The market opened sharply lower this week, making a large gap down compared to the previous close. To an untrained eye, this looked like a very bad sign. But contrary to initial expectations, the market began to rally almost immediately. When we add the 9-5 Count and Natal forecast, we can see what was going on:
The particular bar I'm talking about is the lowest one on the entire chart. Obviously this happened in the past, but if we were right there, we'd probably be asking ourselves whether or not this market is going to be able to fill the gap opening and start moving up again. The initial strength of that bar makes us think so, but then again, the gap opening did look pretty bad.
However, the Natal Forecast (the blue line on the chart) for New York says that this should be a bottom, and that the rally ought to continue into the end of the 9th. Additionally, the 9-5 count has given us a gold "5", meaning that the price cycles have worked themselves out and that this could be a turning point. These two tools in combination give very accurate setup signals.
Now let's check to see if there's any support here that we can rely on:
It turns out that there's quite a lot going on at the bottom at point E. The Fibonacci Vortex (working on swing C-D) is the first thing that you'll notice, and it's showing support from the blue spiral. There are also two ABC Targets that join forces at the low. Those are the green horizontal lines. The light blue Gann Fan from point A (scaled to the vibration of swing A-B) also hits in this area. Finally, the red lines moving up from left to right are the average of the planets Mercury, Venus, Sun, and Jupiter, converted to price. These four planets are important because they have the strongest gravitational pull on the Earth. Gann was aware of the power of combining them, and he speaks about it in some of his rarer writings.
So there's plenty of support at point E. This tells us that the market probably will fill the gap, and as you can see this is exactly what happened.
At lot of people get confused about how to use price tools like the vortex and the fans. There are lots of lines going every which way, and sometimes it's hard to judge which ones are important. But if you use them in the way described here, things will become much easier on you. First you find a good setup using the broad-brush tools like the Natal Forecast and the 9-5 Count. This gets you in the area of a turn. Next, you check the time and price tools to pinpoint where the turn ought to actually take place. So even though there are 5 different drawing tools overlapping on the chart above, we only focus on the area around point E, and just ignore everything else. When we do this, the support level becomes very clear, and we can then make an educated decision about the future direction of the market. If the drawing tools had been unclear in this area, we would know that the odds for a rally here would have been dramatically less than they were.
So combining these tools is a multi-step process. You've got to split your indicators into different categories and apply them in a logical order. You don't use precision tools to get the long term trend, and you don't use trend tools to figure out the time and price of a reversal. Work from the larger term down to the shorter term, and you'll find that everything becomes a lot easier.
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