Traders' Library Blog

Stocata S&P 500 Analysis: November 29, 2014.

Last week I wrote: 
Slowly moving higher. Now reaching the upper side of the volatility channel, a 161.8% historical Fibonacci target and the R1 pivot resistance of the month. Indicators are overbought. I assume we are close to a reaction. It will most probably be rather flat moving in a trading range back to the 50 day average. Long term there is a Fibonacci target at 2114.

Very small move the past short trading week. We are at the upper side of the volatility channel, a 161.8% historical Fibonacci target and the R1 pivot resistance of the month of November. Indicators are overbought. I assume we are close to a reaction. It will most probably be a rather flat move in a trading range back to the 50 day average. Long term there is a Fibonacci target at 2114 that probably will be reached before the end of 2014.

If you have doubt about BBS, have you noticed that the BBS Band Break System used on the weekly chart, took a long trade August 17 2012 at 1418.16 and with a closing at 2010.4 on November 21, 2014, there was a profit of 645.34 or 45.5%.

Sylvain Vervoort   http://stocata.org/

Exploring Charting Techniques Part 6: Market Cycles

Here in part 6 of my “Exploring Charting Techniques” series, I discuss a unique way to identify the beginning and end of a market cycle. This is a part of the article as it appeared in the Stocks & Commodities magazine of December 2014.

There are many ways to approach it and many have tried, but only a handful of techniques work well to identify cycles. In this article, I’ll discuss a unique method that uses trend channels to find the beginnings and ends of cycles.

Applying the Andrews pitchfork

Alan Hall Andrews is well known for creating a method called the Andrews pitchfork. Andrews describes his application as the median line method. The application of the median line method came from the ideas of Sir Isaac Newton and Roger Babson, including, among other things,  Newton’s third law of motion — for each action, there is an equal and opposite reaction. In Figure 3, I show an example of how to draw a pitchfork. The first reference point to use for drawing a median line in a down or up moving pitchfork is the midpoint of the reaction between 2 and 3. The next point is a previous high or low point, labeled 1 on the chart. The median is line 4, which is drawn through these two reference points. Price will return to the median line about 80% of the time. If the price does not complete touching the median line, it will move in the opposite direction, past the price turning point 2 that was used for the construction of  the median line. Typically, price will react around the median line.When the price returns to  the median line, it will often move for some time around that median line before it moves in a new direction. After calculating and drawing the median line, Andrews added two additional  lines (5 and 6) that are parallel to the median line from points 2 and 3. This creates parallel lines above and below the median line. These three lines are called the Andrews pitchfork. Prices tend to move for some time within this pitchfork channel, just as with trend channels. Also, just as with trend channels, prices find support & resistance at the lower and upper side of the pitchfork channel. Once prices move out of the channel you should start looking to draw a new channel.

Figure 3.

Stocata S&P 500 Analysis: November 22, 2014.

Last week I wrote: 
"As I wrote 2 weeks ago "another higher top before the year end is certainly a possibility". And it happened faster than expected with a new higher wave 3.19. The index reaches exactly the single point Fibonacci target at 2042 (the yellow projection lines). This may be the top for the moment and the index will probably stay within a tied trading range the coming weeks. Long term there is a 261.8% Fibonacci target at 2114."

Slowly moving higher. Now reaching the upper side of the volatility channel, a 161.8% historical Fibonacci target and the R1 pivot resistance of the month. Indicators are overbought. I assume we are close to a reaction. It will most probably be rather flat moving in a trading range back to the 50 day average. Long term there is a Fibonacci target at 2114.

If you have doubt about BBS, have you noticed that the BBS Band Break System used on the weekly chart, took a long trade August 17 2012 at 1418.16 and with a closing at 2010.4 on November 21, 2014, there was a profit of 645.34 or 45.5%.

Sylvain Vervoort   http://stocata.org/

Stocata S&P 500 Analysis: November 15, 2014.

Two weeks ago I wrote: 
"It looks like the bullish money managers are winning. They just could not make a new higher high for a wave 3.19. But we certainly must not exclude a new top. Again there is an alternative, with a double top pattern if the index turns down. But the wave 2 correction changed to a new wave 1. We must now expect a pullback wave 2. This pullback will reach minimum the 50 and 100 day average and the low side of the BBS band. We will need again a lower top and a lower bottom before we may think again of a long term reversal. For now, another higher top before the year end is certainly a possibility".

As I wrote 2 weeks ago "another higher top before the year end is certainly a possibility". And it happened faster than expected with a new higher wave 3.19. The index reaches exactly the single point Fibonacci target at 2042 (the yellow projection lines). This may be the top for the moment and the index will probably stay within a tied trading range the coming weeks. Long term there is a 261.8% Fibonacci target at 2114.

Sylvain Vervoort   http://stocata.org/

Stocata S&P 500 Analysis: November 1, 2014.

Last week I wrote: 
"The rather large up retracement we are witnessing now is confusing, but possibly normal. From the top of wave 3.18 we had a large move down in a very short time period. The reaction is a comparable large up move, also in a very short time. Question is will the correction stop at the level we are now? The index reached the 50 and 100 day average, a 50% retracement of the last upswing (the start of wave 3.17 and the end of wave 3.18) and the upper side of the BBS band. The wave 2 correction is still valid. Possibly there is enough resistance to push the index down again. On the other hand we must keep in mind that the year end is coming close. Bullish money managers will try to keep the paper profit for a good end of year report not willing to sell and keeping prices up. The coming week(s) will show what we may expect, perhaps even another higher wave 3.19?".

It looks like the bullish money managers are winning. They just could not make a new higher high for a wave 3.19. But we certainly must not exclude a new top. Again there is an alternative, with a double top pattern if the index turns down. But the wave 2 correction changed to a new wave 1. We must now expect a pullback wave 2. This pullback will reach minimum the 50 and 100 day average and the low side of the BBS band. We will need again a lower top and a lower bottom before we may think again of a long term reversal. For now, another higher top before the year end is certainly a possibility.

Sylvain Vervoort   http://stocata.org/