[FONT="]Stopping at 3/8ths of a range is a normal support or resistance[/FONT]
[FONT="]retracement and keeps the trend intact. Actually there is a zone between 1/3[/FONT][FONT="]rd [/FONT][FONT="]and 3/8[/FONT][FONT="]th [/FONT][FONT="]that[/FONT]
[FONT="]will support most retracements and leave the probability of a normal counter trend and thus[/FONT]
[FONT="]keeps the trend intact.[/FONT]
[FONT="]Unfortunately, a market can temporarily bounce off that level and[/FONT]
[FONT="]eventually go through. But the form of the trend getting there is usually sufficient to answer[/FONT]
[FONT="]that question.[/FONT]
[FONT="]There is one last range to deal with and that is the range of the high price. This is only a bear[/FONT]
[FONT="]market phenomenon or only to be used in a bear market. Many bear campaigns will fall to[/FONT]
[FONT="]50% of the high price. And when dealing with individual stocks and commodities that can[/FONT]
[FONT="]move significantly through that level it is best to keep looking at 50% of the next lower high[/FONT]
[FONT="]and if that is significantly broken, then look at the next lower high and 50% of that price. You[/FONT]
[FONT="]would view this along with the range extensions and the range of the highest price.[/FONT]
[FONT="]The run from the 1982 low up to the 1983 high, corrected back to the 1/3[/FONT][FONT="]rd [/FONT][FONT="]to 3/8[/FONT][FONT="]th [/FONT][FONT="]support level. This retracement is very common in all markets that hold a trend intact. We could call this the[/FONT]
[FONT="]normal counter trend support level for a trend. Dropping down to 50% is more severe and[/FONT]
[FONT="]doesn’t give a high probability of resuming the trend, as does the 1/3[/FONT][FONT="]rd [/FONT][FONT="]to 3/8ths level. Of[/FONT]
[FONT="]course, a ¼ retracement is an indication of an even stronger trend but is more likely in bear[/FONT]
[FONT="]trends than bull trends. Unfortunately, markets can bounce off of any of the retracement[/FONT]
[FONT="]values with a counter trend and then resume the trend. So we need more than just price[/FONT]
[FONT="]level.[/FONT]
[FONT="]Matching the move down with an equal move up is not unusual and[/FONT]
[FONT="]is a harmonic relationship. This set up the possibility of the next drive up becoming[/FONT]
[FONT="]an exhaustion drive or the third ascending trendline.[/FONT]
[FONT="]Because the last move down was starting up without hitting the[/FONT]
[FONT="]previous trendline (chart 47), this leg up could be an exhaustion style of trend.[/FONT]
[FONT="]If[/FONT]
[FONT="]this was a blowoff or exhaustion style of trend, this would produce another higher trendlines.[/FONT]
[FONT="]If this was a very strong trend it would also bottom above the previous high. We could also[/FONT]
[FONT="]assume the correction would not be in excess of the 1/3[/FONT][FONT="]rd [/FONT][FONT="]to 3/8[/FONT][FONT="]th [/FONT][FONT="]retracement level and could[/FONT]
[FONT="]be at 1/4.[/FONT]
[FONT="]Chart 49 shows that retracement to be 1/3[/FONT][FONT="]rd [/FONT][FONT="]and the index made a vertical move to a 3/8[/FONT][FONT="]th[/FONT]
[FONT="]extension. This would make little sense for a high when considering the momentum and[/FONT]
[FONT="]status of the trend. The index moved down one week for the high and started a creeping or[/FONT]
[FONT="]struggling pattern up. This could have produced a high of some significance. [/FONT][FONT="]There was a lot[/FONT]
[FONT="]of volatility, which is indicative of tops.[/FONT]
[FONT="]But as Chart 50 shows the correction was, again, 1/3 to 3/8 and held the trend intact and[/FONT]
[FONT="]produced another higher trend line and continued the exhaustion. You can see there was still[/FONT]
[FONT="]a leg missing to complete the wave structure and turned out to be a 5 wave subdivided 5[/FONT][FONT="]th[/FONT]
[FONT="]wave into the August 1987 high. One thing I have noticed over time and use in my analysis is[/FONT]
[FONT="]old 50% marks will come into play if tested. So once a market produces a range of[/FONT]
[FONT="]movement, the 50% mark of that movement needs to be kept on the chart. In this instance,[/FONT]
[FONT="]the low to the 1987 crash was at, among other things, 50% of that range. Once the market[/FONT]
[FONT="]proved it was trending up from the 1986/1987 low, the current trend we are now viewing. We[/FONT]
[FONT="]could assume another exhaustion leg up, as this would be starting from another ascending[/FONT]
[FONT="]trendline. The April/May correction was exactly at 3/8[/FONT][FONT="]th [/FONT][FONT="]of the leg up and indicated another[/FONT]
[FONT="]drive probable to complete a 5-wave structure.[/FONT]
[FONT="]Chart 51 is the entire range of the move up we have been studying. You can see the[/FONT]
[FONT="]correction of the 1987 crash was down to 50% of the entire range. You can see as that range[/FONT]
[FONT="]was extended upward and the index hit the price levels of the extension, a correction[/FONT]
[FONT="]followed. This is a monthly chart so each bar is 30 days so the corrections where significant[/FONT]
[FONT="]in time on a daily chart. This is all normal for price vibration.[/FONT]
[FONT="]Chart 52 is a weekly chart of the S&P index. After the 1987 crash, I continued to[/FONT]
[FONT="]look for another sharp trend down to test the 1987 low. So each time there was a false break[/FONT]
[FONT="]pattern, I expected to see a fast trend down. There was no reason to believe that scenario,[/FONT]
[FONT="]other than the emotions of living through the crash and emotionally looking for the same thing[/FONT]
[FONT="]to reoccur. I did know if the index moved past 180 days there would not be a further move[/FONT]
[FONT="]down. I also knew that the eighth year of a decade has a very high probability of being an up[/FONT]
[FONT="]year. But emotionally I still kept looking for another big decline. Then in the beginning of[/FONT]
[FONT="]1989 the index moved above the previous high and within a 4-week decline could not move[/FONT]
[FONT="]back below the previous high. This created a space between the previous creeping trend up[/FONT]
[FONT="]and the low to this correction. Indicating the start of a fast trend up was a strong probability.[/FONT]
[FONT="]This would indicate a minimum move to the next significant resistance. In this instance that[/FONT]
[FONT="]would be the 1987 top. The index moved above that previous top and showed a three-thrust[/FONT]
[FONT="]pattern to end the trend.[/FONT]
[FONT="]But one would have felt very confident of testing the 1987 top (the[/FONT]
[FONT="]first high on the chart) once the “spacing” was confirmed. If you go back and look at chart 51,[/FONT]
[FONT="]the most logical extension would be 1/8 , ¼ or ½. The bull trend was only interrupted by the[/FONT]
[FONT="]90-day (intermediate term counter trend) move down in 1990.[/FONT]
[FONT="]There is another aspect of range analysis we can find very useful.[/FONT][FONT="]Important highs and lows[/FONT]
[FONT="]can become 50% marks into the future.[/FONT]
[FONT="]The normal extension to end a trend is ¼ of the previous[/FONT]
[FONT="]vibration; in this instance it would have been the 1/3 to 3/8 extension.[/FONT]
[FONT="]The momentum of the move[/FONT]
[FONT="]down carried the price through the ¼ support but it immediately recovered. If we take the[/FONT]
[FONT="]high of the last counter trend and make it a 50% mark (chart 54), the low is confirmed as a[/FONT]
[FONT="]probable complete leg.[/FONT]
[FONT="]While markets are struggling in a sideways pattern an opportunity can present itself once a[/FONT]
[FONT="]third move against support or resistance is complete. Chart 63 is a US stock BMY. After a[/FONT]
[FONT="]third attempt at support or resistance a market can start to trend in either direction. The fourth[/FONT]
[FONT="]attempt at support or resistance caries a probability of breaking through. [/FONT][FONT="]The only problem[/FONT]
[FONT="]comes in trying to determine which thrust to start the count.[/FONT]
[FONT="]The fourth[/FONT]
[FONT="]attempt at support or resistance caries a probability of breaking through. The only problem[/FONT]
[FONT="]comes in trying to determine which thrust to start the count. The higher low in mid 1994[/FONT]
[FONT="]would not be considered a test because the previous rally didn’t get anywhere near the highs[/FONT]
[FONT="]of the sideways pattern so that is still the same thrust down. But many times that last thrust[/FONT]
[FONT="]down prior to the start of the consolidation can confuse the count if the next low is just[/FONT]
[FONT="]marginal. In this case it is OK and easy to read. A classic volume pattern at the 1994 low.[/FONT]
mi hai preceduto..e consiglio a tutti di leggere il 3d di deviad sui mercati esteri
S&P500, Elliott e Gann in sinergia - Marzo 2009
