Monthly Archives: October 2010

Oct 12 2010

Forecasting a Top in The S&P500 With the Square of Nine Chapter 4 Method

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

Here is an example of the technique described in chapter 4 of the book, The Definitive Guide to Forecasting Using W.D.Gann’s Square of Nine. This indicator is listed in MarketWarrior as Sq9 Chapter 4. This is an excellent time cycle method that is fairly accurate in finding tops and bottoms if you are willing to take the time to set the method up.

The charts below all show the weekly chart for the S&P500.  On the first chart I have added the indicator Sq9 Chapter 4 and started the time cycle count at the major top in the year 2000. In the indicator settings, I have set only the time counts that are on the Square of Nine’s 135 degree angle to draw. The time counts on the 135 degree angle shown on this chart are 13, 31, 57 and 91.  The 135 degree count values of 57 and 91 were close to market tuning points.

The second picture shows the next section of this chart. The new time counts on the 135 degree angle shown on this chart are 133, 183.  The 135 degree count 133 was close to market tuning points.

The third picture shows more of this chart. The new time counts on the 135 degree angle shown on this chart are 381, 463.  Both of these count values were close to market tuning points. The dark arching line in this picture is the 100 period moving average. This is a standard tool I look at on weekly charts. Notice at A the S&P500 made a top on this line.

The final chart shows the next cycle count from the Square of Nine’s 135 degree angle is 553 and is coming soon. This count values come in the last week of October. Because the market is moving up into this time I would expect this to be a top. Notice the points B and C. The S&P500 made bottoms on the 100 period moving average. This moving average is the bottom price target after a top occurs.

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Square of Nine Chapter 4 Pic #1

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Square of Nine Chapter 4 Pic #2

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Square of Nine Chapter 4 Pic #3

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Square of Nine Chapter 4 Pic #4

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Oct 7 2010

Planet Distance From Earth and MSFT

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

The distance between the earth and a planet is called geocentric Radius Vector (RV). The RV creates an interesting cycle that often correlates with financial markets. The pictures below show the daily Microsoft (MSFT) chart. The red line in the subchart is the average RV for Mercury and the moon. This is drawn using the MarketWarrior indicator AT_Radius Vector. This RV will oscillate to a high and then oscillate down to a low and then repeat this type of cycle. The oscillation in this RV from low to low takes about 4.5 to 5 months.

On the first chart I have drawn an arrow from two low points to the price of Microsoft. These low points are close to important tops in the price of Microsoft.

The second chart below show two additional arrows. I have added an arrow from an RV top in late June and the RV bottom in September. Finally on the third chart, I have identified the times when the next RV top and RV bottom occur. These are mid October and mid December. It will be interesting to see if Microsoft makes a top or bottom around these dates.

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Radius Vector #1

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Radius Vector #2

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Radius Vector #3

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Oct 6 2010

Swing Projector Setup

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

The picture in this post shows the daily chart for Apple Inc. Here is a setup using the MarketWarrior indicator Swing Projector. This setup also uses the indicator Stochastic of RSI. The Swing Projector is showing a downward pointing Red triangle and a Red circle above the current price. These are Warning Symbols which indicate the market is ready to make a top. Now notice the Stochastic of RSI is starting to form a bearish divergence. The stock is making a higher top while the Stochastic of RSI is making a lower top.  As this bearish divergence forms, I expect Apple Inc. to make a top over the next several bars.

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Swing Projector and Apple

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Oct 5 2010

Picking a CIT with Bollinger Bandwidth

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

One indicator I have been using for a long time is the Bollinger Bandwidth (BB). I will often step down the data files in a symbol list taking a moment to study each one looking for a very low value in the BB. When this indicator moves to a low-level, it indicates the market is consolidating and is getting ready for a breakout. This indicator can be considered a breakout indicator. The chart below shows the daily chart for Ebay stock. This stock is currently forming a low BB. This is indicating the stock for ebay should have a breakout and start a new move sometime soon.

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Bandwidth

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Oct 4 2010

Commitments of Traders Reports

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

The Commitments of Traders (COT) reports are released at 3:30PM Eastern time usually on Friday by the US government’s CFTC.  This report shows the number of futures contracts that are being held by different groups of traders. The categories of traders are Large Speculators, Hedgers or Commercials and Small Traders. The COT breaks down the positions based on long and short positions held by each group. Normally these reports do not cause the market to move but sometimes there is a surprise in the COT and it causes a big move in a market. If the report shows a large change in the positions held by the large speculators or the hedgers it can cause a rush to exit or enter the market. Because the COT is released late on Friday it usually means a trader has the weekend to take a look at the report and the effect in the market will occur on the following Monday. Below are the COT release dates for the rest of 2010.

October
1, 8, 15, 22, 29

November
5, 15, 19, 29

December
3, 10, 17, 27

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Oct 2 2010

Day Trading With The Keltner Plus Indicator

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2010 by Patrick Mikula All Rights Reserved

The MarketWarrior indicator Keltner Plus can be used to locate when the market has become over extended. The charts below show the mini Dow futures contract YM. This is the 5 dollar per point contract and this example shows Oct 4, 2010. After the mini S&P500, this is one of the most active financial futures contracts.  When using the Keltner Plus you can set up four upper bands and four lower bands. In this example I have set the band offset increments at 2, 3, 4 and 5.

When the mini Dow moves to the top band or the lowest band, it indicates the market is over extended and a reversal may form soon. Normal volatility will usually take the mini Dow to the 3rd upper band or the 3rd lower band. It takes more than normal volatility to take the mini Dow to the highest and lowest band.

On the first chart below, there is one example of the price reaching the lowest band. This is labeled A. You can see the market made a bottom at this bar. On the second chart there is an example of the price reaching the highest band, and another example of the price reaching the lowest band. These are labeled B and C. You can see the market make a Change in Trend at both of these points. This is a simple but effective way to determine if the market is over extended.

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Keltner Bands

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More Keltner Bands

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