4xForecaster

Could $DJIA Rise To 21850? | $SPX $NDX $DJIA $VIX $GLD $SLV

FX:US30   Index of top 30 shares on Wall Street
1347 30 10
Friends,

Recently, I put out a few lessons on basic and advanced technical analysis , using simply trendlines, patterns, and delving into more complex geometries from Elliott Wave , Bill Wolfe and Scott Carney's widely known patterns.

Today, I would like to present a variance of the Wolfe Waves pattern, which some of you know as my main work-horse geometry as a secondary back-up to the predictive/forecasting model I use in my daily analyses.


PREDICTIVE/FORECASTING MODEL:

First, here are two values which the predictive/forecasting model has put out so for, representing loftier nominal targets (i.e.: low-probability attainment, but high-probability reversal, or top/bottom reversals, in contrast to numerical targets, which represent high-probability attainment, but low probability reversal, or future pivot levels) - These two nominal targets are:

1 - TG-Hi = 18945 - 23 JAN 2015

and

2 - TG-Hix = 21850 - 23 JAN 2015


(The remainder of the analysis will be placed in the text area, below this chart and commentary - Thank you - David Alcindor, Alias: 4xForecaster)
David Alcindor, CMT Affiliate #227974
Alias: 4xForecaster (Twitter, LinkedIn, StockTwits)

Signal Service or Private Course - Contact: admin@KADAInstitute.com
All updates on https://twitter.com/4xForecaster
( ... Cont'd ... )


THE WOLFE WAVES PATTERN:

In its strictest morphology, Bill Wolfe's Wolfe Waves patter ("WW") requires that a set of lines passing through points 1-3 and 2-4 be:

1) convergent;
2) tilted in the same direction, where both are declining or rising at a rate differential that maintains the convergence;
3) Point-4 be contained in the prior range defined by Points 1 and 2.

If you respect this construct, you would fine the basic wedge pattern which defines the basis of the Wolfe Waves. While I will spare other details of the WW, remember that the 2-4 line projection from Point-3 and Point-1 defining Points 5-prime and 5-second, as well as the 1-4 Line projection defining the Take-Profit signal are the signature features of the WW that separate it from a mere wedge or a standard Elliott Wave Leading or Ending Diagonal.


ALTERNATE WOLFE WAVES PATTERN:

Now, i would like to define an alternate morphology, reminiscent of the WW, which takes on a widening, or divergent form relative to the 1-3 and 2-4 Line relationship, with internal correspondence that will distinguish this pattern from Elliott Wave's A-B-C Flat, or the Widening Triangle - We shall refer to this as an Alternate Wolfe Wave pattern, or AWW for short.

The AWW maintains the same 1-4 Line importance (thick dotted line) in terms of profit-taking strategy, whereas Points 3 and 5-prime (where 5-prime, or 5', defines the level of price reached past Point-3. The level could be BELOW the 1-3 Line as in the case of this US30 weekly chart, or ABOVE as in the case of the SP500 chart - not shown here) of the original WW, once projected off of Point-2 will help define a signal line for added rallying as we expect to see price course its way towards the 1-4 Take-Profit Line projection.

In effect, Line 2-4 takes no primary importance, at least not in the break-out development of price, ONCE it FIRST crosses, THEN validates the contra-lateral side of the 3-5-prime Line projection off of Point-2.

In the chart, these TRIGGER LINES are defined as Points a, b and Points a-prime, b-prime (a', b'). Only the prime line matters as a signal and confirmation method.


OTHER APPLICATIONS:

As indicated above, a perfect example is offered by the SPX500 monthly chart, where the 5' rests above the 1-3 Line. This position precludes the use of the 3-5 Line (or Points a, b). Instead, the 1-3 Line projection is the element of the geometry that will be used in order to project off of Point-2 and define a TRIGGER LINE.


snapshot




RULES OF ENGAGEMENT:

- DAVID ALCINDOR'S GEOMETRIC RULES

1 - Let points 1, 2, 3, and 4 be defined
a - IF point-5 crosses its 1-3 Line, Point 5' replaces 5
b - THEN use the 3-5' projection off of Point-2

OR

2 - Let points 1, 2, 3, and 4 be defined
a - IF point-5 remains off of its 1-3 Line
b - THEN use the 1-3 projection off of Point-2

3 - The projected line off of Point-2 is the TRIGGER Line
4 - Take profit at the TP Line projecting off of points 1-4


OVERALL:

Now, looking at both the US30 and SPX charts, the illustration suggests one important fact, which is that following above ROE, and given the predictive/forecasting model, we are likely to see a divergence in price behavior between US30 and SPX.

I have not defined any loftier targets for SPX as of this writing, as it will take some time for these monthly charts to unfold.

As always, I appreciate your readership for following thus far, and thank you for your kind thumbs-up and referral. This is all for educational purpose for as long as TradingView continues to put out such a sensational set of technical tools. These software guys are great and deserve much recognition.

Cheers and happy new year,


David Alcindor
Predictive Analysis & Forecasting
Denver, Colorado - USA

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Twitter: @4xForecaster
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+2 Reply
4xForecaster PRO 4xForecaster
2 years ago
US30 - Monthly Chart:
snapshot



SPX500 Monthly Chart:
snapshot



David Alcindor
+1 Reply
Recluse82 4xForecaster
2 years ago
now short or long?
+1 Reply
HamedAghajani PRO 4xForecaster
2 years ago
I have a difficulty in identifying point 1-s.
+1 Reply
4xForecaster PRO HamedAghajani
2 years ago
Hello @HamedAghajani - What do you mean by 1-s? Not sure I understand what "s" is referring to.

David
Reply
24 JAN 2015 - NOTE:

Here is a re-posting of the chart on Twitter, suggesting that while $DJIA might rise in 2015, the $SPX500 benchmark might be stalling, instead.

From Twitter:
----------
Why $DJIA Is Likely To Rise, But #SPX Stall In 2015:

-
Could $DJIA Rise To 21850? | $SPX $NDX $DJIA $VIX $GLD $SLV


via @tradingview | $SPX $NDX $DJIA $VIX $GLD $SLV
----------


Could $DJIA Rise To 21850? | $SPX $NDX $DJIA $VIX $GLD $SLV



David Alcindor
+1 Reply
2use
2 years ago
For some reason i missed the lessons and think it would be great to include links to lessons with their topics so people can navigate to them (i understand its a bit more work, but having that list on all the charts will make i nice study set of charts)
+2 Reply
4xForecaster PRO 2use
2 years ago
@2use - This is a great suggestion. Please, feel free to remind me of this if it's not being done over the next week. I should be able to compile things by then - David
+2 Reply
2use 4xForecaster
2 years ago
Some traders use a footer with links to ideas and their topics. Would be a great manual actually, and i see lots of people who ...need to read them fore posting comments. I sure needed smth like that a year ago
Reply
Excellent, how has this pattern fared thus far David?
+2 Reply
4xForecaster PRO IvanLabrie
2 years ago
Hello @IvanLabrue - I do not have any data other than empirical experience on patterns.

A few years back, I wrote a comment on pattern trading, and the fallacy of "successful percentage rates" - Here is the link:
- http://ratiotradingmentor.com/2012/11/04/success-rate-what-does-it-mean-when-applied-to-pattern-completion-rate-by-david-alcindor/

I have discovered several yet unpublished patterns (Great White, Euclid, Janus) but have turned away from patterns ever since I adopted my predictive/forecasting model.

I believe that patterns, especially those defined by Scott Carney, offer a respectably physical framework based on strictly defined Fibonacci ratios (See Scott Carney's www.harmonictrading.com, and consider live courses from @AkilStokes for pattern trading.

However, in my experience, the forecast I produce predicts a far superior outcome than what might be anticipated by standard patterns. For instance, I can forecast well in advance whether a pattern will complete as a Bat or whether it would extend to a Crab, or a Gartley vs. a Butterfly. However, this is done by strictly ignoring price action - Something I have been advocating for years as I often say that "price is the carrot dangling at the end of the stick held by institutional hands". The series of "Target Hit" I continually publish attempts to support my thesis.

The only significant amount of time I spent analyzing patterns and trading in a counter-trend strategy ledme to discover my on-going foray in occult geometries. It all started by trading the underlying pattern BEFORE it even became a pattern, as Akil explained in that linked article I wrote.

That strategy was called the "EAGLE", for (E)xtremely (AG)gressive (L)evel of (E)ntry, affording the trader to enter at such a precocious time relative to the nascent pattern that the RR were kept at 10:1, 15:1, or even as high as 30:1 - See my linked "Dead-On Hits" in my profile here or on Twitter for such archives proofs and more on that strat.

Long story short, I don't spend too much time on effecting a percentage study. Price behavior remains an empirical exercise, and evidence-based trading is something I rely far more than purported data.

There are lots of site offering percent rates on patterns, but do not reveal what they mean by success. For instance, the Gartley is THE most common pattern to occur in any market. However, once it reaches its destined 0.786-Fib level, it rarely retrace to a widely expected 38.2-Fib (the minimal standard of profit taking among pattern traders). Instead, it moves on and away, leaving traders to their own hopes and miscalculations.

In contrast, the Bat meets my requirements as it tends to deliver, even though it is a rarer occurrence compared to the Gartley pattern.

My work-horse used to be (and remains at times) Scott Carney's Shark pattern with it's 5-0 pattern acolyte of the same author. However, it is one I detect first through the predictive model, which remains my principle tool of market interrogation.

There are still better patterns that need little technical support for verification, and there are my proprietary patterns (which I will keep under seal as I need my own edge, naturally), and Bill Wolfe's namesaked Wolfe Waves patterns, which in its strictest form demands that Point-4 resides within the Points 1 and 2 range.

The pattern that is subject of above original chart offers an alternate method of trade precision using the lines and my ROE defined in the text.

It's up to the trader to see the development of Points 1-4 and act on the condition set by the pattern itself as it behaves relative to its 1-3 Line and thus define the path of application of the ROE.

HOpe this answer your query in part.

Best,

David Alcindor
+4 Reply
IvanLabrie PRO 4xForecaster
2 years ago
Indeed, always a pleasure to read your charts and comments.
Great insights, very much appreciated.
+2 Reply
dionvuletich
2 years ago
Interesting charts and comments below, while I partially agree with your comments listed below,

I do agree bats are one of the best patterns, high R;R and around 60% winning % based on my own rules and testing,
I do accept we all use different targets/ ratios and stop losses which can change the exact numbers but it should be not unexpected to see 60% winners and an average of 2.5:1 R:R if you use 2x targets up to 123.6%

Again, everybody expects prices to go to A-D 338% or C-D 38% and 127% X-A for extended targets but my experience has shown that if there are significant supply level prior to these levels then you should really be adjust your targets to suit price action
123.6% from my own manual back testing (1,000's of trades) has shown that it is often more exact than the standard 127.2% but this is just my own opinion

I like your AWW, interesting theory - and nice to learn a bit about WW's! the monthly charts now have an evening star at your AWW target levels so maybe it is doing what it should...!!
+1 Reply
4xForecaster PRO dionvuletich
2 years ago
Hello @DionV - Thank you for your comments and descriptions of your Fibs. Have you looked at other patterns?

Worth reading (or simply visiting his site) is Scott Carney's patterns. He is the author of multiple patterns, and that is how I started to look into trading. That was many years ago, and since then, I have moved on, but he does offer interesting reviews.

Also, there is one site which I cannot locate where the patterns were analyzed in terms of success rate. I later wrote a blog on the meaning of success rate, using their data. @akil_Stokes published that blog on his site a few years back, but I am not sure whether it even refers to that site.

In any case, the blog I wrote was geared towards Junior traders contemplating pattern trading, especially those patterns that were qualified as high-percentage success rate. What I went on explaining is that this success rate had to be looked at from the perspective of the trader, and not the author of the pattern.

What I mean by this is that given a high-occurrence rate of, say the Gartley pattern, which is touted to be the most-frequent occurrence - and I would agree with this - then its success rate in terms of completion at Point-D is in fact the highest.

However, what is not being said is that from the point of view of the trader, it is perhaps one of the poorest performing pattern - And how could this be, given its high success rate in terms of occurrence and completion? Well, very simple: Most Gartley will NOT offer the anticipated 38.2% retracement which is the minimal counter-trend move any one should expect of ANY pattern, so as to measure the success rate of a pattern.

For instance, the Bat will most often than not retrace a minimum of 38.2% upon termination of its Point-D, which is measured at the proximal level of 0.886 x XA. Similarly, the Shark will do the same at its oddly, often termination Point-C and in fact reverse 50% to complete a 5-0 Pattern. The Crab, the Butterfly and Darren Oglesbee's Cypher (who discovered and so generously shared his pattern when I was part of the "MasterMind" team) with their minimal retracement of 0.382-Fib, as well as other proprietary patterns I have discovered (e.g.: Great White, Janus, Euclid patterns) will retrace a minimal of 0.618-Fibs, far surpassing the minimal threshold. So, what does the Bearish Gartley do? It teases the pattern trader into giving up a long position that will rarely complete. Instead, it would move on to complete a Butterfly, or sometimes some other aberrant pattern that cannot be trusted.

For this and other reasons, I have given up pattern trading. I can say that all patterns have a seed, and that the seed is of Euclidean origin in terms of Euclidean geometry, and that it fits all patterns. Meaning that the values used by Scott Carney, Darren Oglesbee, and others who have provided the current nomenclature of standard market patterns, can all be reduced to one and only one "greatest common divisor" or denominator. This is the value that takes all things, be it a line, a cube, a sphere, or a volume of any shape and compares it to any other forms, and yet reduces the two compared entities into one single value. This is the part of market geometry which is the oddest and most fascinating phenomenon, which is that patterns are not so 8much visible in their repeated occurrence, as the fact that they are all commonly related to that root geometry, wherein the Golden number is only one part of the equation.

Here is the article on success rate meaning I finally found:
- http://ratiotradingmentor.com/2012/11/04/success-rate-what-does-it-mean-when-applied-to-pattern-completion-rate-by-david-alcindor/

The commentaries may be a bit discombobulated, as I wrote that one late night, but it presents the essence of what I was guarded about, which is what success rate actually refers to. Akil's comment in the comment section is correct: I do not and never did trade pattern from Point-C. I have always traded patterns from Point-C (or Point-B in the Shark, odd but highly relevant, generous and friendly pattern), which has been the springboard of my research in predictive analysis, forecasting and occult market geometry discoveries.

In any case, there is a lot to discover in technical analysis, price action study and market geometry. The very fact that most of the moves in most market are paced at the same coefficient make the entire kaleidoscope of price action an array of geometries that are all related to one measure, and yet depart in so may direction. But the path which price follows, and along which each pattern develops, is predictable, foreseeable and repeatable - The reason why you, I, we all miss it is because it demands tuning. Once tuned into, it can never be ignored, even with eyes closed. It only requires that the mind's eyes remain open.

Ancient geometrists could have possibly become bored out their mind with what is visibly (to them) going on in the financial markets.

One author I respect very much is Constance "Connie" Brown, as she has amassed the technical knowledge of advanced systems (Gann Square, Elliott Wave, Lunar phase, ... etc) and orchestrated it all into an articulated system of analysis - I would preempt here to say that lunar phases are not to be discredited by only saying that the author of RSI himself, after publishing his discovery of this most widely used indicator, has then moved on to other things, pretty much abandoning the RSI for a more abstract enterprise.

Indeed, he founded a lunar-based analysis of the financial market called the Delta Society (See: www.DeltaSociety.com). A few years ago, I attempted to contact him about the RSI. I was able to use the phone number I had obtained after joining that society so that I could study the materiel used in his analyses (which is simply impractical to my own way of thinking, but reasonable usable by those wanting to invest in real abstract lessons) . A nice guy answered, but that was not Mr. Wilder. Still, I was informed that Mr. Welles Wilder was not interested in being contacted or discussing his RSI any longer. Another person I contacted is perhaps the only active RSI teacher as a former student of Mr. Welles Wilder. His name is Mr. Andrew Cardwell. His RSI application is something I have not studied (see his site: http://www.cardwellrsiedge.com), but he stayed true to the "physical" aspect of market analysis (as opposed to Cardwell's "meta-physical" approach - Anyway, my point here was to simply state that one should not discard all their is available to our eyes and mind.

Quite a tangential comment on the topic of "success rate" of patterns, but this is truly a very important topic if one is seeking to trade for a living. Patterns are like vehicles, and one should not spend the money, time and facultative resources if it turns right when you expect left, or it keeps on driving forward when your living is to depend on those profitable turns.


David Alcindor
+1 Reply
dionvuletich 4xForecaster
2 years ago
Thank you for your comprehensive response, I know many of the people you noted and have been trading harmonics myself for many years since 2006

The argument of success rate is very subjective and is completely dependent on where you place stops and targets,

I have tested only the 'internal' patterns i.e. gartleys, bats, cyphers, sharks 88.6% etc and the win rate differs from others that I have seen, and to be honest you can manipulate the win rate up by simply reducing your target distance or widening your stop
What you cannot manipulate so easily is your expectancy which is more a result of your position sizing strategy and scaling rules

So success rate really doesn't mean much other than offering a clue as to what to expect in terms of draw downs or strings of losses

What does mean something is expectancy and the win% for a R:R ratio, I personally prefer bats and my testing has shown that I can achieve 58-63% winners with an average R:R of 2.7:1 with my position scaling rules (50% T1, 50% T2) dependent on the instrument I trade.

Saying this I do not use fibonacci retracement based targets for target 1 and my target 2 is the 123.6 Extension... my stop is directly under X by literally 1 pip which again does not comply to many authors rules

Some people claim Cyphers are 70-80% accurate, but my own testing suggests they are only 55% accurate - I still trade these but they are not my favourite
I also have found 78.6% gartleys to be >80% Accurate but were less common than other patterns and had a lower R:R ratio

These stats were from my own manual back testing using over 13 years of data on 1hr - 4hr charts... literally 1,000's of trades which took months - but again, my rules are different than most and the results reflect that

I think the success rate is ambiguous to say the least and is dependent on so many factors that is not really worth much unless you understand all of the parameters they use, I don't think it is a fair comparison for strategies as people confuse 'win rate' with 'making money with acceptable draw downs'... and my own detailed modelling has proven that all directional strategies have an 'expectancy curve'

i.e. if you from a minimum 1:1 R:R ratio if you increase the R:R ratio your win% generally drops, however what often happens is that your expectancy actually increases to a peak "optimum" R;R ratio then starts to fall again also...

So win% means little really, I would rather have a lower win% (to possibly a minimum of 50%) and a higher R:R ratio than a high win% and low R:R

Reply
4xForecaster PRO dionvuletich
2 years ago
" ... I would rather have a lower win% ... and a higher R:R ratio than a high win% and low R:R."

- So true and well said.

David
Reply
millie PRO
2 years ago
Any more thoughts on the next higher target for SPX after hitting all-time high today?
+1 Reply
4xForecaster PRO millie
2 years ago
Yes. Hello @Millie.

If price breaks above the 1-4 Line, it could possibly spike to 2240.46. However, this has not been the case so far. If and once that condition is met, then price could possibly attain that level.

snapshot


However, a few point above prior highs is still a consolidation with the whole. Algos have not allowed negative market closing on Fridays, and this is one of them. But they also have not allowed markets to reach higher-highs of any significant level.

In terms of Fibonacci level, a significant level would have to be a minimum of 1.414-Fib from the height of the consolidation. If price breaks above that level, then it will mean something of a continuation. Any less than that, and it should be translated from bear speak to more consolidation parlance.

David Alcindor
+1 Reply
takefal 4xForecaster
2 years ago
David I am new to trade, can you explain what exactly is the Trigger Line and what its usefulness;
+1 Reply
4xForecaster PRO takefal
2 years ago
Hello @takefal - Which pattern are you referring to? There are trigger lines in patterns and in set-ups which I have described in several forms before. In essence, a trigger line would define a suggested or near point of entry - David
Reply
takefal 4xForecaster
2 years ago
I try to learn the Wolfe wave pattern and refer to this trigger line. Well trigger lines serves only to "define a suggested or near point of entry" ?
+1 Reply
4xForecaster PRO takefal
2 years ago
Hello @takefal - The classic Wolfe Wave ("WW") will use the 1-3 Line as an early point of entry AFTER price reverses back from Point-4. The target becomes the projection of a line that passes through Points 1 and 4, referred to as the Take-Profit, or TP Line.

If instead price were to reverse from Point-4 and continues through Point-5 (i.e.: at the crossing of the 1-3 Line), then expect a reversal right at the projection of a cut/paste 2-4 Line, originating at Point-3. This becomes the likely level of reversal (called Point 5-prime, or simply 5') from which price would be expected to rally towards the level of Point-4 (VERY high-probability), or towards the TP Line (high-probability).

If, instead, price where to continue below the 5' level, then project the same 2-4 Line off of Point-1 to define Point-5-second, a much rarer event. In which case, the target should be NO HIGHER THAN the level of Point-3 as price returns from there.

The probability of a price defining Points 5, 5-prime, and 5-second are as follows:

1 - Point-5 = Moderate
2 - Point-5' = High
3 - Point5" = Low

Feel free to Google "Wolfe Wave + lesson + David Alcindor + 4xQuad + 4xforecaster" as this may gather all that I have ever written on the Bill Wolfe's Wolfe Waves patterns, in addition to new discreet geometries associated with the pattern, as well as rules of engagement, as the ones defined above in terms of where to seek profit when price reach Point-5 vs. Point-5' or 5".

Let me know if you have nay other question on this or other stuff.

Cheers,


David Alcindor
+1 Reply
takefal 4xForecaster
2 years ago
Thanks David, more questions will I go when trying implementation of "WW". I hope to have and then your help !!
Reply
millie PRO
a year ago
Hi David,

Any updates on the models for DJIA and SPX? Thanks.
Reply
25 AUG 2015 - Tech-Note Update:

@minnie - Yes, this is a great time for an update.

First a quick look back on a prior analysis, where in NOV 2014, the Model called for a more proximal set of bullish targets at about 176xx and 179xx - Since then, these targets have been hit and price ascillating up and down these targets, until a recent decline, which is what these Quant-Target suggested - See chart:


snapshot



However, a more recent Model screening of the chart led to this thread, with targets that remain unanswered - See current chart:


snapshot



The lines in the chart are momental lines, part of the occult geometries I have used in the chart to establish probable support (they are weak in nature, but in this case, they may help validate support or further advances).


OVERALL: I would look for a definite decline below the ML that passes through b' to add further credence to this bearish downturn. Until then, there is no certainty, as far as the chart can express.

Best,


David Alcindor
+1 Reply
4xForecaster PRO 4xForecaster
a year ago
Here too, a much older forecast called for this Quant-Target:

See analysis from 2013 here:

$US30 - TG-1 = 16983-17406 Range - 30 OCT 2013



As the Model got improved, the target were progressively refined along the way - The fact that current targets have not been reached raises a question as to the veracity of a bearish downturn.

Best,


David Alcindor
+1 Reply
4xForecaster PRO 4xForecaster
a year ago
Sorry - Here is the link to the 2013 analysis:

$US30 - TG-1 = 16983-17406 Range - 30 OCT 2013


David
Reply
4xForecaster PRO 4xForecaster
a year ago
Click on chart to be re-directed to the actual written analysis - Sorry for the confusion.

David
+2 Reply
devlspawn 4xForecaster
a year ago
Hi David, I'm a bit confused. you've linked to this chart which shows targets being hit, but others above which have a target which has not been hit. Which do you consider to be most predictive?
+1 Reply
4xForecaster PRO devlspawn
a year ago
Hello @devlspawn - The most recent targets are usually the updated Model-adjusted targets - The variations typically originate from differences between timeframes. If a timeframe takes control (say, M15 falls to H1, or H1 to H4 ... it's never a lower timeframe taking control, but higher frame relinquishing control!), then the targets get adjusted based on this new force of influence.

David
+3 Reply
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