do so while watching a P&F chart.

Having the Silver Key will take you very far.. You will be connected to reality.

It's the difference between having a BOX with a reality ( The real is what works has effect )
or having just an Empty Time Slice ( of Framed Noise ) that fills with commentary (has to do so).

This is why most news is just noise and we will do better to ignore it and start putting on our P&F eyes==> (example)
http://www.jstor.org/pss/2288921

Real News has Effect. The newspaper maybe would be fine if it was only printed when real news had filled it like our Boxes on the Figure chart... Then we would have a chance of arriving "at the right Solution "

The Golden KEY is about Optimal FOCUSING and Part 2 ( and maybe 3 through to 3000 :-) )
will soon follow.. ( after part 2 of the Silver Key maybe ..Important aspects here )

We do not need the average true range of a certain time framed chart or any other input from such charts.
The Figure chart itself will inform us how to scale it and how to use it. This is what I mean by INTRINSIC
Our whole P&F toolbox should be built from within the reality of INTRINSIC TIME and the dimensions of our charts.

Motorway