Ten charts that prove Technical Analyis is valid and PATTERNS exist and give you an EDGE
Posted on May 29, 2014 Leave a Comment
CLIFF NOTES: in Mark Douglas’s amazing work, on page 132 of Chapter 8 he defines an edge as “nothing more than an indication of a higher probability of one thing happening over another.” My edge is pattern recognition based on square roots and the inverse of those square roots. As my friend and mentor Larry Pesavento (www.tradingtutor.com) said “defy the human condition and do the work.” If you spend as much time as I have in front of charts you’l find that in the midst of the chaos there is patterns that appear and they give you an edge.
My exemplar below is, simply, silver and the PATTERN that existed from $8.00 to 50 and then back down and the PATTERN that is now coming into play at/around 14. What does this mean? Well, see above – it mean it’s an edge and it might hold and, then again, it might not.
All of these charts are real time w/ ZERO “could of, would of, should of” … the PATTERNS work, technical analysis works and get ready to rumble at 14/oz.
ROCK ON, ok?
ONE: note the red line – EXACT same corrective move DOWN into 8/oz
TWO: I like the symmetry, I like the mirror image fold back and I LOVE the EXPLOSIVE MOVE UP back in the past – BUY at 8
THREE: here we go … NOBODY BELIEVED ME WHEN I SAID GET IN FOR A POTENTIAL $50 dollar target
FOUR: the geometry at the top that was completing the foldback pattern from the past – time to short
FIVE: symetry and measured moves complete – sure looks like falling off a cliff on the other side of the foldback
SIX: the game plan of the correction unfolding
SEVEN: 3 waves up complete – looks like a FLAT CORRECTION – here comes C
EIGHT: triangle 4 then a plunge into the 14 area seems like a PROBABILITY
NINE: continued look at the potential for the fall into the 14
TEN: Silver as of 05/29/2014
S&P 500 still squaring out price and time
Posted on May 29, 2014 Leave a Comment
CLIFF NOTES: the cash S&P closed at 1909.78 yesterday. 1909 days ago was 03/07/2014. Price is equal to time …What I have also shown is, simply, how powerful this move IS … zero, notta, none, null set, etc. describes a single swing low being broken. Note the blue lines … we have discussed them before. Until a swing low breaks this band is going to continue to play. TONS of patterns showing SELLS but perhaps TONS of patterns will all fail?
Squaring Out Price and Time
Loonie vs the USD and how to build a case for managing risk …
Posted on May 23, 2014 Leave a Comment
CLIFF NOTES: I think the “blue box” will be major support.
the BLUE BOX
On more than one occasion I’ve been asked if flying F-14’s has helped me investing. The answer is YES and NO. Yes because it made you appreciate risk, be methodical and “check list” oriented and, believe it or not, become somewhat analytically motivated. But, it has also HURT because of the detail oriented nature that it takes to be a strike fighter aviator these days. Let’s face it, margin for error is EXTREMELY low and therefore, at the expense of slippage, I try to get it too much to a “gnat’s ass” then is necessary in the fluid and dynamic ecosystem of the liquid markets. I’ve come to accept that so I’ll let moves go because they never made my level ….
in flying off an aircraft carrier you get to that point where you do ask yourself – “have I done everything I can to not become fish food?” in tension, w/ the thumbs up and the pilot saluting your about to go on “Mr. Toad’s Wild Ride …” It’s the same thing trading/investing. So, the ride is now the Spot FX market so let’s see what ride is waiting for us …
have we done everything to manage risk .. here comes Mr. Toad’s Wild Ride …!
1. USD vs CAD (Loonie) – look for polarity. Having a PATTERN smack against the brick wall (resistance or support) of polarity increases probability
2. try (the operative word) to figure out past/former corrective moves in PRICE and TIME. Note, since the BIG yearly correction (10/2011-09/2012) the current move has been the “longest” in TIME. shown below is the black arrows down at the low and pasted on current price action. it takes us right down into the two blue horizontal lines (polarity) that is good ….I am going to remove them so as not to cloud the picture.
note the black arrows – equal corrective moves
3. now, before we do some projections I want to go into some “basic” Elliott wave corrections. Note, the first chart that had the dashed box around it? We are seeing a three wave into a new high. quite frankly, that is what this entire analysis of a BUY USD vs CAD is banking on. this is a classic “B” wave correction. Right now, current price action down is a C wave and that denotes we are coming to an end of move. below you will find a daily chart showing the 3 wave move up. also note, typically in an expanded flat (the correction which is unfolding) the C wave is 1.618 of the A wave. Also shown is a “classic” butterfly topping pattern (shaded blue triangles – it looks like a butterfly) Also make you see the purple and blue projections into the shaded blue areas. To finish here, typically (as a rule of thumb) corrections tend to go or stop at the previous 4th wave of a lower degree. I have cleaned up the chart to show this .. note the classic 5 wave triangle of a,b,c,d,e and then the thrust up into the high. Well, that’s the 4th wave of a lower degree and guess what? our blue shaded region is right in this area. so, additional confirmations to add to the PROBABILITY.
the key to this analysis is an expanded flat
previous 4th wave triangle of a lesser degree lines up w/ shaded blue area
4. now, we are going to add in some extension PATTERNS. Note, we are starting the extensions from wave a and have the .14142 and 1.618 extensions right in our shaded blue area and then we do an extension from the last low in/around 1.080 to complete the 3 drives to a bottom a shown by the black arrows. note – all of these extensions are taking us into the blue shaded region.
extension targets
5. do retracement grid.
retracement grid and note the RULE that 4 can’t go below 1
6. do other stuff that nobody else believes works …
7. I want to mention is how the USD vs LOONIE used to be inverse/opposite and was a good indicator to look for a SELL index and BUY USD vs LOONIE. That relationship, for whatever reason is synced. Believe it might come uncoupled sooner or later but make sure to keep an eye on it.
8. here is the FXC ETF – might have bottomed?
FXC
9. RSI weekly and daily
RSI weekly
Daily RSI
Where did that Crude Oil Support Trend Line Come From?
Posted on May 22, 2014 Leave a Comment
Cliff Notes: if your new to this blog you’ll find that it’s all based on geometry and pattern recognition. If you take a look at weekly crude it’s not hard to see that beautiful support line that’s been holding crude up since September 2009. So, when I see that I say “why” and “what’s important about that from a geometrical stand point.
1. Draw a line down from the all time high on crude into the crash low in the low 30’s. That vector is aligned in PRICE and TIME and gives rise to a natural angle.
2. Get a protractor and draw a 90 degree angle. (shown by the purple 90 degree angle shown up at the top of the all time high)
3. Now just “copy/paste” the red vector lines and create squares.
4. note the trend lines that have been “bounding” crude oil (bold red lines)
5. now, be patient and watch price as these lines are “attacked” so, no matter what the fundamentals say, we have our targets and ranges to play and add in additional tools that fit your style, techniques and fundamentals.
6. get a glass of wine or whatever fits your fancy, blow this chart up and look at gaps, consolidation you’ll find there is a lot of action …
Bart
Crude Oil Trend lines from the dark blue line
XLE (Energy) and Sector Rotation …
Posted on May 21, 2014 1 Comment
just showing by the chart below 1) a 5 wave count since it’s inception and some targets and 2) the sector rotation guide that shows energy peaking last before the cycles turn down. we have shown many many PATTERNS that are calling for a sell. Some have worked, some haven’t but as you can see the targets depicted on the XLE are just a little higher and then, again, we take pause and adjust accordingly.
update to the “chart of my lifetime”
Posted on May 21, 2014 Leave a Comment
CLIFF NOTES: we are up almost 3% above the PATTERN that completed from the all time low on the transports some 46,000 ish days ago. Is that statistically significant? Well, I honestly don’t know. We do have the 1.618, 1.68179 (musical note F#) and the 1.732 extension targets that are being played with …so, my “line in the sand” so to speak will be the 8050 level. IF WE GET A DAILY CLOSE ABOVE 8050 THEN THIS PATTERN HAS FAILED. Again, this pattern is 46,000 days “old” and SHOULD be massive resistance. Not calling for a crash or anything like that but it certainly should pause it. And, let’s take a look – no swing low has been broken and it just keeps on “trucking” so to speak. (pardon the pun)
here is the post w/ the chart: https://bartscharts.com/2014/04/01/the-most-important-chart-in-my-lifetime/
I do see a 5 wave sequence coming into play so we’ll just have to wait and see …
the EUROZONE the P I G S and the ECB
Posted on May 20, 2014 Leave a Comment
CLIFF NOTES: the yields on the Italian and Spanish bonds had a big jump last week. The question is – will the ECM support the bonds? These are price swings that must be watched closely. I honestly don’t know IF (the BIG IF) the ECB can support the market but it must be watched.
I’ve attached a chart that was done on the Social Media ETF showing the amazing increase in VOLUME as the sell PATTERN was completing. Folks, if we took away the price of the EZU and SOCL ETF the volume would almost look exactly the same. Here’s the picture of the SOCL at the highs:
notice the volume increasing as the “end was near”
the SOCL is off those highs 30-40%. Now take a look at the picture w/ the EZU ETF:
notice the volume ..almost exactly like the SOCL.
next we overlay the XLF (financial ETF) w/ the EZU and it sure looks like this ETF is one big financial institution – as the banks go, so does the EZU and if you go back some posts you’ll see the XLF completed it’s sell pattern at 22. So …this bears watching. We do have a little more to go for the EZU SELL PATTERN but, w/ the EZU so synced w/ the XLF it might not get there. Now, the banks could very well EXPLODE UP thru the 22-23 level and the band will play on. But just remember, we are at an inflection point and it’s time to watch this closely ….
EZU w/ XLF overlaid
Are the PIGS good to go (Portugal, Italy, Greece, Spain) out of the woods or not…? Believe this upcoming pattern will tell us everything we need to know….
YEN is about to get really interesting …
Posted on May 19, 2014 Leave a Comment
CLIFF NOTES: 99.40-99.80 is where we “should” see some support come in … take a review at the charts below. as you can see we have finished 5 waves up at the 105.40 handle. (note, see this chart below as the 5th wave was completing we were calling for it) so, since we have finished 5 waves up we are either at a 1 w/ 3,5 up to come and we are tracing out 2…or we just did an A and now we are correcting B for a C wave UP. Also note, we are a couple days (max) away from the same amount of TIME that the triangle shown below formed and completed. So … it’s going to get interesting, to say the least. Personally, I wish this pattern was completing lower as the DEPTH of the correction isn’t as big as I would think but is that a sign of the overarching bullishness? hard to say ..but from a TIME perspective we are finishing up the same amount as the triangle. Keep an eye on this one ….
Here’s is the TOP (real time):
JPY top at 105.40
here’s a revisit of the long term picture and then, finally, the DAILY pattern that is forming:
Long Term Monthly Picture
WEEKLY
Daily Pattern Completing a little LOWER
Bart's Charts 