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Saturday, July 31, 2010

Andrews Pitchforks

For a quick and simple method be sure to look at the last half of this posting

Quoting myself "Expecting a pause at 1088.32" That's right, minutes after the open I said 1088.32 and the low for the day was 1088.01. Later I said the SPX would close near 1094. The market came down from 1104 to 1094.30 and bounced at 1094.41. Each time within pennies of my prediction.

Is it just plain luck that I do this day after day? NO!
Read along and I will show you how you can achieve near perfect predictions.

On one hand I'm pleased that people ask me what the market is going to do, but I should not be telling you what the market is going to do. You should be looking at my method and learning from it. It's not difficult.

I've tried to capture the essence of my analysis in the description of my blog (found under the Blog's title)
"Market forecasts derived from the general analysis of nature using classical mechanics, and the recognition of symmetric fractals".

Derived from the general analysis of nature - The market reflects the nature of man's greed and fear. The computer models that govern today's trading are based on algorithms long ago found in human nature.

using classical mechanics - Part of my analysis is based on physics equations derived from mechanical models of kinetic energy. In physics a predictive model is created and described probabilistically. When Price deviates from this model a signal is created.

and the recognition of symmetric fractals - The art in my analysis comes from the visual recognition of symmetry. The Andrews Pitchforks allow this symmetry to be seen easily.
So while it's a system, the heart of the system is Andrews Pitchforks.

What is this chart telling you?
So look at the chart above, and ask "What is required for a symmetric fractal"?

Let's analyze the SPX together one step at a time. I recently created this method of using Fibonacci Fans to help with placement of the Pitchforks, so I'll show you what goes on with that. The chart just below shows a Fibonacci fan. I'd like to point out that this fan was created from only the first 15 bars!

Now let's add a fork using just the data we had after only three days of trading.

This looks pretty good but Andrews suggested using the high and low turning points and this misses the bottom turning point , so with that in mind we may need to adjust this later. Generally the forks will need to be adjusted as the market reveals more of the fractal. Let's see how it goes.

Ok this is not too good. So here's where the artistic part happens. Let's widen the fork.

This looks better. I moved the bottom tine up to the low point and adjusted the center line to meet the next Fibonacci fan. At this point if you already use Pitchforks you may be saying "Hey the center line does not line up with the turning points". Hang in there, this is a learning process. Let's see how this works out as the market reveals more.

Not bad but here is where you get to use your artistic abilities. Let's widen the fork to include the peaks, and adjust it to the next Fib Fan below the current position

Yeah, This is looking better along the top and the center is getting closer to the lows we first began with. Not quite perfect, but let's see how the market develops.

Do we trust this? If so the market should turn right here. It looks close but we are missing these bottoms. Maybe the yellow 0.618 Fan line was the best choice. Let's make the correction.

Now let's see what happens.

Not bad! But do you see the next move?
This is where we need to see the alignment of turning points.


Now just when you think we are done.
Remember there is symmetry in nature, and the market is a reflection of our human nature.
So where's the market going?
This helps, but let's look closer.

What I see is a chart that would look more symmetric with further upside price and a very important level of recognition below the green line.

UPDATE August. 13, 2010
Compare what I said two weeks ago to this chart.

I'd also like to point out something I have termed "Lines of Influence". Even when we draw the forks in positions that will later be moved, by using the symmetry of the forks we are able to find areas of support and resistance.

Take a look at this white fork and ask yourself ...

Where does the symmetry lay?
Does this look complete?

Someday I will explore the Ichimoku Kinko Hyo, and Candle Sticks with you, and maybe if I can get my friend Greg who is much better at explaining math formulas to help, we can explore the physics of classical mechanics behind some of the indicators you are probably already using.

As always I'd like to hear your comments.

Here's yet more examples of the symmetry of the market

I just received an email from someone requesting further help with forks. Below is my answer. I hope it helps

The forks show the market's symmetry. If you have draw the fork correctly, a break out means the trend within the fork is over.

Forks can also be used to find resistance, and support as I showed today. The fork shown below does not originate from the top. The fork is showing where market symmetry lays. If the Price continues up it will find resistance along that fork.

OK we have one day of trading since I posted the chart above. Here's the results of today's trading. Notice the resistance at the top tine of the Yellow Fork. That's exactly what I said yesterday. Does this mean Price will follow the Yellow fork? No, it means the Yellow Fork told you where to find resistance.

So I seem to be getting questions about what's it's worth if we can't rely on Price following the Yellow Fork. Well it's worth a lot. If price breaks out of the Yellow fork we know it will follow the Red Fork.

As an added note: Please notice where the top tine of this fork lays and when you look at the next chart; please notice the price bubble.

Google Andrews pitchforks to learn more from another source. I've never seen anyone use forks the way I do, so don't expect to see what I've attempted to pass on.

That being said I'd like us to go one step further into symmetry.
This is something I noticed tonight 2010.09.09:21:00

And here is a beautiful fork:

This next screen shows my Fibonacci Fan setup for finding the center line of the Andrews Pitchforks. Please notice that the red dashes of the center line are somewhat covered by the 0.786 line of the fan.

I made the 0.618 line a slightly lighter blue for reference and because it often will be the line to align with. It's not always so perfect, but the Fibonacci Fan is generally very helpful.
I want to thank Dean for telling me about this guy Timothy Morge. He has a wonderful real time demonstration of Andrews Pitchforks. His method is a little different than mine, but I'm willing to learn from others too. Here's a link:

Analysis presented on this Blog has only informational, and educational purpose, and does not represent a proposal for buying or selling contracts, equities or currency.

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