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Cross Market Fractal Analysis Strategy, Trends & Time Frames Elliott m o c . g n o L T n o d r o G . w w w Cross Market Fractal Analysis Elliott Wave & S&P 500 Targets Strategy, Trends & Time Frames Money Supply Growth M3 1 Economic & Technical Analysis for the Active Trader WWeellccoommeettoooouurr33rrddIIssssuuee Lots to think about this month. The Theme is Fractals, with several articles and references throughout the issue, along with all our regular segments. Our Featured Article goes back as far as the1 920's and looks at five different markets to prove its point. The All Seeing Eye looks at the Labor Force, Employment, and the Money Supply. You can also find a special write up on the Cyclical PE 1 0 Ratio explaining what it is and how it can be of use. Our Need To Know TA highlights upcoming S&P targets from Elliott Wave analysis, looks at the current potential Rounded Top, Fractal Analysis and a Death Cross occurs on the SPY. The US Dollar, Treasuries, the Euro and the Continuous Silver Contract are analyzed in our Vault. VIX continues to coil for a spring and we take a look at Margin Levels in our Risk Assessment. A quick discussion on trading Strategy, Trends & Time Frames looks at using a KISS methodology to identifying Trends. TRIGGER$ Publications For all inquiries, comments and contact please feel free to email us at: [email protected] Main contributor : Gordon T. Long Market Research & Analytics Publisher & Editor : GoldenPhi Analytical Summaries: GoldenPhi See page 36 for a complete list of our contributors. 2 Contents Economic & Technical Analysis for the Active Trader Mandelbrot Fractals & The All Seeing Eye Technical Analysis On Market & Economic Indicators 4 of our Current Markets 8 ­Labor Force­ Employment Divergence­ Cover Story ­Money Supply Growth M3­ ­Cyclical PE 10 Ratio­ TRIGGER The Vault Need To Know Technical Analysis Currencies & Metals 17 ­US Dollar­ US Treasuries­ ­Elliott Wave & S&P 500 Targets­ 21 ­SPX Rounded Top­ ­Continuous Silver Contract­ ­Fractal Analysis­ Death Cross SPY­ ­Euro­ RISK Traders Mentor Assessment Technical Analysis & 34 Trading Strategy Education 25 ­VIX Weekly ­ VIX Daily­ ­VXO Daily ­ Strategy, Trends & Time Frames ­Margin Levels ­ Open Forums Letters to the editor 36 Readers Comments Discussions Featured Article Cross Market 29 Fractal Analysis 3 Techni - Fundamentalism Economic & Technical Analysis for the Active Trader “Techni-Fundamentalism” TRIGGER$ publications combine both Technical Analysis and Fundamental Analysis together offering unique (and often correct) perspectives on the Global Markets. The ‘backbone’ of this research is done by “Gordon T. Long, Market Research & Analytics” which is subscribed to by Professional Managers, Private Funds, Traders and Analysts worldwide. Every month “Market Research & Analytics” publishes three reports totalling more then 380 pages of detailed Technical Analysis and in depth Fundamentals. If you don’t find our publication detailed enough, we recommend you consider theirs in addition to this one. For the rest of us, TRIGGER$ offers a ‘distilled’ version of the 380 pages in a readable format for use in your daily due diligence. Read and understand what the professionals are reading without having to be a Professional Analyst or Technician. Successfully navigating todays’ markets requires information from a broad variety of sources. Triggers examines it all. From Macro Geo Political to daily events; yearly cycles to break out points on a minute chart: we look at and analyze as much of the information as possible, pulling out the relevant and giving you what you need to know to make the right decisions on a daily basis. An initial or ‘beginning’ publication occurs every month, both in a printable pdf as well as online. From there, the online version is updated daily with current events, charts, news and any relevant information pertaining to trading. The completed version of the publication isn’t actually done until the last day of updates – which occurs right up until the publication of the next issue. As well as the Traditional Methods commonly used, “Market Research & Analytics” has developed “proprietary analytics” for both Technical and Fundamental Analysis and has designed a methodology to combine the two whereby the synthesis delivers a truly unique and forward thinking analysis that gives cutting edge insight. “Techni-Fundamentalism” 4 Cover Economic & Technical Analysis for the Active Trader Story Mandelbrot Fractals & Technical Analysis of our Current Markets This issues theme deals with Fractals and their presence in the markets. Last issues themes demonstrated some laws of nature potentially governing the markets. This months issue continues with some more Julia Set possibilities and information to think about. It gets more and more difficult to argue against In its simplest terms, fractals are repeating the appearance of correlations between the patterns that have similar forms at different markets and nature. perspectives or scales. The exact cause of these correlations is still If you have experience with Elliott Wave then up for debate. Are they natural phenomena you are already familiar with the fractal nature due to the large input of information in the of the markets. EW theory divides the marketplace? Are the markets manipulated markets in to wave patterns that repeat to appear to behave in these manners? Is the throughout all time frames and investment whole thing just one big computer algorithm vehicles. set long ago to run the markets off of? Maybe there is a common thread of mathematics that exists between all things living or otherwise that is just the natural progression of 'stuff'? Whatever you want to believe the cause of it is, that it does exist for some reason is readily apparent. Seeing this and understanding it is important for anyone serious about trading EW 'Fractal' Analysis the markets. These concepts add a new ­ repeating pattern(s) ­ different scales dimension to your technical analysis and fig.1 make forecasting mathematically achievable instead of just some 'gamblers science'. You can see three different colored waves at Fractals the start of the overall pattern in blue, pink, and red. Each of these waves have a similar Fractals appear to have been known for a five wave count. If you note, you can find little while now, supposedly having their roots these waves throughout the pattern, up and in 1 9th century mathematics. A "Julia Set" is down. These three, small, five-count waves a well known type of fractal and comes from can be found inside a larger wave marked the man of the same name, Gaston Julian, with a circled 1 . This 1 is the 1 st of another, who worked with fractals in 1 91 8. larger, five count... and so on. (cont. pg.5) 5 Cover Story Economic & Technical Analysis for the Active Trader Fractals (cont. from pg.4) The Bell Curve Debunked Mandelbrot We are familiar with the concept of standard Probably one of the more recognisable or normal distribution and the graph that fractals would be what is called the represents it, the bell curve. Mandelbrot Set (front cover image). Working on the IBM fractal project, Benoit Mandelbrot became known for 'inventing' fractal geometry and has written several books on the study including The Fractal Geometry of Nature. The Bell Curve fig.3 is not an accurate representation of reality This is in fact a man made concept. That is, it is not a true or accurate representation of what really occurs, in nature or otherwise. fig.2 Mandelbrot Set However, it is mans desire for this to be the Of particular interest to the trader is his 2004 case, and what is currently and most commonly used. Mandelbrot shows proof of publication The (Mis)Behaviour of Markets. Although the work contains no this folly in his book. practical TA methods for a trader to apply, it does provide How many analysis use the Bell Curve as information that is vital to part of the information calculated to form understanding how the conclusions? If the curve is not a real markets behave and what that representation or accurate, then what of means for its participants. This those conclusions? work ushers in a new age of market analysis and it dispels The financial markets love normal some of the current, more common methods distribution, standard deviations and used and sighted for portfolio management regression to the mean. The impact of and trading strategy, showing us how changing their effectiveness or relation to the misplaced they are. markets are far reaching. Of the many conclusions shown and proven, The (Mis)Behaviour of Markets the 'myth' of the Bell Curve is probably the most profound. The implications to all areas In his book, Mandelbrot highlights some of of market analysis can not be ignored and the issues concerning the inappropriate use every player, professional or not, would do of the bell curve in market analysis. The well to consider what is being said before they following list is a summary of a few points make their next move. taken from his publication and we recommend the read to all. As you will see, most (if not all) of the current analytical (cont. pg. 6) 6 Cover Economic & Technical Analysis for the Active Trader Story The (Mis)Behaviour of Markets (cont. from pg. 5) Fractals & TA methods rely on theory derived from the bell curve in some fashion. As there are mathematical formulas for the Julia and Mandelbrot sets, so too there is Analyzing Investments: The two most potentially a formula or algorithm that could common tools for measuring risk are 'Alpha', map out a market. That is beyond the or volatility, and 'Beta', or the degree in which average trader or investor and is not a a stocks price changes correlate to those of realistic suggestion for anyone to pursue.
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