Today we'll take a look at a few interesting signals that have been setting up on the E-mini this last month. Back when I used to run an email advisory service, I used to periodically send out 30 minute charts with a longer term trend forecast. Of course, 30 minute bars may not seem like a long term chart to a lot of people, but I'm speaking from the viewpoint of a day trader here. Anyway, the standard Natal Forecast (running on New York) works very well on this time frame to forecast the action coming in the next couple days. You can see the result on the chart below:
The Natal Forecast is the dotted white line running through the chart. As you can see, it's catching the swings pretty well. It's not perfect, but definitely gives you a general idea of things to come, especially when there are major turns lie the one we had on the 23rd.
Also shown on this chart (at the bottom) is our UltraSmooth momentum curve, running at the default 12 bar lookback period. I've drawn in the divergence signals here, and marked the chart with arrows at the places where they were confirmed. Note how these points frequently line up with the turns in the Natal Forecast, and how between the two of them, we consistently found ourselves on the right side of the trend. I'm definitely going to be watching these two tools around the end of the month. If we can get a divergence signal lining up with that peak on the 30th then we could have a nice short sale.
Now let's take a look at the bar counts at the top of the chart. This is the new-and-improved bar counter tool that can count the degrees of travel for particular geographical locations. In this case, it's tracking New York. What I've done is applied this tool to WD Gann's technique of converting price to time. For example, he would take a significant high or low price, then use that as a value to predict changes in time. So basically you are using price to predict time. So if there is a high in a stock at 105, we could count forward 105 time periods from that high and mark that spot as a possible change in trend location. This technique has been discussed in a previous showcase, and definitely works on the S&P.
What I've done on the chart above is applied this same technique using degrees of rotation of the Earth. So the price at the high was 1162.75. Now count forward 1162.75 degrees and you get the low on the 24th. We can also subdivide this period. So 50% would be 581 degrees. This was the low on the 15th that lead to a 3 day rally. 75% gives us 872 degrees, which is the end of that rally and the resumption of the downtrend. The bar counter tool goes close-to-close, so that's why the numbers on the chart are slightly off. But I've gone to the closest bar. If you've got version 1.43 of Wave59, you can check this technique out too. Try it!
So what I really like to see is when these time counts line up with Natal Forecast turns and technical indications. A perfect example of this is the high on the 18th, which was the termination of our counter-trend rally. The Natal Forecast had already alerted us to the possibility of a turn here, and forecasted a fairly orderly drop into the 23rd. The longer term trend was down, and Fibonacci fans will note that we topped out at the 38.2% level. Then our Price to Time technique hit in at the 78% level at 872 degrees from the high on the 5th. Finally, the technical side gave the thumbs up as our bearish divergence signal was confirmed at 9am on the 19th. If that wasn't enough, we broke out of a little triangle that had set up over the 17th-18th, so Edwards and Magee were in on this too.
Better entries could have been had by moving to a faster time frame, but I think the point is clear. If you've got version 1.42 or better of Wave59, you can try this technique out as well. It's definitely one worth studying.
All for this installment! Happy Trading...
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