The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at
I am always open to questions, comments, or suggestions on how to improve this blog.

Saturday, April 16, 2011

symmetry, force, velocity

  Just an interesting observation of price symmetry.
  Looking at a SPY weekly chart going all the way back to the start of cheap credit and Über leverage.
- 266 weekly bars on the way Up, and half as many on the way Down, 133.
- Another 261 (roughly twice as many) weekly bars on the way back up to a double top (key technical "topping signal").  At this point we have a nearly perfect symmetrical cycle with a 2:1 up/down ratio; up, down, up to re-test, fail.
- The Double-top failure was 73 bars down, or roughly one-third the amount of time it took to test the highs.  
- Since then we have traveled 103 weeks up, or One & one-third the time to retrace higher. 

- So, in this case we had two symmetrical waves moving happily along until acted upon by a force (i.e. Double Top supply). Put another way, an object in motion tends to stay in motion until an outside force is applied.  So, we get an outside force (Double Top supply) at which time there is a reaction whose velocity is determined by its Force.  If the Force (F) is the 261 up bars and the (a)cceleration = 73 bars down and F=m*a or 261=m*73 then m=3.5, so the velocity changed at a rate of 3.5 times.  What does it all mean?  Who cares.  But it is what Andrews (from Babson) was analyzing through his use of Pitchforks.  The pitchfork (or Andrews Median Line) highlights the vector which price will move within once the force and acceleration (action/reaction) are measured.

Looking closer we can add one more pitchfork off of the March '09 lows:
('UML' = Upper Median Line, and 'Mid-Line' are from the longer-term chart above).  What I'm trying to point out is the confluence of the 3 separate pitchforks where price currently sits.

Anyway, adding some Fib. retracements in for good measure; the 78.6% has capped previous moves for these cycles.

While measuring the largest wave in the most recent move and projecting a Fib. extension off of it gives us the following:
As an aside, I'm not totally well versed in price projections, aside from what feels natural to me.  But measuring the 1, 3, & 5 waves off of the March '09 lows and projecting them off the beginning of our move higher starting back in Oct. '10, a confluence of resistance lies around the$140 & $143 levels.

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