ings.
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Dynamic Price Analysis
Close-Only Data and Percentage Change Projections
Unfortunately, every market does not make every extreme high andlow reversal on a price projection or cluster of price projections. The goldrally from the Jan. 15, 1993 closing low made temporary highs almost tothe tick at the 78.6% and 100% percentage change retracements on theclose-only chart as shown above. The final top exceeded normal retracemenl targets by only a few points. Most corrections will not exceed eithera 78.6% range retracement or 100% percentage change retracement.The chart on the following page is the same as the one above exceptwith range retracements instead of percentage change retracements.
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Dynamic Trader - Chapter 4
The previous chart showed that the two minor tops prior to Che finaltop on July 30 were made at the 78.6% and 100% percentage changeretracements. The 61,8% and 78.6% range retracements fell within onetick of each of the percentage change levels. Now that is a coincidenceof range and percentage change retracements to make note oftWhile neither of these two important retracement coincidenceswere the final top, they projected levels that traders would want to beparticularly alert to for potential trend termination. Both levels may havebeen strong profit taking zones depending on the time perspective of thetrading plan.Be very prepared for market pivots at price zones where both rangeand percentage change retracements coincide.
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Dynamic Price Analysis
Price Projections of Three DegreesThe following three charts illustrate the value of examining a market fromall price perspectives and ever smaller degrees of change.
Weekly bonds found support at the coincidence of the 50% rangeretracement and 38.2% percentage change retracement in early 1994.The next support was made at the 61.8% range retracement. The ultimatelow was made in Nov. 1994, just below the 50% percentage changeretracement and above the 78.6% range retracement.Are the price projection methods invalidated if a major trend changedoes not fall right on an important retracement level? As described earlierin the chapter, price analysis should consider waves or swings of morethan one degree to confirm or invalidate the larger degree projections. Asa market approaches a major price projection, the next smaller degreeprice analysis may provide a focus to a specific price zone near the largerdegree price zone where trend change is probable. See the daily bondchart on the nest page.
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Dynamic Trader - Chapter 4
Alternate price projections of swings beginning with the Oct. 1993high pointed to two narrow price zones with a high probability ofcompleting the decline: 97.16-97.12 or 92.23-92.12. The first zonecoincided with the 50% percentage change retracement at 97.12 (seechart on previous page) while the second zone did not coincide witheither percentage change or range retracements shown on the previouschart.97.16: W.5 = 100% W.l97.12: W.5 = 38.2%W.1-397.12: 50% percentage change retracement 9/28/90L - 10/15/93HOnce the Aug. 2, wave 4 high was confirmed by bonds trading belowthe b low, the price zone of 97.16-97.12 would be calculated in advanceas having a high probability of making the wave 5 low. The next job is togo to the smaller degree swings made beginning with the Aug. 2 high tofurther fine tune the price projections from the larger degree swings.The chart on the nest page focuses in on the next smaller degreeswings.
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Dynamic Price Analysis
Smaller Degree Projections Confirm The Larger Degree
Alternate price projections of swings beginning with the Aug. 2,1994 high projected 96.14-95.31 as the ideal target for a wave 5 low.This narrow price zone fell just below the larger degree target shown onthe prior page of 97.16-97.12.96.14: W.5 = 38.2% W.l-395.31: W.5 = 100% W.1The most reliable price projection targets will be calculated fromswings of at least two degrees and from different projection techniques,retracements, alternate projections and expansions of ranges andpercentage change.
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Dynamic Trader - Chapter 4
Intraday ExamplesUp to now, only daily bar charts have been used to illustrate the DynamicTrading analysis- All Dynamic Trading techniques apply to all timeperiods including intraday data. The same dynamic growth process,patterns, ratios and proportions that we have seen on the daily charts arefound on all time periods.The following pages include a number of intraday charts withcomments. There are only a few examples because nothing is donedifferently than if it were daily data. Since we used a number of examplesof the position of bonds in the second half of 1995, let's first look at theintraday data for this time period,
Bonds: 5-Minute Bars From The July 11, 1994 LowA minor wave-four low was made on July 18 on the 8:35 AM (EST) bar.The projection for a wave-five high is 102,81-103,02 (price in decimals,not 32nds). This price zone includes the typical wave-five priceprojections where W.5 = 100% W.1, 38-2% W.l-3 and 162% W.4.
The chart on the next page shows how it turned OUT.
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Dynamic Price Analysis
Bonds: 30 Minute Bars From The July 11, 1994 LowBonds made the wave-five high at 102,94 on July 20 on the 8:50 AM bar.This was a direct hit of the 102.81-103.02 projected price zone show onthe 5-minute chart on the previous page. The 30-minute bar chart belowalso begins from the July 11 low and shows the continued rally into theJuly 20 high.
Let's continue to follow the bond activity after the July 20 high,
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Dynamic Trader - Chapter 4
Bonds: 30-Minute Bars From The July 20 HighFrom the July 20, W.5 high a minor five wave decline was made into the38.2% retracement on the morning of July 21 to complete W.A. An ABCW.B rally followed then bonds continued to decline to a new low. Fromthe W.B high on July 25. bonds made a text book, minor five-wavedecline into the W.C low on July 28,There were four price projections in a relatively tight group where theW.C low was made.101.231:W.C=127%W.B101.188: W.5:C = 100% W.1:C101.094: 50% Ret.101.070: W.5:C = 61.8% W.1-3:CThe W.C low was 101.125, precisely within this price zone.
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Dynamic Price Analysis
Bonds: 30-Minute Bars From The July 11, 1994 Low Through theAug. 2, 1994 HighThe July 28 Wave-C low was the completion of a larger degree Wave-Bwhich is labeled (B) on the chart below. Bonds made another five waveadvance to complete Wave-(C). The ideal price projection for Wave-5;(C)fell in the 104,499-104.813 price zone which included all of the typicalprice projections to complete a W.5 and W.(C).104.499: W.S:(C) = 162% W.4:(C)104.572: W.5:(C) = 38.2% W.1-3:(C)104.625: W.5:(C) = 100% W.1:(C)104.813: W. (C) = 100% W.(A)The Aug. 2, W.5:(C) high was complete at 104.625, precisely withinthe price zone projected for the top. Aug. 2 completed an ABC correctionwhich we found in the previous daily data analysis earlier in the chapterwas the completion of a Wave-4 correction.
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Dynamic Trader - Chapter 4
Bonds: Dally Data From July 11, 1994 Low To The Aug. 1, 1994 HighThe chart below shows the daily data for the same period illustrated by theprevious intraday charts. The minor sub-divisions shown on the intradaycharts clearly helped to discern the pattern of the swings shown on thedaily chart. More importantly, the intraday swings fine-tuned the priceprojections of the larger degree waves and provided much more narrowrange price targets.Every intraday chart will not provide symmetrical, minor pricepatterns that art of practical value to help project the termination of thelarger degree swings shown on the daily charts. But, many will. Fortraders who do not collect real-time data, several data vendors provide tickdata at the end of the day for a very modest cost. Readers may want toconsider collecting the tick data in order to take advantage of theinformation provided by the intraday charts.
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Dynamic Price Analysis
S&P: 60-Minute Data From The July 16, 1996 LowThe S&P appeared to make a Wave-4 low on the 10:30 bar on Sept. 3. Thelow was made at the price cluster that included the 50% retracements fromthe July 16 and July 24 lows as well as the 100% alternate price projection(W.4= 100%W.2).What is labeled as the Wave-4 low briefly traded into the price rangeof the Wave-1 which violated the Wave-4 guideline. While the eventualoutcome may show that Sept. 3 was not a Wave-4 low, what is importantis that the simple dynamic price projections of retracements and alternateprice projections provided a high probability, minor support zone in a bulltrending market.
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Dynamic Trader - Chapter 4
S&P: 60-Minute DataThe ideal target for a Wave-5 high projected from the Sept. 2, Wave-4 lowfell in the 686.90-696.50 price zone. On Sept. 16, the S&P reached thisprice zone which coincided with the parallel channel resistance line. Asyou can see from the hourly chart below, the S&P remained in the pricezone for a week before continuing the advance. While the wave countshown on the chart may he questionable, the projected resistance level wasright-on target.
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Dynamic Price Analysis
Gold: 60-Minute DataOne of the best uses of intraday data is to fine tune price projections. InApril 1996, the major trend in gold was down. Gold began a minor rallyon April 19. The May 8 high was made dead-on the narrow range priceprojection that included the 50% and 61.8% retracements of the prior twominor swing highs and the 127% external retracement where W.C = 127%W.B.
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Dynamic Trader - Chapter 4
Silver: 30-Minute DateSilver made a triple bottom just a few ticks below the narrow rangeretracement zone of the 50% and 61,8% retracements of the prior twominor lows. The triple lop at 497 is at the 61.8% retracement (not shown)of the corrective decline from the Jan. 27 high to the triple bottom.Breakouts from triple tops or bottoms are usually dramatic.
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Dynamic Price Analysis
DM: 30-Minute DataThe DM made a low on the morning of May 28 followed by one of themost significant rallies in several weeks. The 30-minute data shows analmost ideal ABC correction was made between the May 31 high and June11 low. The Wave-C low was made at the 61.8% retracement of the May28-May 31 rally which coincided where Wave-C equaled 100% Wave-Aand 162% Wave-B.Note how this 30-minute data clearly shows the minor five waveStructure of Wave-C.
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Dynamic Trader - Chapter 4
Intraday DataI have only provided a few examples of intraday analysis as theprocedures and techniques are exactly the same as with the daily dataexamples.Intraday data will often provide an invaluable advantage to the trader,particularly for confirming the price projections of the larger degreeswings shown on the daily charts. The same caution must he made withintraday data as with daily data. Don't read more into the data than what isthere. Don't force a wave count when no practical wave count exists. Evenif a practical wave count is not being made, the intraday data can beinvaluable to project the minor projected support and resistance zones thathelp the trader lessen the capital exposure on entry strategies andprotective stop loss placement. Intraday data is also invaluable for shortterm traders.
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Dynamic Price Analysis
Dynamic Price Projections For Mutual Funds
All types of dynamic analysis applies to all active futures, stock,mutual funds and cash data. The chart above is Fidelity's SelectPrecious Metals Mutual Fund- There were two price projections for awave 5 top.21.95-22-55
21.95: 200% W.l Expansion22.19: W.5 = 100% W.122.55: W.5 = 38.2% W.l-3
23.26-23.50
23.26: 262% W.1 Expansion23.31: W.5 = 162% W.423.50: W.5 = 162% W.124.07:W.5 = 61.8%W.l-3
These two zones are calculated in advance as soon as the wave 4low is suspected to be complete. Which of the two zones should havehad the greater probability of making a wave 5 top? Each includestypical wave 5 projections. Ideally, the smaller degree swings withinwave 5 will provide the ideal target. The chart on the next pageprovides the smaller degree projections,
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Dynamic Trader - Chapter 4
Small Degree Projections Confirm The Larger Degree Projections
The chart above shows the smaller degree swings from the March 11,wave 4 low for Fidelity Select Precious Metals fund. The ideal target forthe wave 5 of 5 high would be 22.2-22.59.22.32:W.5 = 38.2%W.1-321.41: W.5= 100% W.122.59: W.5 = 162% W.4This price zone overlapped with the larger degree 21.95-22.55projection shown on the previous page. The final wave 5:5 top wasmade May 31 at 22.42 precisely within the overlap zone for the idealwave 5 of 5 high. Fidelity's Precious Meials mutual fund declined atleast 17% from the wave 5:5 top in May 1996.Dynamic price analysis applies to all actively traded markets. Everymarket will not make a top dead on a dynamic price projection. Butwhen two degrees of price projections overlap, there is a very highprobability for trend change within the overlapped price zone.
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Dynamic Price Analysis
The chart above is Fidelity's Select Software and Computer Servicesmutual fund. From the Jan. 16,1996 low, the price rallied to the Feb. 23high just above the 50% retracement. Price then declined into the April11 low and rallied again above the Feb. (wave A) high. Once the Feb,high was exceeded, price projections for a wave C high may be made.The ideal target for a C wave high was 38,68-39.51.38.68: W.C = 162% W.B39.33:78.6% retracement of the Dec. 5,1995 high to Jan, 16, 1996 low.39.51: W.C = 100% W.A (not shown on chart).Most corrections do not exceed the 78.6% retracement if the priortrend is to remain in force. This simple ABC zigzag correction terminatedwhere wave C equaled wave A, the typical target for wave C.The following page shows a close up of the B wave price target.
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Dynamic Trader - Chapter 4
The chart on the previous page showed the price targets for an ABCcollection. B waves are considered corrections to the larger degree trendwhich is also a correction. In other words, a B wave is a correction to thecorrection. B waves are often ABCs themselves.The chart above zooms in on the B wave of the ABC correction shownon the previous page Once the minor A wave low was exceeded, the pricetarget for the minor C wave of the larger degree B wave could be calculated-The ideal price zone for the B wave of the ABC correction toterminate was the 34.07-33.24 price zone.34.07: W.c:B = 100% W.a:B33.92: 50% Retracement (1/16L-2/23H)33.57: W.c:B = 162% W.b:B (162% retracement)33.24: 61.8% Retracement (1/16L-2/23H)The April 11, Wave c:B low of 33.75 was made precisely within theideal target zone of 34.07-33.24 which included all of the typical priceprojections for an ABC correction.
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Dynamic Price Analysis
Individual Stock Examples
All Dynamic Trading analysis Techniques and trading strategieswork well on individual slocks which are actively traded on the majorexchanges.Apple computer stock made each significant high on a Dynamic PriceProjection during the 1993-1994 rally. The Wave-5 top was made at thecoincidence of the 61.8% retracement and where W.5 = 61.8% W.l-3.
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Dynamic Trader - Chapter 4
Netscape stock had a wild ride during its first couple of years. Itdramatically demonstrates the significance of the 78.8% retracement.The ABC corrective low in March 19% was made just a few ticksbelow the 78.6% retracement. The five-wave high WHS made in theprice zone where W.5 = 61.8% W.l-3 and the 78.6% retracement.
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Dynamic Price Analysis
AT&T is a widely Traded slock. The Waves A and C lows were bothmade at the coincidence of retracements.The Wave-C low was made at the price zone where W.C = 61.8%W.A and the 50% and 78.6% retracements of two degrees,
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Dynamic Trader - Chapter 4
Pennzol's Aug. 1993 high was made at the coincidence of the 61,8%and 78.6% retracements of two degrees. The chart on the new page showsfour additional lesser degree price projections at the Aug. high.
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Dynamic Price Analysis
The box in the chart shows the six price projections that fell near theAug. 1993 high. The chart on the previous page showed the two majorretracement targets. The chart above shows the 100% Expansion of W.1and where W.5 - 162% W.4.
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Dynamic Trader - Chapter 4
Maybe if 1 show a great example from a big book seller, they will helpto sell this book.There were two ideal price targets for a Wave-C low for Barnes andNoble in mid-1996. The first target was where the 50% retracement fellnear the 100% Alternate Price Projection (W.C = 100% W.A) and thesecond where the 61.8% retracement fell near the 162% Alternate PriceProjection (W.C=162% W.A).The ADC correction terminated at the second target
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Dynamic Price Analysis
Price OverbalanceA price overbalance is when the price range or percentage change of acorrection exceeds the price range or percentage change of the priorcorrections. A price overbalance is an alert that a larger degree trendchange may be underway.A price overbalance is not a definitive indication that a larger degreechange-in-trend is underway. But, it is an alert signal that there is morebuying or selling pressure against the trend than has previously occurred.If a counter-trend swing exceeds in price range or percentage change theprice range or percentage change of all previous counter-trend swingssince the larger degree trend began, it is a signal to be alert to the priceand pattern position of the market for clues to the trend position.Price overbalance is a lagging indicator. It is only signaled after theface. While it is not a trade signal, it is an important reference point to alertthe trader to the position of the market,
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Dynamic Trader - Chapter 4
Overbalance Of Price Range
Price OverbalanceThe rally into the May 23 high overbalanced inprice all of the corrective rallies since the Jan 4high signaling the bearish trend may be at ornear completion
From the Jan, 1996 highs, bonds declined making minor correctiverallies of approximately three points. The May rally advanced 3-27/32, agreater rally in price than any since the Jan. high. This was a priceoverbalance and signaled more buying power was coming into the marketthan at any time since the Jan. high. The price overbalance was an alert totraders that the bearish trend may be coming to an end.While bonds made a slight new low in June and July, the priceoverbalance signaled the trend was at or near the end.
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Dynamic Price Analysis
Overbalance Of Price Percentage Change
All price analysis of long term trends should be done by percentagechange as well as price range. The largest percentage decline during theFeb. 1994 to April 1995 rally was 6.05%, The mark declined 8.04% fromthe April high to the May low. This was an overbalance of price bypercentage change and signaled the bull trend was probably at or nearcompletion.The mark rallied to a high in July and declined 8.69%, another priceoverbalance. The bull trend was complete and a major bear trend was justin the initial stages.Price overbalance is a lagging indicator, but often valuable as a signalof an impending or just completed larger degree trend change. Whilespecific, trading decisions are not made by an overbalance in price signaltraders are alerted to the larger degree position of a market by a priceoverbalance.
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Dynamic Trader - Chapter 4
Overbalance Of Price Percentage Change
Gold had been in a prolonged and wide trading range in 1994-1996,The largest percentage decline was 7.21% from the Jan. 1994 high to April1994 low. If a percentage decline greater than 7.21% was made, the oddsfavored a bear trend and breakout of the trading range to the downside.A 7.21% decline from the Feb. 1996 high fell at 386,6- In June 39%,gold declined below 386,6 signaling a bear trend and the probability thatthe decline would continue.The price overbalance shown above at 386.6 is a 100% Alternate PriceProjection (APP) by percentage change of the Jan. 1994 high to the April1994 low projected from the Feb. 1996 high.
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Dynamic Price AnalysisDynamic Price Projections'™These Dynamic Price Projection targets are a simple, yet very powerfulmethod of projecting the price zones that have the highest probability ofsupport or resistance and trend termination. There are four importantfactors to keep in mind with price projections;1. These price projections are not forecasting that a market will reach
any one projected price zone. They are simply important symmetrical,mathematical relationships of past price swings. Support andresistance and most trend changes occur at clusters of these projectionsin all markets. Therefore, we want to be prepared in advance tor thoseprice zones that are a cluster of projections. The pattern chapterdescribed the typical price targets tor each wave sequence.2. All analysis and trading concerns probability, not certainty. We want
the probabilities on our side. If support and resistance and most trendchanges occur at these price clusters, we have a very important edgefor our trading strategies. We have a definite piece of information toact upon,3.
If a market trends beyond a projected support or resistance zone, morethan likely it will continue to trend at least into the next projectedsupport or resistance zone. Trend changes are almost always made at acoincidence of projected price targets. It follows that if one isexceeded, the market will probably continue to the nest.
4. Take a holistic approach. Price projections must not be taken out of shecontext of the other two dimensions of market activity: time andpattern analysis. Price is just one of the three important analysisfactors. As a market approaches the projected price zone, the other twofactors will qualify how important that price projection is likely to be.Traders must be careful not to focus on just one dimension of marketactivity. The value of the type of market analysis and trading strategiestaught in this book is that we look at the whole of the market activity.
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Dynamic Trader - Chapter 4
Review Of The Ratios That AreThe Most Important For Price ProjectionsRetracementsInternal; 38,2% 50% 61.8% 78.6%External: 127% 162% 200% 262% 424%Alternate Price Projections:61.8% 100% 162% 200% 262% 424%Price Expansions:61.8% 100% 162% 200% 262% 424%
Be Prepared In AdvanceAll price projections are calculated in advance. As soon as a new swing ismade, the price projections are updated. It is a simple mailer to keep theprice projections updated. If you will do this, you will always be preparedwith a very high degree of confidence for those price zones that have thehighest probability of support, resistance and trend change.The next page shows a summary of the most important wave comparisons and price ratios to project the target for each wave.
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Dynamic Price Analysis
A Summary Of The Most Important Price Projection Ratios By WaveThe ratios in bold occur the most frequently for the particular wave noted.As a market advances making new swings, more comparisons arepossible. High probability support and resistance zones are found at pricezoneswhere several projections fail at or near the same price level.End of Wave 2 Price ProjectionsW.2 = (38.2% 50% 61.8% 78.6%) W.1 (Ret)End of Wave 3 Price ProjectionsW.3 = (100% 162% 262%)W.1(APP)W.3 = (162% 262%)W.2(Ret)End of Wave 4 Price ProjectionsW.4 = (100% 162%)W.2(APP)W.4 = (38,2% 50% 61.8%) W.3 (Ret)W.4 = (23.6% 382% 50% 61.8%) W.l-3 (Ret)End of Wave 5 Price ProjectionsW.5 = (100% 162%) W.l(APP)W.5 = (38.2% 61.8% 100%)W.1-3(APP)W.5 = (127% 162%)W.4(Ret)W.3-5 = (262% 424%)W.2(Ret)End of Wave B Price Projections (ABC zigzag)W.B = (38.2% 50% 61.8% 78.6%) W.A (Ret)End of Wave B Price Projections (ABC irregular)W.B = {127% 162%)W.A (Ret)End of Wave C Price ProjectionsW.C = (61.8% 100% 162%)W.A(APP)W.C = (162% 262%)W.B(Ret)W.C = (38.2% 50% 61.8% 78.6%) W-l-5(Ret.)
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Chapter 5Dynamic Time Analysis
"The future is a repetition of the past and each marketmovement is working oat time in relation (proportion)to some previous time cycle."W. D. Gann
In the Dynamic Time Analysis chapter you• Learn how to project well in advance the time periodswith the greatest probability of trend change.• Learn the difference between dynamic and static timecycles,• Learn the most important time projection technique,Time Cycle Ratio projections.• Learn which ratios and swing comparisons are the mostimportant for time projections.• Learn which time counts are the most important and howto integrate them with the Time Cycle Ratio projections,• Learn how the time projections cluster to provide narrowbands of time that project future trend reversals.
Dynamic Time Analysis
Project The Time Of Trend Changes In AdvanceDoes your technical analysis methods include a time analysismethodology that will project the high-probability time of trend change,often to the exact day? Dynamic Time Analysis does just that-
The previous chapters taught you how to analyze the pattern positionof the market by the Elliott Wave Principle to understand if a market wasin a trend or counter-trend position and when to identify the terminationof a trend. In the Dynamic Price Analysis chapter you learned how toproject well in advance the specific price zones for support and resistanceand trend termination.This Dynamic Time Analysis chapter will teach you to project theminimum and maximum time targets for a trend or counter-trend and thespecific, high-probability dates to anticipate trend termination.
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Dynamic Trader - Chapter 5
Time, Price and Pattern Coincide To Signal Major Trend ChangeA comprehensive analysis of the whole market position signals to thetrader the lowest-risk and highest profit potential trade set-ups. Whentime, price and pattern projections coincide, change is just aboutinevitable.
Is the example above unique? Of course not! Every market providesfrequent low-list and high profit potential trade set-ups. When you havemastered the Dynamic Time Analysis techniques taught in this chapter,you will often be prepared days, even weeks, in advance for the dateswhen trend changes will unfold.When you integrate dynamic price and pattern analysis with dynamictime analysis, you will have a comprehensive view of the market positionand the information you need to make high probability trading decisions.
5-3
Dynamic Time Analysis
Market Timing Based On RealityBefore describing the specific techniques of change-in-trend, time projection, I will briefly discuss the background of time analysis.Traditional cycle analysis is based on the concept that time cycles ofhuman activity arc linear and of fixed periodicity. This