One of the things I've picked up over the years is that there are folks out there in cyberspace who have been studying these markets much longer than I. People who have scientific inclinations that have or are pushing the discovery envelope so to speak. One such person is Joanne Mcable who often is posting at Wollie World http://www.crystalball-forum.com/context/main/wollieworld/msgindex.htm.
She has a terrific talent for research and discovery not often found in this business, often searching for the hidden clues or indicators of market direction. Unless I have misrepresented her work in this area, the chart above describes one of her little discoveries.....though I think she would probably describe it as a work in progress or esoteric piece of work. It is one my little favorites though because it is a price projector and not based on fibonacci work, though there is nothing wrong with that either.
Here's what it will look like. Plot the closing prices of the snp and run a 10 day simple moving average (yellow line) against it. On top of that, plot a 12 day exponential moving average (red line). I use excel extensively so it is easy for me to do it in this manner; most plotting software out there will easily overlay these moving averages over the snp.
Here's how it works. The 12 ema is the faster moving of the two moving averages. It will turn up quicker and turn down quicker than the 10 dma. As price rises or falls, the 12 ema will lead the way until at some point, about halfway along the total price movement, the 10 dma will catch up and cross over the 12 ema. So, what the crossover of the 10 dma over the 12 ema indicates is the halfway point of a price movement.....as the 12 ema turns up and gains momentum, likewise it gets to a point where the momentum of the price movement slows and the ema is eventually overtaken by the slower moving 10 dma. In other words, the moving averages are measuring the momentum off a price low or high. For instance, below is a listing of the measurements taken off the 6 indicated lines:
#1 Price low = 670, crossover = 775, projected top = 880
#2 Price low = 670, crossover = 875, projected top = 1080
#3 Price low = 670, crossover = 920, projected top = 1170
#4 Price low = 670, crossover = 940, projected top = 1210
#5 Price low = 880, crossover = 1020, projected top = 1160
#6 Price low = 670, crossover = 1035, projected top = 1400
As you can see, #1 price projection was met on April 17th, and #2 price projection is in the process of being met right now. Number 3, 4, and 5 have projected to the 1150 to 1200 area within the rectangular box. And lastly, but not leastly, #6 is pointing to a high of 1400 presently based upon an apparent crossover occuring right as we speak. This one may be a bit premature, but it looks to be another crossover in the making, and I am more than happy to give it a thumbs up at this point. :) So, quick summary.....projections 1 and 2 have been met. Projections 3 through 6 not yet satisfied.
One thing to keep in mind of which Joanne herself has cautioned several times. Often the crossover will point to a top or bottom and not the halfway point of a move. This is obvious because as price makes a turn, its 12 ema will crossover down, or up, through the 10 sma making it look as if it is the other way around....i.e. making it look as if the 10 sma is catching and overtaking the 12 ema where in fact it is not, and what is happening is the faster moving ema is responding to rapid price movement instead. Something to watch out for.
In any event, I like this tool. Certainly can be open to interpretation and can sometimes be misleading but arent they all? I keep it next to my hammer..:). Another point is that this tool does not seem to work well with individual stocks, although with some I seem to recall it does. You would have to work with it on various stocks and even play with the lengths of the moving averages to find one that fits best.
What does this all have to do with tides? Absolutely nothing, but I like to stray from the waters edge once in a while.
