Ok, I understand the purpose of gaps now (see my other post). I
don't see it relevant to deciding where the short-term trend may
reverse: the assumption that there are enough orders there at the
gap that would interfere with the move in the opposite direction.
Well, there are many more orders below the gap as well. In my
observation, what determines the turning points is not the number
of orders but the density of the orders in one place, compactly
placed to obstruct further price movement. I see no reason to
assume that gaps would contain a highed density of orders than
normal.
Turning points occurs in two major cases: buyers (or sellers)
are exhausted or they switch sides when the trend has gone too far
and for too long, and when density of new sellers (or buyers)
exceeds the density of existing buyers (or sellers). Then gaps
could become an obstacle only if the trend has lasted long and is
ripe for reversal already, so a bit higher density of orders in the
opposite direction impedes the already weak trend.
There is another story to gap at 1075: 1070 to 1075 was an old
resistance. To me the word resistance here matters more than the
word gap.
Order density..you indicate why would they contain a higher
density of orders than normal.I think our discussion on gaps
answers that question.We concentrate on them.If I showed 20 traders
a weakening down trend with a gap just below price and asked them
where they want to place a buy order you can guess where many
(a density of orders)would get placed as you put it..around
the gap..maybe above maybe in the middle..maybe below..but around
it.
Sure I agree with your point about 1075 gap..obviously often
gaps occur where price lurches out of a consolidation zone
,trendline etc and yes we could interpret it as support /resistance
issue due to earlier consolidation there rather than gap
issue as to why price turns there...but again as Steve often
says...a confluence of support etc..just another part of the puzzle
but all the bits give one an idea where price turns.
So' junkie' now that we have sorted out gaps lets go enjoy the
weekend.!!!TGIS where I am!...so do you think we will revisit the
gap up at 1148?..or are the bears home free now ..the
machines never let the bears off easy it seems...a question to
consider for the weekend?
Another observation is that a purpose of the gap is to jump over
a support or resistance zone. We saw this in December during the
stalemate between bulls and bears in the rectangle consolidation,
till the option expiration day. Ok, now the nature of the market
manipulation with futures over the weekends is clear to me: they
create gaps and ease transition to the next target. Heck, tha't why
the market falls so steeply now: it's rise to sky highs was
artificially strong, so there is less resitance than in the other
direction than it would normally have. Now Peter Campbells comment
on the purpose of the such a long advance makes sense: it was
engineered to recapitalize those who drive it at the expense of
everyone else, to the hilt.
Now I can answer your question: we will revisit that gap, but
not in wave 2. Wave 2 or B up will stop much lower than that gap
zone, because it would be such an awesome shorting opportunity for
everyone else. That trick cannot be played twice, now it's been
exposed to the masses and it will not work again. What will happen
is, the price will turn around at an odd point: a Fibbonacci
retracement plus 2 or 3 points. This advance retraced 53% of the
decline from 2003 to 2007. Wave 2 is (sometimes) engineered to
exceed a known entrance point --such a MA(20) or EMA(20)-- by 11%,
because stop loss orders are typically 10%. Or wave 2 retraces more
than 61% of the decline in wave 1: most think that a move beyond
61% retracement is a genuine move in that direction. (This explains
a sudden strong move after November lows above 1075, whereas before
that a move up seemed weak. And remember that 1075 was around 61%
of the retracement from the previous low at 1019). Quick moves are
genuine moves, and they portend more action in the same direction.
(In the EW parlance they are termed impulsive. Steve, if you are
reading this: can you explain the purpose of extra moves beyond the
minimally required number of 5 moves, such as 7, 9 or 12?)
I have plotted the Fibbonacci retracements between 1150 high and
1007=MA(200) low:
38%-
1093
50%-
1075
61%- 1057
70.7%- 1044
78%- 1032
Note that we closed at 1091, and 1075 is the 50% retracement.
Now it's becoming very interesting. Now note incorrect Fib.
retracements (the Fibbonacci retracements +3 and -3):
41%- 1088, 35% -1097
53%-
1071, 47%- 1079
64.8%-
1053, 58%-
1062
73% - 1039, 67%- 1048
So the current decline may turn around at 1088 (41%),
1079(47%),1071(53%),1062(58%),1053(64%). Assuming that the whole
move is going to be ABC, and wave C is 61% of move A; I get
1051-1007=144, and 144:2.61=55, and 144-55=89. A drop from 1151 in
89 points would lead us to
1062, which is 58.8% retracement of the move from
1151 down to 1007.
Therefore, 1062 is a pretty realistic target for wave A down. As
far as the whole move, 10% of 1150 is 115 points, leading us to
1036. The average decline so far has been 6.37%, or about 80
points, leading us to 1081. So, if 1071 is taken out, we are headed
down to 1036 or 1007 for the entire move.
Title: to hurricanemalta on gaps Ok,
$SPX...
Posted by junkie on 22nd of Jan 2010 at 11:38 pm
Ok, I understand the purpose of gaps now (see my other post). I don't see it relevant to deciding where the short-term trend may reverse: the assumption that there are enough orders there at the gap that would interfere with the move in the opposite direction. Well, there are many more orders below the gap as well. In my observation, what determines the turning points is not the number of orders but the density of the orders in one place, compactly placed to obstruct further price movement. I see no reason to assume that gaps would contain a highed density of orders than normal.
Turning points occurs in two major cases: buyers (or sellers) are exhausted or they switch sides when the trend has gone too far and for too long, and when density of new sellers (or buyers) exceeds the density of existing buyers (or sellers). Then gaps could become an obstacle only if the trend has lasted long and is ripe for reversal already, so a bit higher density of orders in the opposite direction impedes the already weak trend.
There is another story to gap at 1075: 1070 to 1075 was an old resistance. To me the word resistance here matters more than the word gap.
Title: Gap Junkie..I like it..lol Order
Posted by hurricanemalta on 23rd of Jan 2010 at 03:00 am
Order density..you indicate why would they contain a higher density of orders than normal.I think our discussion on gaps answers that question.We concentrate on them.If I showed 20 traders a weakening down trend with a gap just below price and asked them where they want to place a buy order you can guess where many (a density of orders)would get placed as you put it..around the gap..maybe above maybe in the middle..maybe below..but around it.
Sure I agree with your point about 1075 gap..obviously often gaps occur where price lurches out of a consolidation zone ,trendline etc and yes we could interpret it as support /resistance issue due to earlier consolidation there rather than gap issue as to why price turns there...but again as Steve often says...a confluence of support etc..just another part of the puzzle but all the bits give one an idea where price turns.
So' junkie' now that we have sorted out gaps lets go enjoy the weekend.!!!TGIS where I am!...so do you think we will revisit the gap up at 1148?..or are the bears home free now ..the machines never let the bears off easy it seems...a question to consider for the weekend?
Realistic targets for this move down based on Fibbonacci ratios
Posted by junkie on 23rd of Jan 2010 at 09:14 am
Another observation is that a purpose of the gap is to jump over a support or resistance zone. We saw this in December during the stalemate between bulls and bears in the rectangle consolidation, till the option expiration day. Ok, now the nature of the market manipulation with futures over the weekends is clear to me: they create gaps and ease transition to the next target. Heck, tha't why the market falls so steeply now: it's rise to sky highs was artificially strong, so there is less resitance than in the other direction than it would normally have. Now Peter Campbells comment on the purpose of the such a long advance makes sense: it was engineered to recapitalize those who drive it at the expense of everyone else, to the hilt.
Now I can answer your question: we will revisit that gap, but not in wave 2. Wave 2 or B up will stop much lower than that gap zone, because it would be such an awesome shorting opportunity for everyone else. That trick cannot be played twice, now it's been exposed to the masses and it will not work again. What will happen is, the price will turn around at an odd point: a Fibbonacci retracement plus 2 or 3 points. This advance retraced 53% of the decline from 2003 to 2007. Wave 2 is (sometimes) engineered to exceed a known entrance point --such a MA(20) or EMA(20)-- by 11%, because stop loss orders are typically 10%. Or wave 2 retraces more than 61% of the decline in wave 1: most think that a move beyond 61% retracement is a genuine move in that direction. (This explains a sudden strong move after November lows above 1075, whereas before that a move up seemed weak. And remember that 1075 was around 61% of the retracement from the previous low at 1019). Quick moves are genuine moves, and they portend more action in the same direction. (In the EW parlance they are termed impulsive. Steve, if you are reading this: can you explain the purpose of extra moves beyond the minimally required number of 5 moves, such as 7, 9 or 12?)
I have plotted the Fibbonacci retracements between 1150 high and 1007=MA(200) low:
38%- 1093
50%- 1075
61%- 1057
70.7%- 1044
78%- 1032
Note that we closed at 1091, and 1075 is the 50% retracement. Now it's becoming very interesting. Now note incorrect Fib. retracements (the Fibbonacci retracements +3 and -3):
41%- 1088, 35% -1097
53%- 1071, 47%- 1079
64.8%- 1053, 58%- 1062
73% - 1039, 67%- 1048
So the current decline may turn around at 1088 (41%), 1079(47%),1071(53%),1062(58%),1053(64%). Assuming that the whole move is going to be ABC, and wave C is 61% of move A; I get 1051-1007=144, and 144:2.61=55, and 144-55=89. A drop from 1151 in 89 points would lead us to 1062, which is 58.8% retracement of the move from 1151 down to 1007.
Therefore, 1062 is a pretty realistic target for wave A down. As far as the whole move, 10% of 1150 is 115 points, leading us to 1036. The average decline so far has been 6.37%, or about 80 points, leading us to 1081. So, if 1071 is taken out, we are headed down to 1036 or 1007 for the entire move.
Disagreements and corrections are welcome!
Nice post Junkie...I just want to see 1030 target by Friday..lol!
Posted by hurricanemalta on 24th of Jan 2010 at 11:19 am