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Realtraders,
Due to size limitations on realtraders, I had to send the charts separately.
Thanks,
John Boggio
Attachment Converted: "c:\eudora\attach\SYLT716A.gif"
Attachment Converted: "c:\eudora\attach\SYWK716B.gif"
Attachment Converted: "c:\eudora\attach\SYDL716C.gif"
Attachment Converted: "c:\eudora\attach\SYST716D.gif"
For recent commentary and more informations regarding SymWave, please go to:
Commentary: http://www.realtraders.com/Boggio/disc7_toc.html
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm
Thank you.From ???@??? Thu Jul 16 17:06:05 1998
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Date: Thu, 16 Jul 1998 19:36:59 -0400
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From: "G.John Boggio" <boggio@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: MKT SymWave for the SPU8 7/16/98 Part 1
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<x-rich>Realtraders,
What you are about to read has turned into a short novel but I think
you will find it interesting, enjoy. Also, due to size limitations on
realtraders, I had to send the charts seperately, see Part 2.
As many of you know, I used to post, on a regular basis, my analysis of
various market, particularly the S&P. This analysis usually centered
around a method called Symmetry Wave by Michael Gur Dillon, or as I like
to call it SymWave. I would then combine this method with various other
technical and classical chart formations that would enable me to
determine where pullbacks in an uptrend will most likely occur. Vise
versa for downtrend analysis.
After taking a rather long sabbatical from posting such commentary to
the group, I think I will again start back up. For those not familiar
with this form of analysis, you can go to my signature below to find more
information as well as past (older) commentary regarding such.
Currently, I am actively charting and trading the September S&P (SPU8).
It is this market that I am seeing some interesting wave formations take
place. In an attempt to best illustrate the current wave formations, I
believe it will be most useful if I begin with the largest wave structure
and work towards the smallest. In doing so, I have attached several
.gif files that should help visualize these structures.
By starting with the largest wave structure, we have to go all the way
back to the 1987 crash and then work forward. To most of you, this is a
repeat of past 'long-term' analysis that I have already presented but can
act as a refresher.
The first graph (SYLT716A) is a weekly chart of the S&P CASH for the
period 1/1/87 - 1/1/95. The largest wave structure began with the high
during the week of 8/28/87 at 338 and is labeled Wave (I) (a far cry from
where we are now). Following that high, the market declined or crashed
to a low of 216 during the week of 10/23/87, Wave(II). This decline
measures 36.1%. Using the Symmetry Wave Trading method, we would look
for future retracements that symmetrically measure or match this same
magnitude plus or minus 20%. This means 20% of 36.1% or 7.22%. Once you
have this number, you would use it to find your allowable leeway for a
matching symmetrical decline. In this case, simply subtract 7.22 from
36.1 and then add 7.22 to 36.1 and you get a leeway in percentage terms
of a possible future decline of 28.88% - 43.32% with the ideal
symmetrical match at 36.1%, obviously. Note, today's analysis is NOT
going to forecast a crash like that at this time, I am simply starting my
analysis with the largest wave structure and will get into a more
realistic decline or pullback based on much smaller structures that more
realistically reflect todays environment. However, I will say this, "A
36% decline is somewhere in our future".
Now that I have explained how a leeway is determined, we will work
forward to find any and all other wave structures that currently exist.
The next largest wave structure is marked by the decline of 1990. This
decline began with the high of 370 on 7/20/90 (week of) and is labeled
Wave I and ending at 295 on 10/12/90. This decline measures 20.3% and
its associated leeway is +/-4.06% or 16.24 - 24.36% around its mean.
This second wave structure <italic>may</italic> more appropriately
reflect today's market but I do not believe that a decline of this
magnitude will ensue before we hit a high of Dow 10,000 +\-200 points.
Therefore the good news is that we are going higher, but the bad news is
that a decline in the range of 16.24 - 24.36% is near.
Next we will move to the decline of 1994 and this is were we begin to
see some very interesting and somewhat difficult wave structures which
begin <underline>repeating</underline> themselves. During the week of
2/4/94 we had a high at 483 on the S&P CASH and on 4/8/94 we had a low of
436. This decline is identified on that first chart as WAVE 1 - 2 and
measures 9.73% +\-1.95% or a leeway of 7.78 - 11.68%. Remember these
numbers!
If you now go to the second chart (SYWK716B), also a weekly chart, you
will see our next wave. Specifically, on 5/24/96 the market hit a high
of 681 and we will call the Wave 3. The Wave 4 low was formed on 7/19/96
at 606. This decline measures 11.0% and symmetrically matches the
Original Wave 1 - 2 as identified above. This Wave 4 bottom marked your
entry to go <underline>long</underline> this market, at that time, based
on this form of analysis. Your protective stop would have been place
just outside the original leeway zone of Wave 1 - 2 or if the market
continued to decline greater than the 11.68% as identified above.
Subsequently, the market rallies from the Wave 4 bottom to a high of 818
on 2/21/97 (Wave 5) and again begins to decline into the Wave 6 low at
734 on 4/18/97. Guess what, the magnitude of this decline measures 10.3%
and again symmetrically matches the original Wave 1 - 2 wave structure
and again gives us another buy signal to go long this market based on
these long-term wave structures. However, without getting into to much
detail at this time, as a wave structure begins to mature PAST the level
of a Wave 6 or 8 or its equivalent, it suggests that its wave structure
will begin to weaken and failure is imminent. Therefore, new purchases
to go long at the Wave 6 bottom had to be taken with greater caution.
Anyhow, as we know, that bottom held and the market again rallied all
the way up to the 10/10/97 high of 983 and we will call this the Wave 7
high. At that point, you can clearly see a divergent sell signal forming
on the 14 period RSI and extreme caution would have been taken either buy
selling some or all of your position which you accumulated since 7/16/96.
Now this is where is gets a little complicated. From the 10/10/97 high
(Wave 7), the market begins to decline and during the week of 10/31/97
the market/index makes a low at 855. If we measure this drop, we will
see that the decline measures 13.0% AND falls outside our original Wave 1
- 2 wave structure. Thus leading us to the conclusion, at that time,
that the market was going to head toward its previous wave structure
which was identified earlier as the 1990 crash which measured 20% +\-.
As we now know, that did not happen and the 855 level was quickly
reversed on the weekly charts AND can be clearly seen as a Japanese
candlestick 'Hammer' formation, a bullish sign. Therefore, we had some
contradictory information at that time but it was resolved when the
market proceeded to exceed its old highs in January 1998.
Further, as I mentioned earlier, this decline presented us with another
complexity. Let me explain. If we go back to the Wave 3 - 4 wave
structure on the second chart, and measure
<bold><italic><underline>its</underline></italic></bold> 20% leeway of
the 11% decline, we get a range of 8.8 - 13.3%. Notice that the next two
structures are almost identical in magnitude declines and if you used
this 1996 Wave 3 - 4 pullback as your Original wave structure, instead of
the 1994 decline, then the October '97 decline WOULD HAVE stayed within
the target zone. Anyhow, I am not trying to make excuses nor am I trying
to 'optimize' this method of analysis, but I thought I would present it
to you because I know that a lot of you (or at least a few of you) have
actively followed my analysis for the past several years and might find
it interesting. Therefore, I am just letting you know my thoughts.
So what does this mean, I'm not sure! Either we have begun an
<bold><italic><underline>new</underline></italic></bold> Wave structure
which measures approximately 13% (as seen in the Wave 7 (tricky) - 8)
and therefore suggests that a decline of any serious significance SHOULD
measure 13% +\-20% or 10.4 - 15.6%. <bold>OR</bold> we
<italic>include</italic> this 10/10/97 - 10/31/97 wave structure
<italic>with</italic> the recent past structure as presented above. If
this is the case, I could clearly say that that structure is now
overextended and if our next decline in the market measures greater than
13+%, then we should look for it to continue to decline towards 20.3%
+\-4.06% as identified in the 1990 correction and labeled Wave I - II on
chart 1. I told you this was a little complicated but I should be able
to figure this out as time goes on!!!
With that said, we can now move forward to some of our most recent
market activity. The third chart (SYDL716C) is a daily chart of the Cash
index. I will begin with the high set on 12/5/97 at 986.4 and will call
this Wave A. From that high, the market retraces to the low on 1/12/98
at 913.31, Wave B. This decline measures 73.09 POINTS (we have now
switched to points as opposed to percentages because our time frame and
trading range have narrowed to reflect current market behavior and
sentiment). If we take the 73.09 points and calculate its leeway of 20%,
we get a range of 58.47 - 87.71 points. Therefore, we are looking for a
decline, in the future that falls within that range and we will look to
again go long.
On 4/22/98 the market made a high at 1132.96 (Wave C) and a low on
5/22/98 at 1074.39. This decline measures 58.57 points and falls just
within our target zone. Therefore, we would go long at that Wave D
bottom. Interestingly, you will notice that on 6/10/98, the market made
a top (not a new high) and then reversed back toward its 5/22 low. It
hit this low on 6/15/98 at 1074.67. Now look at the channel lines drawn
on the chart. These channel lines actually represent a symmetrical
channel and are drawn by starting your line at the TOP of the Wave A high
and connect it to the TOP of the Wave C high. Next, use your parallel
line function in your charting program and place it on the Wave B low and
allow it to ascend upward. Do you see where it crosses the price
action, you guessed it, at the 6/16 low at 1074 and even formed a double
bottom. Therefore, we have a confirmation of this Wave A - B structure
in BOTH price and time...amazing. BTW, another new buy signal is again
given at this point (Wave D).
Now what I would like to do is focus on a shorter time frame,
specifically the 15 minute chart of the S&P FUTURES (SPU8). I am
switching to the futures because I believe it more accurately reflects
current market conditions as well as having the ability to lead the cash
market. The reason why I do not use the futures contracts for the whole
analysis is because as a wave structure spans multiply contracts, I find
it difficult to properly adjust for contract rollovers and early market,
thinly traded activity at the beginning of a new contract month.
With that said, let's look at chart SYST716D, a 15 minute chart. Let's
begin with the Wave 'a' high on 6/10/98 at 1139.70. The wave 'b' low
occurred on 6/15 at 1084.00. This decline measures 55.7 points and if we
calculate the leeway, we get a range of 44.56 - 66.84 points. Therefore,
considering that the SPU8 has rallied over 100 points from it June low,
it is not to unrealistic to expect that our next decline of any
significance could/should fall within our symmetrical target of 55.7
point +/- 11.14 points. Further, if you add this 55 point move to the
TOP of the Wave 'a' high, you get approximately 1195 on the SPU8 and
suggests that this current rally is close to exhaustion. Thus, if this
market does not go much higher than our closing high of today (7/16/98 at
1193.50), and a decline ensued, a 55 point symmetrical decline plus our
leeway, would take us back to approximately the 1148.94 to 1126.66 on
this contract. Further, I have included a Fibonacci retracement scale on
this chart and it too indicates a 50% Fib retracement at the 1138 level.
Combine this with classical chart formation analysis of old highs acting
as new support levels and again we have confluence in the 1140 area.
Finally, since this rally has been extremely strong, I would be a buyer
as soon as the market declined to the minimum leeway area so as not to
miss the next leg up, thus forming a Wave 'd' bottom and a new go long
entry signal (near the 1150 area which also has a 38% Fibonacci support
level associated with it).
There is one more possibility that I would like to present to you that
is NOT based on symmetrical wave analysis that could allow for a bottom
at the 1160 level and leave us just 10 points short or our leeway zone.
My reason for believing that this 1160 may hold, is based purely on the
old high, old low support line drawn on the chart at that level.
Consequently, if the market were to reach that level and reverse, then
make a new high, it would then form another new wave structure which
would require our attention in the future and keep this bull market alive
even longer. I will keep you informed.
Now that I have given you an idea of what I am looking for, I thought I
would conclude with a very nice setup of an even smaller symmetrical wave
structure that has been present for the past six weeks.
Again take a look at the SYST716D chart. Let's begin with the decline
that took place between 6/17 and 6/19. This original decline measures
18.80 points and its resulting leeway allows for subsequent declines of
15.04 - 22.56 points. This original wave will be called Wave aa - bb.
The next wave occurred all in one day on 6/25/98 and measured 15.70
points and symmetrically matches Wave aa - bb and issued another new buy
signal. The third wave began with the high on 6/29 and the low on 6/30.
This Wave ee - ff measures 16.50 points and again matches the original
wave. Next, go to the 7/8 high and the 7/10 low and measure it (Wave gg
- hh). It comes in at 18.30 points and again symmetrically matches our
original wave. Guess what, the market again finds its support and has
continued to rise to its current levels, isn't this amazing.
Finally, earlier I mentioned the formation of extended wave structures,
and as you can see, this Wave aa - hh is now overextended and failure is
imminent. Therefore, the next time this market declines approximately 18
points+/-, I would NOT be a buyer and would begin to look for a more
significant decline in the magnitude of 55 points+/- as mentioned
above.
Finally, finally, as I mentioned, I suspect that we are quickly
approaching that short-term top which should lead to this expected
decline. When you consider this weeks rally and the fact that we are in
the midst of option expiration week which ends tomorrow, we could very
well see an unwinding of these positions the beginning of next week.
Time will tell!
For those of you that have read to this level, congratulations and
thanks. Now I remember why I took my sabbatical... this stuff requires a
lot of time to put down on paper so that all can understand.
Have a good day and trade profitably.
John Boggio
For recent commentary and more informations regarding SymWave, please go to:
Commentary: http://www.realtraders.com/Boggio/disc7_toc.html
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm
Thank you.
</x-rich>
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