Euro as an Example of My Techniques 11Mar12

The Euro composite started as a basket index and then became the Euro Index and is pretty much as close to textbook of Andrews pitchforks. When combined with MAP waves which is based on Elliot waves it gives good results as to approximately where the market will move.

From the chart I start with monthly pivots.

This can be seen clearly below using a long simple moving average – in this case SMA50 of (Open+High+Low+Close)/4 with an offset of -23.  It is obvious that even though there has been a change in trend that occurred in 08 this trend is not yet clear  some 3 years later other than it looks like it might be rolling over.

MAP Waves are based on the following rules:

1 >= 0 / 2 >= 0 / 3 >= 1 / 4 >= 2 / 5 >= 3.

0 is the starting pivot on each time scale, and is a pivot from the next larger scale, and pivot 5 is a pivot of the next larger scale, which follows the same rules. The same rules apply for down waves in reverse. Where there is a confluence on median lines on occasions a 3 wave pattern sometimes occurs.This is where my waves differ substantially from Elliot Waves (EW), however just like EW the wave count can only be confirmed retrospectively. The reason for this is behavior is different of Bulls and Bears so scales often change up or down one scale.

EW uses a process of endless corrections with numerous changes depending on how the correction develops, so can go on for years! Some EW specialists have corrections going back to 2000 if they choose that as the top.

For EW general pivot trendline identification is as follows –

From pivot 0 draw trendline to pivot 2 and draw a parallel line from pivot 1. Once this trendline is broken you are in wave 3.

Once pivot 3 is made draw a trendline from pivot 1 to pivot 3. Draw a parallel trendline at pivot 2. Once this trendline is broken you are in wave 4.

Then on the way to pivot 4 draw a trendline form pivot 3 to the second smaller pivot. Once this trendline is broken you are in wave 5.

Fibonacci extensions and retractions are used to estimate where pivots might fall. This method however is pretty much a wild guess especially as counts are continually changing as waves develop! Because of these limitations some analysts use trendline as a primary guide and retrospectively fit the wave count, and that even continually changes!

My rules overcome this and when combined with different pitchforks and combinations give predictable results.

Chart colour coding of pivot scales is as follows;

Yearly pivots – Not enough Data but also need to find a way of leveling to account for inflation?

Quarterly pivots – Gold

Monthly pivots – Orange

Weekly pivots – Red

Daily pivots – Purple

4 hourly pivots – Dark Blue

Hourly pivots – Lime Green

10 Minute pivots – Sky Blue

5 Minute pivots – Grey

In general forks give an approximate limit of the extremes, or trend channels, where as prices approach the parallels we can expect changes in trends, and once exceeding the parallels indicating over bought and over sold conditions. The trend lines are essentially cycles, and multiple trendline scales give an interaction of multiple cycles! So I am combining a number of well established techniques!

Basics:

ML – Median line / MLU – Median line parallel upper / MLL – Median line parallel  lower / SP – Sliding Parallel

Fork notation – Scale then starting pivot then high and low pivots.

Fork 012 – gives you the trend on that scale as can be seen above, and changes in trend on different timescales.

Pivot 3 has not made the MLU so the trend decreasing, so expect pivot 5 closer to ML then pivot 3

Once pivot 3 is made make a sliding parrallel – dashed line of same colour scale and slide it to pivot 3. This gives you an approximate target line for pivot 4 – the MLL.

Now draw your next fork 123 and where the SP012MLL and123ML cross is your target area for pivot 4.

Once pivot 4 is made, draw in a sliding parallel of fork 123 and slide the MLL to pivot 4, and draw in fork 234.

SP 123 gives the expected extreme of pivot 5.

012 ML and 234ML is the target area for pivot 5.

The distance from 012MLU to pivot 5 is expected to be greater than pivot 3.

Assuming pivot 5 is a monthly pivot, then the new trend is assumed to be pivot 345, but also I feel that it is reasonable to assume this is also a quarterly pivot so the new trend is shown in gold.

It is not surprising that the pivots after the 2008 high are in the approximate limits of the old trend lines.

So where do I expect it to go to?  Pivot 1 rarely makes the 345ML, and often turns at the 125ML.

But that is a long line!

So going down 1 pivot scale to the weekly pivots we can narrow it down.

One Response to Euro as an Example of My Techniques 11Mar12

  1. mapportunity says:

    UPDATE 22April – Some observations over the last few months
    The 5 wave count does not necessarily follow the rules stated above when there is an interaction of multiple time scale median lines. Here you will sometime get a failed pivot 3 or pivot 5.
    The Forks are a form of cycle analysis. On a small time scale it can be difficult to distinguish the scale of a pivot as a full swing on a smaller scale (MLH to MLU) could be a half swing but valid bigger scale pivot (MLU or MLH to ML), so on a shorter term investment it is better to manage risk by waiting until it is clear if prices move through the ML’s rather than assuming they will go through where it is clear that the fork scales are very similar. This seems to occur mainly when market psychology is changing from bull / bear.

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