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No flames please; got this from a friend no longer on the list. I'm just
forwarding this as it pertains to the Bonds thread. I have nothing to do
with the author.
Brent
-----Original Message-----
From: Asher <azlcpa@xxxxxxxxxxxxxxx>
To: brente@xxxxxxxxxxxx <brente@xxxxxxxxxxxx>
Date: Monday, May 17, 1999 4:24 AM
>This is a message posted to the TFC Commodity Traders' Forum at
>http://tfc-charts2.w2d.com/forum/
>
>Market Symmetry
>
>Posted by RICK RATCHFORD on Monday, 17 May 1999, at 1:45 a.m.
>
>====================
>Market Symmetry
>====================
>
>by Rick J. Ratchford
>
>There are several books on the subject of Cycles, Geometry, Formations and
so-forth
>that relate to the markets. All these fall under what is called Market
Symmetry.
>
>The markets follow a natural order or law. Nothing in the universe can
escape the laws
>that surround us all. Plants, animals, people and geography all play to
tunes of the
>natural sound track.
>
>Since so much has been written on this subject, I'm not going to get into
detail as to
>how each are affected by the laws of nature. What I'm going to deal with in
this article
>is simply the symmetry found in the markets and how they can be useful in
>determining a trade.
>
>Market geometry flys in the face of random market action. There are some
who believe
>that the movements you see on the price charts are the result of random
action.
>However, enough information is available for the astute reader to come to
the
>realization that those patterns you see on a price chart simply could not
happen
>randomly. The ratios within the patterns are mathematically related to each
other to
>form geometric shapes, which upon discovery can lead you to locating major
market
>turns.
>
>I recommend for those new to this subject to consider the study of
Fibonacci. As a
>beginning trader back in the summer of 1990, just prior to the Desert Storm
war, the
>markets appeared to be a jumbled mess of lines moving up and down without
any clues
>of where it might go next. Indicators such as the Stocastics were brought
to my
>attention, and I soon discovered how easy it was to lose a few thousand to
something
>that lagged market action. It was early 1991 when I learned about
Fibonacci, and that
>jumbled mess didn't look so jumbled to me anymore.
>
>There are many traders who like to look for 50% retracements, or for
support and
>resistance by noting previous support and resistance that formed those
market tops and
>bottoms. The reason this actually works to some degree is because those
fall into a
>geometric pattern.
>
>When you bought your first book on market analysis, what were you quickly
>introduced to? That's right, triangle patterns, flag patterns, rounded
bottoms and tops,
>channels, etc. What do you think those are? Triangles, squares, circles and
rectangles.
>Right? You are being taught to recognize the shapes of these geometric
patterns without
>being given a reason why they form, or how you can determine where one will
start
>and another will end. The only clue you are given is to watch for a
'breakout'.
>
>In going back to the subject of Fibonacci, there are a few geometric ratios
I would like
>to share with you now. Those would be the following:
>
>(.382) (.618) (.786) (1.00) (1.272) (1.618)
>
>These are just some of the related ratios of Market Geometry. I'll briefly
demonstrate
>how they are related.
>
>First off, 1.618 is called the Golden Mean. It appears in the growth
patterns of plants,
>the human body, sea shells and many other things found in nature. Even the
planets
>follow a pattern based on the Golden Mean. For example, for every time the
earth
>orbits the sun, Venus orbits the sun 1.618 times. The relationship between
Venus and the
>Earth is 1.618:1.00.
>
>(.618) is the reciprocal of 1.618. (1.272) is the square root of 1.618.
(.786) is the square
>root of (.618). (.382) is (.618) squared.
>
>If you take a right triangle with a base of 1.00 and a right side of 1.272,
the hypotenuse
>of that right triangle would equal 1.618. Also, if you take a right
triangle with a base of
>(.618) and a right side of (.786), the hypotenuse would equal 1.00.
>
>So now you can see how they are all related.
>
>Now it would be very difficult to go into every ratio, and all the
applications there are
>in using them. I can however encourage you to buy all the books on the
subject if you
>so desire to learn this fascinating field of market study. But for now, let
us consider a
>real life example using the daily June 99 T Bonds chart (all values are in
decimal to
>make the math easier.)
>
>On January 11th, 1999 a low was formed at 123.53. The next major top was on
January
>28th at 127.69. By taking the range of this climb, we can derive expanding
support and
>resistance levels using those ratios shown in this article.
>
>The top refers to Jan 28th, 1999.
>The bottom refers to Jan 11th, 1999.
>
>(1.00) ratio from the top provided us with the reversal bottom on Feb 8th.
(.382) from
>the bottom provided the support for Feb 12th. (1.00) from the bottom
provided the
>March 4th bottom. (.272) from the bottom provided the top on Mar 17th.
(1.00) from the
>top provided resistance to form the top of April 9th. (.272) from the
bottom provided
>the resistance that formed the double top on April 21st and April 30th.
(.786) from the
>bottom provided the support to form the April 26th bottom. (1.382) from the
bottom
>provided the support for the recent May 12th bottom.
>
>Coincidence? Random? You decide. But to this market analyst, this is purely
market
>symmetry.
>
>Now, I'm going to use market geometry to determine the likely bottom in the
T Bond
>market which has yet to happen. Today is May 16th, 1999 and the current
bottom in the
>T Bond market is 116.90 made last Friday.
>
>I'm going to use this time the weekly charts because I'm expecting a weekly
bottom to
>occur during week ending 5/21. This is based on a geometric mathematical
algorithm
>that I use to help determine weekly and daily reversal dates called Wdates
and Fdates.
>The algorithm is not available to the public, although the dates are. If
you are
>interested, our website address is http://fsoftpublishing.com.
>
>On the weekly charts, note the weekly top made week ending April 9th. The
previous
>major weekly bottom was made week ending March 5th. And the most recent
weekly
>bottom was made a week earlier from the top, during week ending April 2nd.
>
>The range from the April 9th top to the March 5th bottom is 4.31. (.618) of
that is 2.66.
>Expand 2.66 downwards from the March 5th bottom and we arrive at 116.62 or
116:20 in
>32nds. (T Bonds are quoted in 32nds.)
>
>Now, take the range from the April 9th top to the April 2nd bottom and we
get 3.908.
>(.786) of that is 3.07. Expand down from the April 2nd bottom and we arrive
at 116.62
>or 116:20 in 32nds.
>
>Do I have your attention now?
>
>But here is something else. If you take those same two ranges and expand
them out
>(.786) and (1.00) respectively, they both intersect around the 115:25 to
116:00 area. And to
>further this geometric picture, if you take the bottom made week ending
November 6th,
>1998 and draw a trend line from there underneath the March 5th, 1999 bottom
and into
>the future, it intersects the 115:25 - 116:00 price area for week ending
5/21. That happens
>to be the same week we are expecting a weekly bottom to occur based on our
date
>algorithm.
>
>And since we are still on this chart, if you take the top made week ending
December
>11th, 1998 to the November 6th bottom and expand it out by (1.382) from the
bottom, we
>again arrive at the 115:25 - 116:00 support area. And if we take this same
range and
>expand down from the bottom by (.786), we get the support price that formed
the March
>5th bottom!
>
>Okay, I think you get the picture by now. Nothing random about any of this.
Purely a
>mathematical way of exposing the geometric picture of the markets. We have
discovered
>that major and minor market tops and bottoms are related to each other in
some
>geometric form which may not be clearly visible to the eye (geometric
shapes are
>actually 3 dimensional, whereas the charts are only 2 dimensions. Try to
visualize the
>market forming a cube on a 2 dimensional chart. Get the picture? ) However,
by simply
>exposing the ratio relationship of previous market action, we can determine
probable
>market behavior to a point. As traders, we deal with probability. This is
certainly not
>the holy grail by any measure.
>
>Some may ask why would I share such information. Isn't there the chance
that it could
>affect future market behavior?
>
>There are a few reasons why I do not believe this will happen.
>
>#1 - This is nothing new. I'm sharing things I've learned from other
sources that are
>available to the public.
>
>#2 - You could actually expose the holy grail system to every trader and
most will not
>do anything with it. Some because of a level of skepticism, others because
they do not
>wish to do the work.
>
>#3 - These geometric patterns occur due to natural laws. Nothing we do will
ever
>change that.
>
>Take the time and work these out on some of your other price charts. See if
you can
>note the mathematical geometric relationship within the patterns. Some
markets will
>show different types of ratio patterns as opposed to other markets. Get to
know YOUR
>market. As you can see, the T Bond chart is one that I've found to have a
nice
>symmetry to it.
>
>So the next time someone tells you the markets are random, simply hand them
some
>darts and wish them a good day.
>
>:)
>
>Rick Ratchford, CTA
>CycleVantage Membership
>
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