Breakthrough Strategies for Predicting any Market: Charting Elliott Wave, Lucas, Fibonacci and Time for Profit

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BREAKTHROUGH STRATEGIES FOR

CHARTING ELLIOTT WAVE, LUCAS, FIBONACCI AND TIME FOR PROFIT

JEFF GREENBLATT FOREWORD BY DAWN BOLTON-SMITH

Marketplace Books Columbia, Maryland

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This now is strong resistance. Notice the next spike up was on the 18th hour of the trend. This is what I mean by rotation or spiraling. A bear phase will either spike or create a high on the chart on a Fibonacci or Lucas number bar within plus or minus one. What I observed after thousands of hours is the strongest moves will exhibit the spike right on the number. The third spike in the sequence completes on the 8th hour after the 18th spike bar. Up to this point, you've had three opportunities to go short. They were ll-hour, 7(18th)-hour, and 8(26th)-hour, high-to-high cycles. Follow the progression of the 3rd wave. From the 26-hour spike, it moves another 13 hours to create a small degree low with that hammer. That 13th-hour low is also 39 hours off the high (Fibonacci 38.2) and 143-15 minute bars off the top. The next spike high is in the eighth approximate hour, which clusters with the 46th hour off the top. In other words, the 47th hour starts the final leg down and this final leg completes in 18 hours. What is not shown, but is highlighted, is that the whole trend completes in 235-15 minute bars, which are off by 2 from 233. In a 10-day span, there are no fewer than 12 important time relationships on this chart. There are probably many more if I choose to count what might have been going on at the 5-minute level. There are a few other relationships on this chart. In terms ofprice,

Ask yourself the following

the action is somewhat choppy and would best be counted as an ABC down as opposed to a 5-wave impulse. This is because the spikes at the 18- and 26-hour marks both invade the price territory of the first small leg off the top. This applies to the over-

question. Do you need to

lap rule. Still, there are three major thrusts to this move. Ifyou go by strict Elliott interpretation, what you would call the first and fifth waves do not have a .618/1.618 common price relationship. However, when you put the time x-rayon these legs you will see each is of 18-hour duration. In terms of time, you could say 1 = 5. Then, when you measure the leg from the top all the way down to the hammer on the 39th hourly bar, you will see it has a 1.618/.618 price relationship with the last move starting on the 47th hour. So this best counts as an ABC down where C = .618*A. The

know the exact wave count when you really just need to understand the tendencies of what the bars can do? Understanding when a spike occurs on a specific numbered bar means you trust the flow because this is the specific language of the market.

Breakthrough Strategies for Predicting Any Market 46

waves are not labeled because the point of this discussion is to show you the rotation of the bars and the finer detail of market precision. There is no subjectivity here at all. Just like the outcome of a sporting event, a spike on the 46th hour is exactly what it is: no more and no less. Ask yourself the following question. Do you need to know the exact wave count when you really just need to understand the tendencies of what the bars can do? Understanding when a spike occurs on a specific numbered bar means you trust the flow because this is the specific language of the market.

Fast Moving Bear Figure 3.2 illustrates how you can get lost in a wave that really doesn't have a clear count but still be able to navigate your way through the maze. This is a daily chart of Intel, which is representative of the fast-moving bear Figure 3.2 Intel Daily Bearish Rotation Intel Corpor

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days off the August 2004 pivot. In terms of the weekly frame the NASDAQsequence for the cycle was 88 weeks up off the August 2004 low to April and then 13 weeks down. Do the calculations and you'll see 13/88 is .147 or extremely close to our minimum Fibonacci tendency of a .146 retracement. Looking in the rear view mirror the NASDAQended up retracing almost 61 % of the leg up from August 2004 while the NDX retraced just a hair over the 61% price retracement. The whole point of the discussion is that a pivot high which is extremely well organized like May 2006 is going to cause one of two things to happen. First, it could create a long term top. Second, it could create a violent intermediate term trend change. In this case it chose the latter as we had one of the most violent reversals since the 2000-2002 bear market. Even though the rest of the market had an intermediate term correction the S&P 500 was short in terms of both price and time. As we know, the market is always right, so how do we deal with situations like this? Refer back to page 20. This is why we have Rule 3 in place. In short Rule 3 states that strong clusters will be broken only by a very powerful wave. So if you are following a chart where there is a pivot that materialized by a strong cluster of relationships, the retest will usually fail. If it doesn't fail, it is likely destined to continue a long way. There is no middle ground. In the case of the S&P 500, the May high was 1326 and the as this book went to press was over 1500. The May 2006 Dow high was 11670 and it's equivalent number was 13300. Even the NASDAQwent 150 points higher. It has continued a long way.

One Minute Charts Our final lesson of a bullish rotation is to illustrate the ultimate x-ray of market precision. If you really want to understand what a market is doing, study the I-minute charts. To many people, day trading has a very negative connotation. Unfortunately, all we heard during the NASDAQbubble years is how day traders ended by quitting their jobs and ultimately losing everything. The sad truth is that 99 percent of them probably had no idea ofwave rotation or how to figure out market precision.

S9

If you really want to understand what a market is doing, study the 1-minute charts.

Breakthrough Strategies for Predicting Any Market

60

In fact, a I-minute chart on any futures contract moves very quickly. Ifyou don't know what you are doing, it's a big mystery or worse. A I-minute chart can be your undoing it's true; but with the proper training, it could also be the beginning of your breakthrough into really understanding market precision for the first time in your life. Mter we get through this chart, I think you'll be encouraged enough to examine and possibly trade I-minute charts on your own. In non-trending markets, understanding this smallest time frame may turn out to be the only way you can make money until market conditions change. Consider how many minutes there are in a trading day and you can begin to understand how many different patterns can happen in that time. The good news is that even on a I-minute chart, the universal laws taught in this book are followed with incredible precision. Figure 3.7 1 minute chart of the NO 1IQt603-E-MIHI NASDAQ 100 STK lOX

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The first leg on Figure 3.7 tops in 18 minutes and pulls back for another 13 minutes. The next leg up is another 13 minutes so we have an ABC up of18-13-13 minutes. There are 44 minutes that have elapsed; ifwe scaled up to a S-minute chart, you'd see this A wave top in 8-S minute bars. This is perfect market precision. The pullback measures 11 minutes for A down, 18 minutes for B up, and finally 21 minutes for C down. There is any number of time relationships just in this little sequence. From the high at 1717 to the low at 1712.50 back up to 171S, we have a tiny 29-minute, high-to-high cycle that sets up the final drop of the move, which turns out to be 21 minutes. Three legs with perfect precision, but they don't end on a Fibonacci number why not? This is a SO-minute correction that corresponds to another 10-S minute bars, right? If we count the first 44 minutes (8 bars up), and the next SO minutes (10 bars down), we end up on a S-minute scale with another 18 bar, low-to-Iow cycle. This 18-bar cycle on the 5-minute time frame sets up the move of the day. On the way up, you can see a progression of 26 minutes followed by an 8-minute pullback. This creates a 34-minute, low-to-Iow cycle, which presented itself with the very last chance to get into this move. The top came another 33 minutes later. The entire third or C wave lasts 67 minutes or 13-S minute bars. While the whole move up to this point is 31-5 minute bars, your precision in this case comes as a result of the first leg being 8-S minute bars and the big leg 13 bars. To conclude, 8/13 has that .61/1.61 relationship to each other that we always look for in our price relationships. What made Wayne Gretzky the greatest player in the history of hockey? He certainly wasn't the fastest skater or the biggest player on the ice. He has been asked that question a million times in his career. His answer was that most players chased the puck. Gretzky always anticipated where he thought the puck was going to go. That's how he always ended up in the right place. Hockey is a very fast game. His ability and anticipation of the highest probability place where he thought the puck would end up enabled him to slow the game down. It's the same principle here. A 1minute chart moves very fast. That won't change. However, if you are able to anticipate the tendencies, the action starts to slow down, and you can actually anticipate what will happen next.

61

Breakthrough Strategies for Predicting Any Market 62

SIDEWAYS MARKETS Up to this point, we've covered what happens in bull and bear rotations. However, we know that markets don't have two possible directions, they have three. Markets spend a great deal of time going sideways. Let's assume you have a good methodology and know what you are doing. You use stops and are not part of the group that stubbornly hung on and lost 90 percent of the gains made in the 1990s Internet bubble. The biggest obstacle to your profitability is whipsaws. Getting chopped up in sideways markets is like water torture. It will bleed your account slowly over time. Although it is vitally important to recognize bull and bear moves, it may be even more important to recognize a sideways trend. The time cycles offer great comfort to those ofyou who want to get out of the way of a whipsaw market. First, you stay out of the larger trend. SecFigure 3.8 Biotech Index (BTK) Triangle BIOTECHNOLOGY INDEX AMEX

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with a real good time cluster. That could be a good reason why this high is eventually taken out. The next example, Figure 4.8, illustrates the polarity line as a zone as opposed to a line. The SOX spent 5 months testing the zone from 420 up to 445. It briefly broke below in January and April. Finally, along with the rest of the market, the SOX tested this band one more time before finding support. A small hammer on the daily bar reversed on the 62nd day of the correction and turned up for a 140+ point move up to 560. Although we can see the reversal on the 62nd bar of the pullback, the April low is the 162nd day of the trend, and the October low is the 289th day of the trend. The difference is 127 days (1.27 is the square root of 1.618). All time bars are fair game for reversals. What we have, in addition to all of the other

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fact, check out that first wave up and notice the gap up at 71. Check out where price action in wave 4 ends right near 71. You can also see other instances on the chart where spikes or pullbacks complete just in the price territory of other gaps thus confirming what we discussed in the chapter on support and resistance lines.

US Dollar This isn't a book about Forex, but the next example is of the U.S. Dollar chart. The Dollar chart offers the exact same principles as many Forex charts and has a good correlation to the USDIJPY chart.

Figure 5.8 Crude Oil Entire sequence of events CU......Light Sweet Crude Oil Futures,Aug-288li

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In this example (Figure 5.9), we have a five-wave progression to the downside. We have a shallow first leg that tops on a 23-hour, high-tohigh cycle. Note the large black candle; it's the 34th bar in the sequence. This time bar supersedes all moving averages. The third wave is 21 hours in duration. The fourth wave up completes in 26 hours of a high-to-high cycle off the last major pivot at the top of wave 2. More important, however, is the polarity line it creates as former support on the way up now becomes resistance. Once we have the fourth wave high and take out the prior low, we start watching for a sign that MACD is not confirming the new low. This is our cue for a potential reversal and finally the 61-bar cycle kicks in. That would be signal of at least a chance

Figure 5.9 US Dollar Hourly MACD Divergence Sept 2006 0XI50!-US Dollar Index Futures,Sep-2IK

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Halliburton (HAL) I realize that many of you don't trade the indices and you'd like to see how this principle works on stocks. This divergence principle is so important that we can't overkill it with too many examples. The next two charts highlight a progression from Halliburton (HAL). The first chart (Figure 5.11) shows a 7-point (68-75) bullish progression on a 15-minute basis. This chart highlights many of the principles we've applied to the indices. We can make an argument for a five-wave progression, but also some of you can make a case for a seven-wave progression. Does it really matter? Using our principle of setting up for the largest move in the sequence, we see this chart ends the retest of the low leg on Figure 5.12 Halliburton, shorting opportunity from divergence HAllIBURTOH

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it isn't exactly clear what pushes the chart higher, but we do have a 3-day window from day 144 to day 147, where the chart finally achieves liftoff. Whatever the case, we never do come back down to touch the support area created on the 126- to 127-day windows. If you look at the first chart of the entire move (Rgure 6.10), you'll see three major pivots. The first one came in at 76 days; the next, at 126; and finally the last one, at 180 days. The 180th day can be interpreted as Lucas 18 times 10, but more important would be the difference between the 126th and 180th day, which implies a 54-day, low-to-low cycle. On the 55th day of the rotation off the 127-day cycle, Keithley starts a run that triples in value over the next 61 trading days. It pulls back for another 25 days, and on the 26th day goes parabolic until the 319th day of the move, which makes the parabolic wave exactly 54 days. The final case study of this chapter first appeared in IBD, January 200l. Skechers came to prominence during the spring rally of 2001 when other

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One clue might be that the first leg down retraced 23 percent (green line) of the entire move up. Looking at how these retracement markers line up, our first conclusion would be to look for a pullback to the 1150 area because that is the 50 percent retracement of the whole move, but only a couple of points off the 61 percent retracement off the secondary bottom. We look for a cluster. Without having any other information to go on, this immediately becomes the highest probability point to consider. Another area to consider would be the 1130-1136 area, which represents the blue 61 percent retracement that is near the April low. Once the first leg down off the high completes, we have a little more information to go by, and we start looking at whether there are any correlations between internal wave extension points and Fibonacci points. The more information

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projects a potential high at 3 in January 2006. In this case, it so happens we do have a common interwave relationship as the December to January rally has an approximate .618 relationship with the October-November leg. As opposed to an extension, Leg 1-2 with it's projection as far as 48 gives us advance notice ofwhere the third leg up in the sequence is going to end. Line 4-5 also projects a top at 3. This is a good cluster and sets off a 5-point ABC sharp drop. But the pattern isn't done. The leg to the February low has common Fibonacci relationships as the C leg is .618*A. We have common Fibonacci relationships mixed in with the advanced techniques. Nobody said this is a piece of cake. As you can see, the January high is taken out at the end of February to point 8, which has perfect precision with line 6-7. Finally, the turn comes, and we have a progression from points 9 to 15, in which every leg is perfectly related to its smalldegree correction along the way.

Starbucks Figure 8.8 is a wonderful of example of a great setup with Starbucks (SBUX). We measure out the correction and see the extensions. This chart bottoms out at a 2.618 extension of a B, or second, wave. I'm starting to put in Fibonacci extension lines in place of the straight lines you've seen in the past few charts. You can also see that the whole trend off the top completes in a perfect 62 days. Obviously, not all setups are as clean as this one. However, when you see something like this, you should go for it 100 percent of the time. As far as pattern recognition goes, you can't beat this; you will be getting into this stock at the highest possible risk/reward ratio possible. It's worth mentioning here the other principle concerning the relationship of final waves to first waves. Check out triangle 1-2-3. As you can see, the final leg up, which is 1-2, has a .618/1.618 relationship with the first leg down of the new trend. By the way, the first leg down completes in 13 days. Let's say you went short at the top. Armed with this relationship, when you see the first leg hitting and reversing on the target, is this your clue to take your profits? When you see this happening on the correct number of days, bells should be going off in your head to take your profit. Want to get back in for the best part of the move? Check out triangle 4-3-5, which

1 80

Breakthrough Strategies for Predicting Any Market ---------------"---~--------"---"------------------

starts near the end of May, and you'll see lines 4-3 (hard to see) have a .618 relationship with 3-5, which is the B wave. If nothing else, that is your pattern recognition clue of where the B wave might end. Remember, looking at these charts in real time is very different from seeing this after the fact in this book. Once the correction is over, you can do your drawing extensions to see the potential of the down move. Could it have ended at the 1.618 extension after day 60? Absolutely! This is an art, not a science. You didn't get a really good reversal on day 61. You needed to see more in terms of the candle, which as a harami didn't even cover half of the black candle the day before. Day 62 brought us the gap down to the 2.618 extension target. As you can see, day 62 was a big white

Figure 8.8 Starbucks, 2.618 extension setup Stlrbuck. Corporltion-(....dlq HM) Exp. Milv A vg. (20) Lasl=31 .66

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------------=----=---------=---'-------------see where the red retracement lines project. The bottom point is a cluster of the two price projections and price action turns up on the 133 day of the trend right after the NASDAQbottomed on the 61 day (see Figures 8.1 and 8.13) Figure 8.12 highlights several of the principles we discussed earlier. First is the concept of corrections driving the price action. Then, we have a cluster where the last wave of the old pattern projects a target for the new pattern. As you can see, the last wave concept should be used as a guide simply because we really don't know if it's going to project to the bottom of an A wave or the bottom of something much larger. Unfortunately, we don't have the answer to that. All we know at this point in time is that the relationship of the final leg is going to be meaningful in the new trend. This methodology, however, becomes very useful by the time we get to June/July 2006 because we can get a jump on the competition on where there will be a high-probability low. Understand at first, this will be a bit confusing; however, the more you work with this concept, the more you will see its application and how precisely it works on a variety of time frames. For now, I want you to get familiar with this concept. I believe these final charts go a long way to help in our understanding of forecasting financial markets. Figure 8.13 is a chart of the NASDAQ from the January 2005 high to the April 2006 high. We already covered the back end of this chart earlier in the chapter. What is most fascinating to me is the relationship of the correction from January to spring 2005 in relation to the rest of the pattern. We are not going to cover the time relationships again because we have already done an exhaustive job earlier. Ultimately, what finally turned this chart in terms of price was the relationship of the corrective wave. Recall, on the first day of trading in 2005, the chart topped at 2191 and finally bottomed at 1889 for a move of302 points. When we take a perfect 1.618 and multiply it by 302, we get 488, which would have taken us up to 2377. We topped at exactly 2375.54 or 1.46 points short of that target relationship. You can go over this chart, and you will not find another interwave calculation that comes as close as that one. There are a few others that do come close, but not with this type of precision. As far as I'm concerned, the NASDAQhigh in April of 2006, in addition to all of the time relationships, turned precisely on the relationship to the 2005 pullback leg. As you can see, there are several

8 • Advanced Projection Techniques

----------------------------"----------=-----------187

smaller degree relationships that work as well. I've outlined 4-5-6 and 7-8-6. There are many more on this chart. Finally, Figure 8.14 is the chart of the NASDAQbear market from 2000 to 2002. The ultimate B wave of our time spanned from May to July. There was a retest close to the high with the failure in September. I've drawn three sets of retracements. The first is that larger pullback from that summer and two more from early 2001. This illustrates that when we take either a 1.618 or a 2.618 projection from the top of these corrective waves within the larger trends, we come to a close estimate of where the final bottom actually traced out. When we take either the 2.618 or 1.618

Figure 8.13 NASDAQ Jan 2005 high until April 2006 high various projections NASDAQ COMPOSITE

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Along the way you can see that the 1.618 extension of the B wave took us exactly to the January 2001 low. If you recall, that was the exact point when Greenspan announced a surprise interest rate reduction, which wasn't at a scheduled Fed meeting. Whoever was short at that point in time was the victim of a very intense bear market rally. Not only did this technique give us an excellent estimate for the bottom, but it also gave us advance warning of a potential sharp reaction in a bear market on the purple 1.618 line. I haven't included all of the relationships on this chart, but there are other instances where the 1.618 extension of correction caught smaller degree bounces along the way. Do you still believe that news events rule the waves? Or do you now consider that waves and their calculations somehow manifest news events at precisely the correct point in time on a price chart? Figure 8.15 BHP 89 month cycle Bhp BIlllton Limited

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ADVANCED CALCULATIONS To conclude this chapter, I'm going to change gears and show you some really sophisticated calculations. This next case study falls under the category where we really don't know the ending. But it certainly is interesting to see how we've come to this point. I've included this study on BHP because it is a very important stock that is traded both in the United States and in Australia. But there are some important lessons to take from this study. I'm going to show you the progression from the bottom on a weekly and monthly time scale. This is the NYSE version. There is nothing special about the first chart, Figure 8.15. All it shows you is that from the bottom to the steepest correction since 2001 equals a total

Figure 8.16 BHP highlights the first stage of the move Bhp BlUlton Limited

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9 • Timing the Forex Market

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The 20-day moving average supports a very powerful wave (iii) because it is touched on the 28th day of the leg, and day 29 is a powerful open candle. The move finally tops in the 56th day of the progression and forms a triangle. You can make a case for a wave (iv) triangle here, which I've outlined. However, because it ends on 50 bars, perhaps you can also make a case for an ending diagonal triangle instead. I've drawn the possibility of a triangle and diagonal triangle so you can compare and contrast the subjectivity of Elliot and you can confirm the time count on your own with the time count. I drew the triangle because the price measurements confirm it. I would prefer to see a triangle confirmed by both price and time calculations, but the market doesn't always give us the perfect setup. What it does give us are perfect time calculations as the whole move tops in a 188/62 bar cluster. We also get a very nice reversal candle formation at the top where the bearish MACD divergence pays off.

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Figure 9.7 is an hourly chart where the MACD divergence pays off. Before we get there, follow the progression of this downtrend. As we come off the top, price action hits the 20-period moving average on the 11th bar, which is a good pattern-recognition tendency. The 20 is not touched again, although bar 21 is the highest point of the next small spike. We get a near-term low on the 46th bar of the cycle, which you know by now is a very common relationship. The downtrend resumes at the 56-bar window (55+ l).The bounce creates a congestion zone into January 9. This particular high stalls at the 38 percent price retracement of the portion of the leg that started down on January 3.The final low traces out on the 33rd bar of the progression off that congestion zone. What you should take away from this chart is the fact that divergences will persist for a long time. This is such a powerful downtrend that we covered a lot of price territory in the first 46 bars where momentum peaked. However, it took nearly another 100 hours of price action before we got a good low. Keep in mind the time frame of this action. In the bigger scheme of things, it was an A wave low, and ultimately, by the end of the Figure 9.7 Aussie dollar, hourly where the MACD divergence pays off (AUD AO-FX - AUSTRALIA DOLLAR COMPOSITE,GO) Dynamic.O:OO-24:OO

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month, this low was taken out, but not before there was a good countertrend rally. Figure 9.8 shows what happened in the C wave down later in the month. We are using the same time frame. What is notable in Figure 9.8 is the spike into the 20-period moving average on the 47th bar of the progression. Once again, we have a strong initial thrust that takes the MACD all the way down. We don't get a low for another 100-120 hours. Where does the progression bottom? Fibonacci bar 144 finally takes care of a triple positive divergence. Figure 9.9, the correction from 2004, changes gears a little bit but exhibits another concept we've covered in the advanced Fibonacci section. Check out the final leg up in February. I've drawn extension lines that cover only the final small portion of the uptrend. There are two major relationships in this downtrend to which you should pay close attention. The first leg down, which ends near price point 73, is a 1.618 extension of the final leg up. It shows a .618 line there only because I didn't want to use too many

Figure 9.8 Aussie dollar, 144 bar C wave later in the month lAUD AO-FX - AUSTRALIA DOLLAR COMPOSITE.WI Dynamlc,O:OO-24:OO

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retracement lines with the eSignal format. That particular point on the chart, which you can target ahead of time, hits a beautiful low on the 18 (Lucas) bar move of the trend. After another 18-bar cycle bounce, the downtrend resumes. I will repeat this tendency for the benefit of Forex traders who are skipping the rest of the book to read this chapter first. Gann and all traders who follow financial geometry believe multiples of 144 (Fibonacci) are very important. And they are. That is why we pay special attention to 36, 72, and 108 cycles. Of course, Lucas 18 is a multiple of the same. In this case, we have two 18-bar cycles or a 36-bar high-tohigh progression. As the trend continued, we saw a small spike up into the 56th bar at the 20-period moving average and finally a bottom on the 87th bar. That low is an excellent 2.618 price extension of that final leg up. I urge caution, because it doesn't always work out this way; but, it does more often than not. At the very least, had you targeted this low using this methodology, you would have been in an excellent position to go long in the middle of June when you had an excellent reversal candle. Figure 9.9 Aussie dollar, 1.618 extension correction of final leg up AUD AO.FX . AUSTRALIA DOllAR COMPOSITE.D) Dynamlc,O:OO.24:OO • .

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The next two charts of our Australian dollar case study are for those ofyou who concentrate on intraday patterns. The first is very straightforward. On a 15-minute basis (Figure 9.10), we have a 55-bar progression. The first leg up creates a congestion zone around bar 21 as three bars share a common high. The low comes in at bar 23. There is another huge spike down at bar 29, and we top at bar 31. The Fibonacci retracements are drawn off the low and secondary low to the high at bar 31 to target a pullback off the 31-bar high. You can clearly see that we found a bottom at a double 38 percent retracement line after a 13-bar pullback (44-31). The final bar tops in the 11th bar of the leg for an overall high at the 55-bar cycle. The final chart (Figure 9.11) is here because I wanted to highlight a basic Elliott relationship that I haven't covered in this chapter. There is a fivewave progression where the top of wave (iii) is a 1.618 price extension of wave (i) as it is measure off the low ofwave (ii).1his is how traditional £1liotticians measure waves based on common Fibonacci calculations. Wave (iii) actually tops on the 69th bar of the move, which is the 125th bar

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Breakthrough Strategies for Predicting Any Market 208 - - - - - - - - - - . . . . : : : . . . - - - . . . . : : : . . . - - - - - - : : : : . . - - - - = - - - - - - - - - - - - - - -

overall. Notice the Iowan bar 56 as it leaves a huge tail to the downside. Although this is a very big bar, it really is only half a bar! If you consider that, by the time it tops, it is the 68th bar of the move even though it is actually the 125th bar of the entire trend. That bar is also a high-wave candle. I believe the chart may be under the influence of both the 123rd (Lucas) and the 127th (1.27 derivative) bar cycles. Although it is not shown, the ensuing correction that ends on the 156th bar is a cluster with the 38 percent price retracement off the low. The final high comes in at the 188-89 bar cycle, which is a double high and also 33 bars off the wave (iv) low. The MACD also levels off at that point.

Yen The final two charts of this chapter exhibit excellent timing calculations on a Yen 5-minute chart. If you are going to trade on 5-minute bars, this might be the one that has the cleanest tendencies. I've outlined all of the relationships on Figure 9.12. In this downtrend, we break lower after the Figure 9.11 Aussie dollar, i ntraday five wave progression

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9 • Timing the Forex Market

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18th bar. The bounce concludes after 21 bars up. The next phase lower gives you numerous chances to get in. There are opportunities to go short on the 11th, 29th, and 46th bars. We get a very clean low on the 162nd bar of the move. For the most part, where the trend is not contained by the 20-period moving average, it is contained by the 50. Finally, Figure 9.13 shows what happened on the next progression up off the 162 bar low. I've added this leg so you can see just how powerful a 162-bar tendency can be. The whole cycle starts anew with a 68-bar move the other way. Note how the 55-bar cycle becomes a buying opportunity at the 61 percent price retracement level (breaks out on the 55th bar). Here are a few things to note about this chapter. I've given you examples from some of the most liquid and popular markets. There are other less liquid markets that you should avoid because setups will be few and far between. Here I've picked some of the better examples. However, it's just like the other markets really good setups don't materialize all of the time. Because there is 24-hour trading, many of the setups are nothing

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Breakthrough Strategies for Predicting Any Market

248------------.:::..-----=::---------.:::...-...:....-----------------

next bar. You should enter just below the low of the bar with the taiL As you can see, that sets up a beautiful short. Then at the bottom, a positive divergence develops in the 47 (Lucas)-hour time frame. We get a beautiful bullish engulfing bar on the time window. Tails are a bit different. You shouldn't wait until the white candle completes, because your stop (which should be below the low of the tail) is too far away. If it goes against you (and sometimes it will), your loss will be relatively large. You can enter once the white candle gets above the high of the final black candle with the taiL When you have a taillike that, once the high gets taken out, you have a good chance a low is in.

Figure 11.4 Hourly of CL-Colgate Palmolive COlGATE PAlMOlIVE

Chart Courtesy Of Prophet Financial Systems (www.prophet.net)

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