The last two showcases have been a little on the esoteric side, so in this issue we'll take a step back and look at something a little different. As I'm writing this, the S&P has just closed down strongly, wiping out almost all the gains made by yesterday's strong rally. These big moves are what make futures trading so interesting, and also so potentially profitable.
Let's look at a chart:
This is a 2 day chart of 4 minute bars on the mini S&P. Charting at 4 minute increments can be a good idea because the Earth rotates one degree in that time period. This can be important when using counting techniques because we are tying each bar to an actual, physical event. If you've ever spoken with me, you know I'm a stickler for scaling charts in certain ways. Plotting 4 minute bars (and multiples thereof) is simply a further refinement to selecting important harmonic scaling factors.
Let's take a look at the indicators. The numbers above and below the price bars is the output of the 9-5 Count, a turning point detector. Buy signals happen on blue nines and gold fives underneath price. Sell signals happen on red nines and gold fives above price.
The green line shown as an overlay is our Natal Forecast. It is known before the opening bell, and is very useful for finding high probability times for turns. It is shown using the default settings, just as it comes in Wave59.
The pink line at the bottom is our UltraSmooth momentum curve. The most accurate signals given by this indicator are when it diverges from price. Price making higher highs while this curve made lower highs would be a bearish divergence, and would be considered a sell signal. All divergences recorded during this period are shown on the chart with red trendlines. There are 5 of them (one is a compound triple divergence signal that could also be considered two buys in a row). As shown, the accuracy is frequently quite high.
Looking at just these three indicators, turn your attention to the high of the day on the 21st. Notice that we've got a forecasted top with a large decline, a red 9 above price, and a bearish momentum divergence signal. When you see non-correlated tools start coming together like this, it's time to pay attention.
There are other interesting things happening at this point on the chart. At the top of the chart, two static time counts are displayed. You simply select an important price level and start counting forward. When you reach a number in the Fibonacci sequence (1,3,5,8,13,21,etc...) you have the potential for a turning point. Notice that the counts from point "A" and point "C" line up with our forecast very closely. This is shown in the red rectangle. These Fibonacci counts are really only important when two or more of them come together like we've got here.
Another interesting thing can be seen by examining the lowest price on the chart (point "B"). The price of this pivot was 1073.75. Divide by ten to get 107.3, then count forward 107 degrees (or bars since we're on a 4 minute chart) and you land in our red rectangle with the static time cycles from the last paragraph.
So we've got momentum, price cycles (9-5 count), our forecast, two fib time counts, and the square of a major low all telling us to go short right at the top at "D". But as they say in those commercials, "But wait! There's more!!!":
Those pink lines across the chart are the values of the planet Jupiter converted to price. Think of it as a support/resistance tool. The pink vertical lines on the chart (there are two of them) show the time when Jupiter rose in New York. Just like the Moon, planets can rise and set as the Earth rotates during the day.
Notice at point "B", the market is not only hitting the Jupiter flux line, it is doing it right as Jupiter rises. So price and time are "square" in an astrological sense right here. Why Jupiter and not some other planet? Because if we look back to our major low at point "A", we'll see that the market bottomed right on this exact formation the previous day. So the rally lasted almost exactly from one Jupiter rising point to another, both in price and in time.
So catching that top on the 21st really wasn't a big deal if you were paying attention. We've got signals to sell coming in from all over the place, all pinpointing a major change within a small window of maybe 20 minutes. We know from the forecast that this ought to be a decline, and we also know that it should be a large one.
I hear from a lot of people that try really hard to trade and make $X per day by placing 8 or 10 trades throughout the session day in and day out. Most of them end up forcing the issue and losing money. Trading is not about beating your head against the computer screen until you find a winner. It's about sitting there patiently until a winner falls in your lap. It's OK not to trade during the day if you can't find anything. The good trades are not as common as the crappy ones, so you've got to wait for them to show up.
But once you've got the tools and know how to use them, there's really not too much work to do besides being present to take advantage of the opportunities. Most day traders are Type A personalities so it's hard to be patient and not chase the market, but I'd personally rather be bored than be constantly taking losses off of low-quality setups. Just watch the tools, wait for a perfect setup to develop, then get in and hold on. Remember, the goal is to make money, not to churn-and-burn your trading account. Take it slow, and don't take the bait unless you've got an irresistible setup.
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