Time@mode is a way of showing accumulation and distribution in the prices of actively traded/valued securities and markets. When a market is in motion, it tends to hold at a certain level longer than at any other level before it moves once again upward or downward. Much like a rest stop on a long drive, the congestion area or "mode" provides a useful measuring tool. All we need to do is quantify the amount of time at the mode and then once the market has broken free of that mode, we simply use that time projected forward to signal a likely ending for the trend.
In the same way we can project time, we can also project price by looking at the lowest low and the highest high during the bars that touch the mode. This congestion price zone can be quite wide at times and it projected from the mode once the market has disconnected from the mode. By disconnected, I mean that it has traded for an entire bar above or below the mode.
First off: I am showing you weekly bars that are encompassed by a monthly box, which is colored red or green. These "multi-time period" charts are very helpful at seeing multiple time frames at one glance, which is very helpful.
To begin to analyze TIME@mode - You will look for a sequence of "congestions" in the chart: To begin with on the lower left hand corner.
1. Purple - 4 months - the market peaked in the 5th month, broke under the low of the previous month and dropped back to the mode as shows. (check) 2. Green - 10 months - the market peaked very nicely at the top of the projection and dropped dramatically back exactly to the mode right after 10 months of time had passed. (check) 3. Yellow - 12 months - the market peaked perfectly in time and price right at the end of 12 months and at the projection area. The resulting decline only dropped under 3 months worth of lows and held above the 12-month mode by a mile. (fail). 4. Orange - 11 months - the market rallied the ideal amount of price in 10-months, then failed to break under a previous monthly low. (fail). 5. Blue - 6 months - the market rallied the ideal amount of price in 6 months, then also failed to break under a previous monthly low. (fail). 6. Light Purple - 5 months - the market perfectly peaked in time and price at the end of 5 months and returned to the mode at 1850. (check) 7. Light Yellow - 6 months - the market perfectly reached the peak in time and price but has not broken under a previous monthly low, and has not retreated to the mode down at 1850. In the time of the advance, a new mode of 7 months has been created just under the 2000 level, and this may halt the decline since it is a bigger mode than the 6 months at 1850. 8. Gray - 7 months - formed during the current uptrend and projects to 2290 in 4 more months (to September's close). 9. Green - 7 months - forming now, but not confirmed as we need an entire month above the mode at 2070.
The ONLY trend that is in place right now is the 7 month trend in GRAY. IF WE GO UNDER A PREVIOUS MONTHLY LOW, under 2070, then we can quickly sink to 1850 because that is where the previous trend's mode was where there were 6 months at 1850. If 1850 doesn't hold then we drop to the next mode down at 1650, then at 1330.
I can do this analysis on any market, on any time frame and it yields sufficiently interesting results.
I am putting a SHORT for this label for the main reason that time expired and a 1% drop could turn into a quick route to 2000 then to 1850. Stay tuned!
Tim 2092.83 last S&P500
Comments
reluctantplumber
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Another great chart and educational post by timwest. Thanks for your great work!
IvanLabrie
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Amazing, as usual ;)
juanclos
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Sorry for a basic question, what is the mode?
juanclos
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I mean, already understood the congestion area and describing it, it is composed by a first tiny range, then a peak, and finally another tiny range, opposed to the the peak which usually goes further than the previous tiny range; but in terms of market behaviour, how it is described?
timwest
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The mode is the most frequent price during the period studied. In looking at "monthly" ranges and drawing a line only through the level that touches the most number of monthly ranges, you can use that line to determine when the market "disconnects" from that line. Disconnect "UP" and you have accumulation. Disconnect "DOWN" and you have distribution. The mode is the measure of KEY accumulation or distribution and becomes the measure of time and price going forward once the market disconnects from it.
timwest
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I determine the period of study by looking for "No new lows for 5-periods" and then begin an uptrend from the lowest low. Alternatively, if there is no new high for 5-periods, I will use the highest price to begin a downtrend. I then find the mode and then continue my analysis. (Check out the many other charts I have posted here).