PTR: Forecasting the Future...but
not married to
any absolute prediction of it!
LIKE it or not, you and PTR are both
in the business of forecasting the future, a task that many academics and
social scientist claim is impossible to accomplish and unwise to attempt.
Needless to say, while we are most likely more involved and closely
linked to the art of forecasting then the vast majority of our subscribes,
we are essentially all in this boat together and it's along swim to shore...so
to speak.
The majority of you have money to invest or
speculate with, and you want to, or need to, make prudent decisions about
that money from time to time. We, at Price-Time Review, also have the majority
of our free capital tied up in investments or speculative trades, and we use
the proceeds of this service to purchase trading software, newsletters, and
economic analysis to help ourselves...and in the process to help you too.
As might be expected, we do not agree with those
who reject out of hand all efforts to forecast the future, at least certain
aspects of that future. For example, if a couple asked me to predict
whether their next child would be a boy or girl, I would quickly reply that
I have no expertise in that field, and from my limited knowledge of the subject
I "highly suspect" that conception is "a totally random event." Would I be
right or wrong?
Well, I would most certainly be correct about my ignorance of the subject,
but my statement about "a total random event" is, of itself, highly
skeptical. For example, if I had taken the "time," and done the "work,"
to research the subject, I may have found out that Mr/Mrs. Unknown have already
had seven daughters in a row (over many years and without fertility drugs),
and the "statistical probability" of a women giving birth to eight girls in
row is only one in one million. Therefore, someone with the knowledge
of those statistics could make a "reasonable forecast" that the next child
would "most likely be" a boy.
Now, can anybody say for certain, or even give assurances within a "reasonable
certainty" that this will be the case? Absolutely not, and everyone should
be highly skeptical of those who say otherwise!
Wrapped inside this little analogy lies the underlying basis
of our job as forecasters, commentators, and market technicians; as well as,
your job as subscribers. Yes, that's right, you have a job too!
In this job, you are the CEO, CFO, and Chairman of the Board, and we are
only the Consulting Engineers and strategist that research and advise you.
We do not make the final decisions because it's your money that is
on the line and not ours...directly anyway.
Like all good executives, one of your primary duties is to be "skeptical"
of our opinion and the "supporting evidence" for that opinion. If there
is little or no supporting evidence, then you need to start looking for a
different engineering and consulting firm, and, believe me, there are plenty
of "stock market consultants" out there that are backed up by "opinion only."
The way we see our job is to "review" the historical, statistical,
and technical trends, cycles, and macro economic indictors to guide us in
constructing a "road map" to the future. Unlike a fixed road map, or
travel plan provide by AAA, or some other travel agency, our road map is
both "dynamic" and "interactive."
For our trip, we leave our home base with a fairly solidified idea of where
we are, where we want to go, and by which route we will "most likely" take
to get there. Never the less, we also realize that we must stay flexible
enough to change routes or even our whole travel plans if we encounter important
new information indicating obstacles, road blocks, or detours in our path.
A good example of our long term forecasting is the PTR Annual
RoadMap, where we analyze "daily" charts of the Dow Industrials dating from
1896-1900 to current, S&P 500 (SPX) charts from 1926 to current, and Nasdaq
Composite Index charts (CMPX) from 1971 to current. This next link
is a very small example of our RoadMap but it's one of the most important
charts you will ever view...save it!
BETTER YET, subscribe to our
weekly timing and forecasting service
for three months and get full and un-edited chart.
<Example:Free but partially edited-PTR's annual RoadMap-2006 DOW>
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"When the cards you see being played
no longer make any sense, it's probably NOT a 'new era,' but more likely the
result of someone dealing off the bottom of the deck."
Into the Looking Glass -Stock Pattern Analysis Vol.2 (2005)
B. Bonfoey
Co-editor of the Price-Time Review
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PTR's Trading Methods:
Personally, since turning to a lot
more trading and a lot less investing, back in 1997, I have always liked to
find one or two volatile stocks, indexes, or proxies and stick with them until
they flatten out into a trading range. Of course, this has it's advantages,
but can also be dangerous if you don't hedge, and we usually only hedge a
small portion of our capital.
In today's world, we can best be described as "swing traders," and our primary
investment vehicle is to derive buy, sell, sell short, signals from the Nasdaq
Composite Index (CMPX), and exceute our trades via the Nasdaq 100 proxy (QQQQ).
The reason that we choose this combination, and rarely deviate from
it, has changed over the years, but is essentially because it has shown itself
to have high, or even very high, "volatility" over the years...since 1997.
Because of this high volatility, the CMPX ranks as the number one index signal
for our proprietary trading model, the MSAR (Modified Stop And Reverse) and
is the backbone of our "actual trading."
The buy-long OR sell-short signals from this trading model accounts for
about one half of the total weight of our "trading opinion," at any one point
in time. That is to say, regardless of what "we think" Gann, Fibonacci, Cycles,
or Dow Theory are pointing to, for the near term it would be rare for us to
buck the signal from this model.
In addition, when we added in the signal from our propriortary "confirming
model," the PCM, "Pivot Candle" Model, we are basically down to just commenting
on why these model "should work" and what they pointing to...for the near
term!
Based on actual trading since 2002, and then back-testing going back to
7/1997, this model has returned 826% (to 2/2007), while the SPX and DOW are
up only about 35%-50% over that total period...of 9-10 years. That
is to say, the MSAR has had an annual return "on average" of "about" 27%,
while those two indexes have had annual returns of only 2.9%...on average.
Needless to say, once the CMPX index starts to move more sideways than
up or down, as has been the case, some what, over the last few years, this
model becomes less reliable or outright useless...as would nearly all trading
models.
While this MSAR model is classified as "aggressive," since it's always 100%
long or short the QQQQ's, we can, and do, reduce it's aggressive nature at
times by simply reducing the amount of our trading capital applied to the
model verse our total cash position. For example, since we fully expected
the market to make a major low and reversal sometime between late summer
to late fall, 2006, and the FED cowboys to be playing games with a "rate pause"
during the same period, we reduce our MSAR position to 25% of capital at
the go-short signal in early May, 2006, and did not get back to a 75% position
until all the long cycles had expired...by late October of 2006.
Eventhough I maybe doing research and planning every day, I usually
wait for a high probability low in which to enter the market with my major
speculation capital, and I have not been doing any "so called" investing since
1998. Never the less, the information we supply in this service
can be used by a trader or investor with any style or time frame, since we
will locate "most of" the near term, intermediate term, and long term highs
and lows--within 2%-4% "typically"--even if we are not trading in or out
of them ourselves.
Web Site Postings:
OVER
the years, I have found that the ability to describe complex processes and
mechanics in a few simplistic terms is a very desirable human trait; unfortunately,
I don't possess that trait. Considering that for the majority of my
forty-one years as a professional engineer, designer, manager, and technician
I have always been the one who was responsible for the "dirty details" as
well as the whole project.
Therefore, I have never developed the ability
to paint in "broad strokes." So, I'm fully warning everyone here of
something they will find out in do course for themselves if they subscribe
to our service: mainly, that my sin is to supply too much detail rather then
too little, and, therefore, to use longer paragraphs, more complex graphics,
and larger html pages then many people would like to see...like this one!
Now, I know fully well that this "tendency"
to "run on" does place extra burden our client's time, and, having said that
right up front, I'll promise to do my best to get across "all" the key information
with the least number of words, tables, and charts possible. However,
in the end, my priority has to be in getting out enough details to convey
my thoughts and information clearly. This is the very first part of
our philosophy, and it can be condensed into the follow declaration:
At PTR, we will do our best to convey all the "timely" information that
we posses, and to the most detail possible while staying within the reasonable
constrains of time and length of the article, or we will segregate our postings
into a separate "condensed" and "full" version.
Ok, having fore-warned you about our writing skills, and the short comings
associated therewith, lets get to the key points of our methods and philosophy.
This will be presented in an outline form from here to the final summary.
History Repeats, or a Random
Walk and Chaos rules the financial markets?
" Charts are records of past market
movements. The future is but a repetition of the past. There is nothing new.
As the Bible says " The thing that hath been, it is that which shall be."
History repeats and with charts and rules we determine when and how it is
going to repeat. Therefore, the first and most important point to learn is
how to make charts correctly because if you make an error in the chart, you
will make an error in applying the rules in your trading."
The Basis of My Forecasting Method
The Gann Angles Course W.D.Gann
(1943)
"Stock Market RISK is not knowing what you don't know about it."
Into the Looking Glass: Inverted Yield Curve Vs.
the Perma-Bulls (2000)
Bernard (Ben) Bonfoey
Founder and Co-Editor of the Price-Time Review
bonfoey quiggly
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AS you can well imagine,
we wouldn't be offering this service if we believed in either of those latter
two theories (random walk or chaos), and we can clearly state our position
in regard to this first broad separation of market theories as follows: We
have absolutely no doubt, what so ever, that "nearly all" stock markets,
and most other financial markets, have an "extremely strong tendency"
to repeat prior patterns, cycles, and history.
Now, can we say that this will always be the case in the future,
or can we guarantee that it hasn't already decided to stop repeating prior
history just last week, last month, or next month? No, absolutely not!
There are no guarantees in this business, or more clearly stated, there are
no legal guarantees that we are aware of.
However, we at PTR, as well as many other firms, have spent thousands,
or more likely millions, of man-hours reviewing the "evidence" for and against
both arguments and we have decided that the evidence solidly supports, "to
a reasonable certainty," that market history does indeed repeat itself..."most
of the time."
That is about as clear and uncompromising statement that anyone will ever
hear me express about a market subject, and I can assure you that my associate
firmly backs that statement.
If you subscribe to the service, you will find that it is extremely rare
for me to use phrases like "this will do that," or "so and so theory is totally
bogus," or "so and so person is totally off the mark." However, our
comments will support the opinion that we are 99.99% certain that the markets
have indeed repeated common and identifiable patterns for over a hundred years,
they are continuing to do so as of the date of this writing, and they will
most likely continued to do so in the future.
As a matter of fact, because of the Internet, home PC's, and the nineties
roaring Bull Market, it is my opinion that this "tendency" to repeat prior
patterns is getting stronger and not weaker. Now, lets move on to another
part of our market philosophy.
"When you have eliminated the impossible,
that which remains, no matter how improbable, must be the truth"
Sir Arthur Conan Doyle (1859-1930)
Author of Sherlock Homes and the Hound of the Baskervilles (1902)
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General Technical Analysis can be useful, but
without Pattern Recognition methods it is very limited.
General Technical Analysis, other then pattern recognition methods,
can many times give a good "alert" signal for a possible change in trend,
identify levels of support and resistance, and give a fairly good indication
when a turn has already occurred, but they are nearly useless at determining
the length of, or strength of, or eventual longer term direction of this new
pattern.
Furthermore, they never indicate where the points are that are "more likely"
to be major reversals than all others on our Radar Screen, unless used in
conjunction with a good historical data base, and that is a to key long term
trading and very important to long term investing. This includes every "individual"
technical indicator that we are aware of, and I don't think there are any
we are not aware of. Now, that is what we believe unless and until
we see strong evidence to the contrary, and it brings us to the next part
of our general philosophy.
DO reoccurring and identifiable patterns,
and/or cycles, form in the price of stocks and indexes, and are there methods
available to decipher these patterns in such a way as to be useful in making
predictions about future price and time targets which will have a probability
of being achieved that well exceeds that of pure chance?
A bsolutely! As I stated in the prior paragraph, I
have no doubt about this premise. Now, it is crucial to note that wave
patterns and cycles are not one in the same. A cycle is identified when
it makes regular (or approximately regular) bottoms (also in tops on occasion)
in a reoccurring (periodic) manner. Whereas, a pattern can exist such that
one "wave" (or section of a movement in time) "looks like" some, or many,
previous "waves;" eventhough, none of the waves, or at least most, ever make
a series of highs or lows in a regular sequence of time.
For example, a price Vs. time movement of stock XYZ, as displayed on a "chart,"
could make a nice low every year on a certain date, yet the wave
form between those two lows could be a mass of ups and downs that doesn't
match anything in the past...and most likely will not match anything in future,
but it would still be an "identified," or "well defined," cycle.
On the other hand, a price Vs time movement of XYZ could repeat a nice five
waves up and three waves down pattern for many years without the highs and/or
lows of any of the waves occurring on the same yearly date, or forming a reoccurring
"time span" between lows and lows. Therefore, it could be an identifiable
wave pattern, but not an "identifiable cycle." In the real markets,
reoccurring and identifiable patterns are "many times" formed within the
close proximity to the time span of an identifiable cycle, but that is not
anywhere close to a certainty.
For example, if the October 2002 low was the low for the last "Secular (large)
Bear Market" low, which is at least HIGHLY UNLIKELY for the Nasdaq based
stocks and indices, then it would have been, "almost exactly," four years
from the October 1998 low...which was a high degree low in anybody's book.
In addition, we note that 10/1998 low was very nearly four years from the
1994 low...that launched the final bull leg up to the 2000 highs.
In addition, since four years is a well identified and widely know market
cycle, the so-called "Presidential Cycle," you can be sure that t his was
no coincidence.
Furthermore, I'll give you one more huge piece of cycle information here.
The two year cycle (21-26m) is another well know, and "major," cycle
in the U.S. markets, so it is probable--or even highly probable--that "the
Boyz" are driving for a "minor" low around Aug. 21 to Oct. 21, of 2006...since
this 2-year "technology upgrade cycle" typically bottoms in that time
frame.
Of course, the Boyz don't always get what they want, but the odds are in
their favor. Look back at what they pulled off in 1986-87 and again
in 1998: bulls to the walls until four to five weeks from the cycle date and
then they tanked the price straight down to hit that cycle date dead on.
Needless to say, this was no coincidence either!
For our forecasting service, the Price-Time Review, I explain why "I know"
that stock market cycles do exist, and show the cycles that were identified
scientifically by J.M. Hurst using Spectrum Analysis, and by William C. Garrett
using observations based on his theory of Torque Analysis.
Then in the last part of that Cycle Section, I'll show how a Wave Synthesis
of the two most common "market cycles," identified by our Spectrum Analysis
using a Fourier Transform, Digital Filters, and Sine regression methods will
reproduce a near perfect Elliott Wave Pattern of five waves up and three waves
down (or nine waves up and seven waves down), and at ratios very close to
those identified by that Theory. To be sure, it's very unlikley that
this is a coincidence either.
I have one last comment about cycles before I move on to patterns: In the
Review, I show why the periodic cycles are only one component of the
composite (resultant) wave form, whereas the long term fundamental component
is the main "non cyclical" force, and this force is non-linear in form; as
a matter of fact, it is clearly an exponential growth curve when viewed on
linear scale charts and a straight line in semi-log scale charts.
Now, if patterns do exist then why should they?
Well, R.N. Elliott believed these patterns were associated with natural,
human (mass-herd) psychology (or more likely that is what R.P. believed).
While I believe in the mass part, it's my belief that the real masses
are large speculators, and "Market Specialist," who decided, long ago, to
follow the rules of Elliott Wave Theory; or more likely then not, follow someone
else's rules that Elliott discovered by observation and made into his theory.
Man has always sought to turn chaos into controlled chaos and controlled
chaos into a predictable science. While I would have grave doubts about
anyone turning all stock market action into a pure science, since it would
no longer be a market if everyone knew where it was going, I sure wouldn't
reject the idea of a set of rules to help a group of big speculators tame
the market beast for their own benefit.
Furthermore, since the market is actually a zero sum poker game, where someone
has to loose for someone else to win, then a pure scientific or mathematical
basis would not be what the big money gamblers would want anyway, or even
allow. On the other hand, if these big speculators had just a
few rules that took some randomness out of the process while still leaving
enough mystery to confuse everyone outside of their own little private clubs
(now referred to as an Exchange or the Masonic Temple?) then they get just
what the doctor ordered.
While this may sound like a fine recipe for a full blown conspiracy theory,
and to some degree it is, in the end it really doesn't matter why these patterns
exist, only that they do exist.
Although some pundits my have serious doubts about repeating wave patterns
and cycles, there is no doubt in my mind, and I have some very serious doubts
about just how accurate many of the scientific laws are that are used every
day through out the world. For instance, are the Laws of Chemistry and
Atomic Theory, that are being taught in every school and university around
the world, actually true?
While some portion of the laws of Chemistry have been proven to a reasonable
certainty, a fairly large portion of them have not. However,
that has not stopped "non provable theories" from being turned into "non provable
laws," and it most surely has not hampered their usefulness to mankind.
In the final analysis, these laws are mostly just theories that can be followed
like a recipe to arrive at a reproducible and predicable result, however,
regardless of how useful they are, their basis has not been confirmed to anything
approaching absolute certainty. For example, does the electron really
exist in a discrete energy band that revolves round the nucleus of a tiny,
marble like, center of protons and neutrons?
We don't know that for sure, but John Dalton's theory accounts for the actions
that are observable to a scientist, and provides a firm foundation upon which
Chemistry can be, and has been, used for two centuries to help humankind,
and that's what is really important.
Now, with all that said, let me make it crystal clear that I do not consider
Elliott Wave Theory or Cycle Theory anything close to a law of science, regardless
of how much, or how little, "statistical proof" can be applied to the basis
of their thesis.
A theory , by definition, is a hypothesis that has not been supported
to a reasonable certainty, and MAY NOT always produce a predicted result to
within a reasonable degree of accuracy. This is a fine definition of
Elliott Wave Theory, and no one at PTR, and especially me, will ever say that
"so and so IS a wave so and so and it IS going to so and so. Elliott
Wave Theory is highly subjective by nature (open to interpretation by the
investigator), but it would still place very high on the long list of theories.
For example, and in my opinion, it would easily place light years ahead
of all Elvis Theories, the Warren Report's Single Bullet Theory, and the
theory of Alien Abduction...ha,ha. Now, that may be a poor choice of
company to place Elliott Wave Theory into when I think so much of it, but
it accurately conveys the strong message that this theory does not belong
next to Newton's Laws of Conservation or any of the laws of science that
are highly reproducible and continually accurate.
Nevertheless, it's highly plausible that this theory could have been developed
to reduce total chaos to controlled chaos, and that is exactly what
I believed did happen, and just because it can not always produce the same
result to a high degree of accuracy, doesn't mean it is without merit.
Well, this is as much ranting about Elliott Wave Theory that I'll do here
in the introduction, but I have many more comments, that are supported by
real world examples, on the introduction pages to the Elliott wave section
of the Review.
Before I move on, I'll say two more "things" about Ewave, which is also
in the general introduction. First of all, if anyone believes
in the 38% and 61% retracements, then they are part way to believing in Elliott
Wave Theory, since those values were identified first, an only, by R.N. Elliott
and C.J. Collin's in 1938.
Furthermore, if this portion of his theory has become so wide spread that
about half the techies on CNBC are identifying them, then I fail to see why
many, most, or all of his theory is not at least feasible when hundreds of
books and many software programs are now devoted to the subject.
Our psychology about cycles and
patterns can be summed up as follows:
At PTR, we believe very strongly
in periodic, reoccurring, and identifiable cycles, and use many methods to
identify those for our subscribers. We also believe very strongly in
reoccurring and identifiable wave patterns, and seek to identify those using
the rules of a wave theory put forth by R.N. Elliott and later enhanced by
Robert Prechter in the Elliott Wave Principal. Ok, that's
it on Elliott Wave Theory, lets move onto the Funnymentals.
Fundamentals don't matter that much since the cycles
and waves actually control the markets.
WRONG! I seriously doubt there
are many who firmly believe in that statement, and I can assure you that we
don't. As a matter of fact, we believe just the opposite is true. That
is to say, we believe that the reoccurring cycles do exist, but they have
more influence on the time of highs and lows then on price. That is
to say, while we believe that well identified cycles are "most likely" to
reoccur and produce a low near the time they are scheduled, that low
could be anything from a sideways consolidation, like the primary degree wave
four in 1997-1998, to a monster super-cycle degree wave two "crash," like
1928-1932.
Furthermore, as our Cycle Theory spells out, the tops are, more often then
not, not symmetrical with the lows. That is to say, the high may not
be in the center between the two lows, but may be clearly offset from that
"theoretical center." As a matter of fact, they usually are offset
strongly in the direction of the fundamental trend, and a Fourier Synthesis,
from J.M. Hurst's and William C. Garrett's work all show why that is
the case. In addition, the ratio between the up motion to down motion in a
wave pattern is many times close to the theoretical values derived from the
synthesis of the two most common market cycles.
From our observation, wave patterns have about the same influence on price
as the more common minor periodic cycles, and considerably less effect then
the key market cycles of .## and #.# years. At PTR, we also
believe that other aspects of pattern analysis have a greater influence on
price then all the periodic cycles and all wave patterns, except for those
two I just mentioned.
For example, we firmly believe that price is a lot more likely to "reach
out" and grossly over extend it's fundamental function, AND/OR it's pattern
formation in progress, while seeking "to reach" one of R.N. Elliott's and
C.J. Collin's Fibonacci Retracement Levels (FRL), a Fibonacci Trend Line target,
or one of W.D. Gann's price-time angles or "squares" of price to time (1/8th
divisions of the circle and the square), then it is to seek a completion
on a certain cycle date.
However, for some reason unknown to me, the Longwaves (many years to many
decades) seem to do just the opposite. That is, they tend to be more
bent on completing a cyclical rhythm then any wave count or measurement. By
the way, the .## and #.# cycles are clearly identified for the DJIA in the
cycles section of the review.
The financial markets in the United
States are totally free from manipulation and are a fine example of Capitalism
at it's best. They are also all seeing and usually discount the future
well in advance of most major news that has the ability to influence it's
movement.
If the second part of
that statement is true then the first part can't be, because I'm fairly certain
that no one has a true crystal ball. Of course, the second part is true,
and that does answer the first part.
Have you ever wondered just how much security there is at the Bureau
of Labor Statistics, or at the Fed, when millions, or billions, of dollars
can turn on what these "highly skeptical" statistical releases are. I
have, and I have also wondered how it is that the market almost always correctly
"guesses" what these numbers will be, even when they fly in the face of logic
and reasoning? Hum?
Furthermore, another thing that burns me about government data is: if they
are constantly revising these numbers by 50% or 100% every month, then
why the heck release them at all? They should just wait until all the
"real" data is in, and release what is correct even if it's delayed by another
month or two.
Oh well, that's nothing I'm going to be able to change, so I apologize for
the mini rant! However, while I'm on the subject of manipulation, I'll
let you know right up front that I have a very strong distaste for the
Federal Reserve, and especially SIR Allan Greenspan, who I referred to as
Mr. GreenInk, EasyAl, GreenSpam, SuperBankerMan, Allan Pressman, and the Great
Manipulator.
In my book, the end does not justify the means, and a vigilante mob is just
as guilty as the "accused" criminal they are bent on "string up"...if you
get the connection.
Also, in my opinion, all this "we can't tell the the public the real truth
because it would cause a panic" is total BS to cover their own tracks, and
those tracks are "most likely" being made in the pursuit of something to help
them, or their few "real friends," AKA, "cronies," rather then "the people"
they claim to be serving. Sorry, but should you subscribe to our service,
you'll find out that this is my biggest pet peeve, and I verbally unload
on these "manipulators" on a fairly regular basis.
Ok, back to the discounting idea. Yes, we do believe that the market is
all seeing in nature, which probably has a lot more to do with illegal "things"
then legal ones, but, nevertheless, all seeing. And, this brings up
another very important point about our market and trading psychology...and
the last one.
At PTR, we "strongly" denounce any of the methods that "adjust" the long
term chart history for any reason. This comment is mainly leveled at
the "inflation adjusted" charts that seem to appear from time to time.
If the market is "all seeing" and "a discount mechanisms" then the markets
have already fully discounted the combined effects of inflation , deflation,
currency values, the color of toilet paper used in XYZ's Johns', or
anything else that may effect it's value, and at the time when this actual
value was determined by the millions of traders, and investors, who actually
set that price.
Otherwise, we have some bean counter in the future essentially saying that
these people, who paid what they paid for a stock at the actual time they
traded for it, didn't know what the current or future effect of inflation
or deflation was on XYZ's stock, or any multitude of other variables, such
that they inadvertently over paid or under paid for them....Right? Not
likely!
Without a doubt, over along a period of time the purchasing power of money
does change, but for someone to try and place an adjustment multiplier on
the past history of stock prices so as to say "this is what they should have
been paying,," is nonsense. What they "should have paid" is wild speculation,
but what they did pay is an absolutely certainty, and I see no reason for
one person, or a few people, to be making belated judgments as to what thousands
of traders and investor "did" decide the stock was worth at the time that
they bought or sold it.
In my opinion, there is one very easy way to compare the movement of stock
prices in 1900 with the movement of stock prices in 2000... use percentage
(relative) terms. As one of my associates likes to say: $10 gained in
a stock in 2000 would not have anywhere near the same meaning, or buying power,
for a person today as it did for his Great Grandfather, back in 1900, since
$10 today would buy you a lot less then it did in 1900. However, a
stock price that moves from $10 to $100 today has the exact same meaning as
it would have had in 1900. It's a 1000% gain in both cases, and I fully expect
that the modern investor would be just as delighted as his Great Grand Daddy
was about that outcome.
In his Wave Theory, R.N. Elliott correctly identified the need to
use logarithmic scale when dealing with charts that cover long time periods,
OR those that have a large price changes over short time periods, which he,
incorrectly, called "inflation."
We at PTR fully agree with his keen observation, and we follow his example.
However, we do use linear scale for most charts going back only a few
years, and we are always checking both scales for chart patterns that extend
out for more then a year, or that have large price swings inside of that one
year time frame.
For example, if stock XYZ goes sideways at $10 for ten years, it wouldn't
matter if the scale was linear or log, since it didn't have much of a "price
range change." To the contrary, a stock that has blasted off from $1.00
to $10.00 in a few weeks and then makes another launch up to $100 in short
order is going to need log scale, and percentage terms, in a big way since
the next $10 in movement is only a 10% move as compared to that first $10
move, which was 1000%.
Unfortunately, there is no fixed rule to tell us where the switch from linear
to log sale is necessary, but it is fairly obvious that anything that has
moved by a factor of 10:1, or has exceed five years in duration, "most likely"
needs log scale for the "y" (price) axis.
Since we are absolutely certain that the long term mathematical function
of the stock market is an exponential growth curve function, upon which the
short term cycles ride, and prices on these long term charts will appear as
steeply accelerating curves in linear scale, those "straight" trend
lines in linear scale and all those linear regression lines have little to
no value when dealing with long term data.
On the other hand, if the long wave charts of the market's exponential function
is displayed in logarithmic scale, it produces straight trend lines, and also
shows the common standard deviation channel structure that is routinely displayed
in short term charts...which are typically displayed in linear scale.
As a final comment on this point, I will say that the tendency toward Fibonacci
retracements becoming more accurate, or as accurate, on linear scale as they
are on log scale , even on some long term yearly charts, seems to be increasing,
and I suspect that is due, in part, to all the software that is working only
in linear scale.
While it is considerability more work to check both scales, that is what
needs to be done, and that is what we do. So, you will see both chart
scales used at PTR, and we will try to make sure a huge note points out the
scale of chart displayed. By the way, when I said this new software
is "in part" responsible for the increasing accuracy on linear scale, the
"other part" is explained in then introduction to the Elliott Wave Section
of the Review.
Here, below, are some of the small introductory prefaces that we "usually"
apply to each sheet that displays our "routine analysis".
CYCLICAL ANALYSIS SECTION:
This page, or pages, contain PTR's manual periodic
cycle analysis, that we call "Visual Elliptical Fitting" (VEF); as well as,
our summation of the Fast Four Transform, Sine Regression Analysis, and Digital
Filter frequency domain filtering from DPLOT and ORIGIN. Our manual cycle
diagram should "always" be considered "a work
in progress," where we are "testing" the "fit" of some common market cycles
to the chart data.
While there is very little doubt that a good portion of the trading community
takes "cyclical analysis" very seriously and "most likely" uses it in their
overall trading and "investing" decisions, there are a few pundits who totally
reject the idea of reoccurring patterns or cycles in the price of stocks.
While I venture to say that these pundits are only a minority inside the
worldwide trading community, and probably even a minority within the institutional
investment groups, they will alwasy be around to "talk down" this analysis.
At PTR, we consider the Fibonacci retracements as the "most influencing"
of the technical aspects of trading, and we then consider Cyclical Analysis
in a dead heat tie with both the Gann Angles and Elliott Wave Theory for having
the next greatest influence of the "technical aspects" of trading.
While we also believe that it's entirely possible for strong fundamentals
to trump either of these, or even all of these technical influences, we "firmly
believe" that is a very rare occurrence and anyone who thinks otherwise will
pay the price for that erroneous belief over time, whether they eventually
realize it or not. Of course, this is just my opinion and others are
always entitled to theirs...just not here, and now!
ELLIOTT WAVE THEORY:
PTR's manual wave counts shown and discussed on this page
are based on all the data and technical information we possess at this time
in relation to this XXX index (XXX), and the
U.S. and World financial markets in general, as of
X/XX/200X . This page also contains the new links to all other charts
and comments that relate to the XXXx
index that is illustrated and discussed here. .
If you are a new subscriber, or you haven't taken the time
to read the general notes for our "service," please do so now or at your
earliest convenience. The PTR "preferred" wave count is "essentially" the
final summation of our historic analysis and future "expectations" for this
stock, or index, based on all the information available to us at the time
we developed and posted it to our web site. Of course, nothing related
to financial speculation or stock trading is cast in stone, and all subscribers
are fully warned that we, or any other "information" service, can be partially
or completely wrong in our analysis and "expectations."
Therefore, we strongly urge that all subscribers take action to confirm
or reject our information by other means, which we refer to as the first,
or primary, opinion, and protect their investment capital by those methods
prudent to risk management.
Using Professional Stock Analysis with Gann,
Elliott Wave, Fibonacci, Periodic Cycles and Dow Theory for PriceTime
LLC
XXX proxy for XXX
index (XXX) Posted X/2/04
PTR's ANALYSIS OF A STOCK OR INDEX
USING METHODS AND THEORIES DEVELOPED BY, ARTICULATED BY, OR DEMONSTRATED BY
W.D. GANN, WHICH INCLUDES:
1) The Gann angles are based on our determination for the current "key"
frame of reference when applied in the correct Gann scale of one point per
calendar day, week, or month.
2) The square of the range "price" (historic decline or rally) to future
"time."
3) The square of the "price" high, or low , to future "time."
4) The placement of three "key" time targets based on Mr. Gann's "square
of time," of the range, to future time, which are also the same, or nearly
the same, targets identified by the Fibonacci ratios and extensions based
on the time of that range.
5) The 1/8th divisions of the squares of the range
and the high (or low) to time.
6) The 360 degree and/or 180 degree Square of Nine support or resistance
"lines" in price (index value), even though we usually only show the
360 degree targets that are "near' the current price.
7) Not Gann, but also shown for these charts is the Fibonacci retrace targets
based on logarithmic (percentage) scale. Note that the Fibonacci retracements
in absolute values (linear scale) are "very nearly the same as Gann's 1/8th
divisions of the square, which are also shown on these charts. For example,
61.8% is very close to Gann's 5/8's division of "the range" at 62.5%. So,
while there is absolutley no such Fibonacci retracement at 78.2%, another
market farce, the Gann 1/8 line is at 75% (6/8 or 3/4) and the actual Fibonacci
"operator" is at 76.4% (1-.236).
8) PTR's bull and bear targets based on this analysis, and our overall price
and time targets based on all current analysis.
Sept 25, 2003
A.J. Quiggly
PTR Editor
Bernard (Ben) Bonfoey
Developer and Co-Editor
Price-Time LLC
In order to provide our opinion,
advise, guidance, and "conjecture" to a large group of clients all at the
same time, we must speak in common terms in order to completely understand
each other. In order for us to do that, we have adopted the "terminology"
used for one of our five key methods of analysis, Elliott Wave Theory. While
we may at times "speak" in plain english, a lot of our "detailed" information
will be summarized and illustrated by terms, axioms, and graphics specific
to that theory.
While it is not our purpose here to make expert Ewavers out of our
clients or force them to deal with what could be called just a practical level
of competency, all subscribers will need to obtain at least a minimum level
of competency with the terms and theory. That is to say, you at least
need to understand the underlying "basic concept" of 1) charts forming
patterns of five waves up during an "impulsive advance" (as in a bull market),
covering time periods of a few hours to many years, and 2) charts having
a strong tendency" to form patterns of three waves down during corrections
(as in bear market declines).
While there are dozens of good, and free tutorials, out in web land
that teach Elliott Wave Theory, I suggest you start with our free tutorial,
or our optional Ebook, which can be reached from a selection on the Subscriber's
MarketView Home Menu (A1), after logging in.
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For the Bean Counters and Number Crunchers among you,
with gasoline near $3.00/gallon here in the summer of 2006, what would be
it's annual rate of inflation from the $.11 per gallon shown on this filling
station sign in 1963?