Friday, 9 November 2012

ES Z12 A bounce here...but the carnage will continue.Introducing a new Pitchfork

If you have ever followed my theory on market geometry and PForks/ML's you will know that I think all a PF does is express the relationship between 3 pivots. There are multiple pivots and thus a myriad of forks that can be drawn ( and thats before you even add the reaction/warning lines for each of those individual forks!). The result can be a chart that resembles a birds nest of lines and too many lines to make sense of price behaviour... the message is obscured to most who are unfamiliar with multiple PF/Raction line charts and trading. There are important observations I have made since 2007 that have gone un noticed by others
(past and present) in the same field or those indeed who hold Dr Andrews and others work too sacred to explore the subject further. I am certainly not equating myself with any of these great theorists and market gurus but the power of the modern PC and charting platforms plus custom indicators etc. has made it far easier for the modern chartist to observe, delve, discover, develop and expand new concepts.

It must be remembered that all any chart is a collection of data and the bars/candles etc are just data presentation mechanisms of which the market is not conscious/aware of. We must be extremely careful how we interpret and view this data especially when overlaying that chart data with dynamic linear studies such as MLs' and reaction lines etc. Below is a current example of the E mini S&P using the daily chart ( esignal platform).
The candlestick chart has what i call an unorthodox fork or very nearly a FNL fork (see bottom of this post).
This fork is one that would probably make Dr Andrews ( if he was still with us ) have a coronary but yet despite that P1 is behind P0 it simple represents the relationship with these three pivots alone- nothing more. The fact that they are extremely significant pivots in the daily TF should reveal a greater correlation with price than say 3 pivots in the15 min TF.
We have added the reaction lines at both 50 and 100% intervals of P0 to P1-extended forward into the body of the fork ( and beyond its UMLP/LMLP's). THIS CHART IS IN ARITHMETIC SCALE.

You may look at it and say "well, OK it's nothing special but there is some correlation with price and more so when viewed in the 60 min chart below.Obviously I can see the bounce we are seeing in today's (now) trading session of the lower ML but so what,..the reaction lines seem pretty useless to trade with"!
 In fact we have what could loosely be called by som folk a 'multi pivot line' but are different insomuch that as reaction lines they have a mathermatical/geometrical relationship with the 3 pivots cncerning us, plus we can see the bounce off the LMLP-OK we are agreed so far..
 Now below we change the scale to LOG and something remarkable happens....
here is the 60 min chart LOG scale

Here's the daily LOG scale now we have a much greater correlation with price but we also have price having fallen below the LMLP but can also see price bounced first before passing through lower.This question of Arith or LOG must beg the question: " Where is the true location of a line"? as represented on a chart contrived by us.

.The question is why do we have the same reaction line and LMLP showing two very definitive correlations with price in two very different locations. If you are interested in the answer then subscribe to my free daily charts email (one simple email a day- no spam/offers ot other rubbish) with no strings attached-FREE!

NOW Here is the true FNL Fork i developed on the same chart below. if applying it to an uptrend I take the significant low as P0 then the first higher high of wave 1( before any significant retracement)as P1 then the last low...hence FNL or " First n' Last".
There is a fundamental relationship between these three pivotal highs and lows and if you add the reaction lines you will nearly always find perfect frequency and the FLR ( First Line of Resistance). It works in any time frame as i will show you below. Before we do that here's the detail in 240 min  Arith scale.

Now look at the whole FNL fork in 240-min log- see how the location changes
Here's the daily same FNL fork in LOG...see the distortion of the fork? It reveals price inside its ML's and showing a remarkable relationship withe the ML's and RL's.
I observed that we are always dividing swings into smaller swings and drawing forks within forks yet there exists a powerful & crucial relationship between the first HH of any uptrend and the previous low and last low. Here's a second example in a smaller time frame and using MT4
If you are interested in knowing how 1. I construct charts and 2. trade this type of fork then sign up for my free service

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