The information in this article will be familiar to almost all of you.
Specifically, it relates to the lesson we give you in Chapter 5 of Trading with the Time Factor, vol. 1 - Trading with PRICE.
I've got to admit, it is probably my most favourite chapter in that book.
In that chapter, I give an example of how the price geometry in the Dow Jones index all the way back in 1921 continued to forecast major stock market tops and bottoms for the next 30 years. And I mean MAJOR.
From the low in 1921, we used the price geometry to calculate the 'Great Depression' high in August 1929 to the exact point. The geometry then went on to call a sequence of other major turning points in the stock market right up until 1953. We stopped the lesson at 1953 because by then, I felt that I had already proven my point.
In any event, to demonstrate that the 1929 to 1953 market action was not just a one off fluke, we then go on to describe in that chapter how the exact same geometry in the S&P 500 beginning in 1978 called the 1987 market top to within a fraction of the actual high, right before the famous October 1987 stock market crash!
We then applied the same geometry from the 'dot.com' high in March 2000, and how that geometry worked to predict the eventual stock market lows in 2002 and 2003. We then used the same geometry again and extrapolated it to forecast the October 2007 high in the S&P500 right before the big Global Financial Crisis came.
If you've still got your copy of Trading with PRICE, it's definitely worth having a review of that chapter and familiarising yourself with the technique. It can be applied superbly to soft commodities and almost any other market.
Since that book was first published back in 2013, the stock market may certainly have moved on, but the geometry certainly has not.
The chart below is on the S&P500 futures market and is current to the present day - 19 June 2020.
It shows how the geometry in the S&P500 continues to work, even today, despite COVID-19, despite black box computer trading and even in light of a very volatile geopolitical environment. The market geometry just seems to find a way to work, and work, and work.
Notice in the chart that the low in October 2011 came in at a price of 1069. October 2011 was a major cycle low.
From the 1069 low, you can see that the market ran higher into the May 2015, with a range of 1065.2 points. This is almost an exact geometric repeat of the price of the October 2011 low.
The average of this geometric price (ie 1069 + 1065) equals 1067. Notice that 2 x 1067 = 2134. The exact price of the May 2015 top, was...
you guessed it... 2134.
This is geometry in motion.
You will then notice that I have marked three additional price ranges higher. The first includes the run off the 2016 low. This move was 1073.9 points higher.
The second is the move off the major 2018 low. This was a bull run of 1079.6 points.
The most recent price run off the COVID-19 low has seen a range of 1056.2 points.
Notice the almost exact price range similarities.
The average of these four price ranges gives you 1069.5.
What was the price of that low back in October 2011 again?
Do you still think this is a fluke?
And to add the icing to the cake, if we multiply 1069 x 3 it gives us a price point of 3208.
The recent top in June on the S&P500 came in at 3231. Yeah, it's not exact, but it's pretty darn close for a price move that started all the way back in October 2011.
Pretty amazing, isn't it?
As I mentioned before, these PRICE techniques work even better on soft commodity markets. In fact, I am seeing the geometry work again right now on Coffee futures.
For those of you with copies of Trading with the Time Factor vols 1 & 2, please feel free to email me and I'd be happy to send you my Coffee charts.
The truly amazing thing is that when you combine these elements with TIME techniques, you get some genuinely astonishing results.
TIME is more important than PRICE. And believe me, the time techniques we have discovered work even better than price.
It's all outlined for you in my books. It's worth going back and re-reading them.
Until next time...