Day Trading & Forex Forum

The Dutch Clown

It seems to be somewhat boring but it has also a degree of comfort that the multi year Elliott Wave Analysis sticks to the TripleZigZagC pattern as the preferred one. And I consistently keep the alternative pattern scenario alive in the back of my mind (see previous weekly’s) and add that for the short and medium term trading it will not differ trend wise. The character of the pattern has extreme implications for future directions which you will read in numerous publications. But an alternative scenario with opposite direction is not so far from this scenario and might very well enter the arena. In order to get some grip on the long term outlook I have done a bit more Cycle Analysis because it was simply far to long ago I did some work in this area.

The obvious choice for Cycle Analysis is the 4 year’s cycle which bottomed in the DJIA in October 2002 and the AEX in March 2003. Primarily the DJIA October 2002 4 years cycle bottom is the focus of attention in numerous publications and warnings for a serious correction to come. Personally I favor the Benner 56 years Cycle that fits perfectly the March 2003 bottom in a series of tops and bottoms throughout the last century. Mind you that the DJIA dropped also in March 2003 but did not place the absolute low. This implies the next relevant event is a top due 2010 but does not exclude a correction although it should be seen differently within the larger picture.

Mr. W.D. Gann also viewed the stock market movements in a cycle way but his conclusions are I would say typical Gann so not quite easy to understand and multiple conclusions are made by as many different Analysts. However if one uses the findings of Mr. Gann one will find that the year 2006 is the last of three years that typical show panic (even the word Crash is used) related to 4 year periods. If we take a look at the Gann cycle performance of the DJIA in the last century or so we find: 16,22% in 98 days and 23,41% in 619 days; 86,60% in 813 days;16,24% in 363 days and 13,54% in 31 days; 21,85% in 379 days with large drops and reactions; 41,16% in 56 days. If we project the Gann cycle idea’s to the near future a serious drop is expected towards the end of 2006 to start and the low is formed in the next period 2007-2008 followed by a couple of years rising.

Relevant to us at this stage is an answer to the question: Is the top (DJIA 11670 and AEX 478,44) there or is there more to come before the decline is executed? We might find some help in the work already done by a number of people to isolate one dominate cycle as appose to using a number of cycles which is traditionally done by measuring the number of bars between lows. Well what can I say relevant lows in the AEX present swing are 217 and 307 which is 365 bars. The next relevant low is 345 which is 181 bars from 307 and the next there after is 375 which is only 49 bars and if you remember the date and event it was the London hit last year. If we forget the London attack the next relevant was 383 at 130 bars. Using single frequency trigonometric regression one can find a single dominant cycle, to keep this contribution focused I just tell you that the AEX dominant cycle is 134 day’s.

In order to move further we need to read a couple of books to get into the grooves but I will summarize conclusions since I am not all together up to speed in this area yet. This forecasting technique can be used on different time frames so I have checked day, hourly and 5 minute charts and found that it’s more likely to expect lower AEX values than higher ones although the daily chart is about to turn positive. No surprise since this technique does not work properly in non trending markets as we have seen on the AEX the last couple of day’s. This technique has some similarities to what we call a flag in Technical Analysis where the AEX moving sideways could be considered a consolidation phase. The set-up is there it’s just a matter of confirmation and we are on our way. So At this stage I have to conclude that although Cycle Analysis is indicting serious short opportunities it can not help us right now by telling that the time has come to go full blown short yet.

Why so much effort spend? Well for cross checking I use the DJIA and where the AEX multi year EWA prefers a last wave up in the total swing from 217,80 the DJIA multi year EWA has a preference for a scenario where the 11670 is the high for quite a while and future projections match the Cycle Analysis idea’s of Mr. Gann. An other observation is the EWA from the high on 478,44 which indicates that a TriangleExpC pattern is active with the accelerating wave presently active moving down with targets below the recent low on 409,56. For the bulls, it has to be mentioned that this pattern is a complex one and frequently changes due course into an other pattern.

To earn some money in the meantime I use the layered charts like you have seen in previous weeks. At random and when I feel like it I might update some charts, in general I think you can work with to given outlines yourself given the fact that everything can be found in books I already referenced several times.

S6 and remember to Trade to Win.

Disclaimer: these weekly thoughts are for educational purposes.

The Dutch Clown

10.00u
Intraday OB followed by ND and scalped a good point, now PR and looking for PD to go long.... all supported by the relevant Gann Fans.

gogo27

Good morning Clown

We are back in business... confusing conclusion this time... expecting a short squeeze on the AEX (?)... have a nice day!

Gogo

The Dutch Clown

Gogo27,
FKA...059

Do not use words like short squeeze they express emotions which a trader can not use in his trading. When trading you need to have a plan by which you can act, it is not about expectations it is about the conditions or outlines if you like.

Just look at what your charts tell you and use what you have learned about indicator patterns and conditions. This morning we had quite an OB situation on the intraday graph which was followed by Negative Divergence playing with the 1x1 line from the 446,34 Fan ... just too good to let it pass for a short scalp.... than the RSI scored a positive Reversal (the spread is a bit large but this is the part where the other techniques come in) on the intraday chart just below the 3x1 line from the 447,52 Fan and closed the shorts taking 1 index point times euri 200 times number of fti's minus some small change for the broker.

Now just look at what ever comes first, that will be positive divergence or a "hidden" reversal signal, taking in account that a trading potential of minimal 1 index point is around.
Easy does it and just pick the nice ones so you keep trading to win and earn your weeks income monday morning in the first trading hour so you will have the rest of the week for some extra.

Have Fun I know I will anyway.

PS the PR signal in the EOD chart is still there, although the exit intraday (only) was executed.

Pacito

Clown,
concerning the long term I reached the same conclusions you did. For the cycles you only have to extend the pattern Prechter showed in his book. Your Elliot analysis is exactly the same as mine. About Gann, I'm still not experienced enough to thrust my calculations, however if they coincide with my other calculations, it makes me happy.
Keep up the good work.
Pacito

gogo27

My charts are from stone age times... I still use drawer and pencil for my conclusions... therefore I was all looking to your charts to make my work easy(er)...

but I do not let emotions take my decisions! I took my positions in due time and will finalise soon this trade...

Now let's take a drink first...

Cheers

Gogo

The Dutch Clown

Pacito,

The EWA of the DJIA indicates that 11670 was the top for quite a while and this is "the red flag" for the AEX EWA which prefers a wave 5 up to wrap the 217 swing up. Now I have slept one more night over it I came up with an other thought... they might be both right and the difference is made by the Eur/Dol??!!.. and if I recall my latest EWA outlook on the eur/dol it was a wave 4 down (1,2981-1,2457) and now 5 up.... the FED will stop raising the intrest rates where as the EU start to raise.....

Mr. Gann is known from his wheel as C. Brown explains in the book but it's not the thing I use. Mr. Gann did work on many things fi charting, price/time targetting and cycles. The last one is quite unknown and a whole different ballgame. As I stated previously I consider the long term outlook interesting but the failure rate is a bit high and costly, so I work with my trading systems on the short term to eat pudding now not in a few years, where I transform them into the larger timeframes in a later stage if the pudding is of my taste. But the systems work so extremely well on the short term that I now question whether or not I should ride the long waves anyway.

Sandwich time.

gogo27

Bon appétit!

If the systems works than you should stick on it...

A mechanical system is valid as long it does not fail...

Time for lunch!

Didi