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>Robert McKinnon's article, "Enhancing the Raff Regression Channel," in
>TASC Nov. 98 describes a technique of looking at the underside of lower
>Raff channel lines as offering resistance to rallies: ". . . once the
>support provided by a channel bottom is overcome, the channel bottom
>becomes a strong resistance line." (Figure 7). In case you missed it,
>today's (Tuesday's) rally in the S&P 500 (cash) rose to just under the
>bottoms of five (5) Raff channels, the longest one tracing back to the
>Dec. 1994 bottom. If McKinnon is correct, this could be a portent of a
>sharp turn to the downside in the near future.
1. All trendchannels bottom lines through breaches can be seen as support
becoming resistance (a common standard theory "old resitance becomes support"
and visa versa, and as such nothing fancy).
2. Metastock build in Raff Regression Channels(-Tool) are not the commonly
known and used Linear Regression Channels(using as base a periods highest high
and lowest low as its surrounding bording values).
Raff RCs are dynamic and as such give the wrong output.
3. Metastock build in Regression Line(-Tool) is dynamic too, and as such is also
not used as a Linear Regression Line(MEDIAN) or for Linear Regression Channels.
dynamic=adjusts for periodical data input
median=middle
Whatever the functionalities are of the Metastocks build-in Raff Regression Channels
and Regression Line Tools are "beats me".
They are dynamic and when plotted start to float in the charts and do not ever hold their
original first start point and neither -in time- their last, are as such misleading in the way
its North or South Regression Channel lines would be the prices or trends support &
resistance lines, which, from this daily floating in the chart, obviously they are definitly not.
The common Linear Regression Channels(see below), with as its base a periods highest
high and lowest low as well as the Median, the line in the middle, have been used for
centuries and provide the real support & resitance.
And as such either Metastock has got these "mixed up" or just hasn't got around to
build-in the proper ones.
WorkAround:
If you want the Linear Regression Channels for Support & Resistance plotted
properly, use the APF-tool (Andrew's Pitch Fork):
Use a Major Low as starting point, eg "the first point to drag the animitation from" and a
consequtive All Time High(or last High) as top lines 2nd point and a consequtive Major Low
as the bottom lines 3td point
-Place the first point exactly on the Trends starting Major Low
-Place the second(North) on the Trends highest high
-Place the third(South) on the Trends next up Major lowest low
Now you have the true Linear Regression Channels.
Rules:
-An outbreak at the top implies to draw another channel, tiled on top of the APFs 2nd point
line, done by creating a parallel line with as its width the same distance as can be measured
from the Linear Regression Line(=Median, line created from the APFs 1st point)
-An outbreak at the downside also implies to draw another channel, this time attached
to the bottom APFs 3td point line and created and measured the same way
Both type of outbrakes can be seen as 'suspect' as the trend is accelerating to "unknown
territory levels" and as such a pull back return to the former channel usualy will be made,
and a return into the former channel can be seen and interpreted as a very weakening signal,
with usualy, after its return into the former channel, a pull back attempt to the outer line will
be made in an attempt to escape from the former channel. If such an attempt has been made
succesfully, a further trends continuation can be expected, and if the attempt fails
-another weakening sign- a return to the Median is then to be expected.
------------------------------------------------------------------
As you have discovered we are now at a Major intersection, with lines from all sort
of directions, coming together at one central point. Also such suspect break to the
downside has taken place. Here are some of the lines:
Patterns & Lines:
1095 - former first flag in downtrends support line, now resistance
1075 - horizontal support in former Broadening Top pattern, now major resitance
1075 - right shoulders resistance line in former falling Irregular H+Ss pattern
1075 - flags rising support line, now resitance
1075 - IMT diamonds falling resistance line
1075 - Goslin48 - price levels "47 to 48 days ago"
1070 - LRC rising former support since 1994 (APF-points: 1st 1994-Low,
2nd 1998-High, 3td 1996-Low), returning attempt into the former bottom
channel, now Major resistance
1070 - SMA200 Long Term Major support, now resistance
1055 - ST Broadening Bottom diamonds falling resistance line, now support, outbroken
with a current target to be set at 1200
Indicators:
MACD - around "0" level(+ =possitive, - =negative), valid trigger buy
RSI - around 60, support, now resistance, valid trigger buy
CMO - around +12 (+25 level =support, now resistance), valid trigger buy
Rally Meter(Osc) - around -0.02 (+ =possitive, - =negative), valid trigger buy
(All indicators show positive higher 2nd bottom divergences)
BBands-daily chart widening(=more volatility ahead)
BBands-weekly chart narrowing(=less volatility ahead)
Rally Meter(LJ1-Mom) - Negative
Rally Meter(LJ2-Regr) - Negative
Most lines where former Major Support Lines being breached to the downside.
And with "old support becomes resistance".......................................................
And here is more, it is not only happening in the S&P500, but worldwide on all
major exchanges indexes.................................
And in bearish markets(Japan&HongKong) indexes as well............................
The in this years top formation build up support level will now become this years
stiff resistance..................... with the re-testing of latter former Lows to be expected.
Regards,
Ton Maas
Ms-IRB@xxxxxxxxx
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