Wednesday, January 10, 2007

>Market Timing Methods Compared

Tonight I compare and contrast some of the more popular timing methodologies. Every one of them is a step in the right direction. Those of us who are involved in any market timing methodology have one thing in common: we all have the same mission of advancing technical analysis beyond what the Random Walk crowd wants you to believe. It is amazing to me that in the 21st century there are still those who would have you believe you can't time markets and all moves are entirely random. There is no other way to spin this.....those who preach that philosophy are either not skilled enough or have an agenda to see that the public doesn't figure these things out for themselves.

The Random Walk philosophy is obsolete.
Gann to me is obviously the father of market timing. The man himself had an amazing track record as the greatest forecaster of his time. However, it does take years to learn everything there is to know about what Gann practiced on a regular basis. So let's just say most of the market timers that have come since practice some of Gann's principles. I know my publisher Marketplace has an excellent updated Gann work by Robert Krausz.

Bradley Model is likely the most popular astrological based methodology. It has a streaky track record. There have been years where it has been uncannily accurate and then misses for several years. The challenge is you never know when it's going to start hitting again. One must pay attention to it.

Dynamic Cycle
Theory as practiced by people like Merriman as well as the Foundation For The Study Of Cycles has done some of the most progressive work in the field. These are the people who are responsible for bringing the four year cycle to our attention. There are cycles which are larger and smaller that traders can use as a pattern recognition system for their own time frames. For instance, if we know the four year cycle is supposed to bottom two years after the Presidential Election, it would be to our advantage to buy after the bottom comes in. The problem, of course comes in when one of these cycles extends. We are in that situation now as it is unclear if the June/July 2006 low is four year cycle low or are we now in a situation like 1937 and 1987 where the cycle topped at those times. We already know the Dow has taken out the 2006 high so there is a chance the four year cycle is bottoming late this time. The issue I've developed over the years is the four year cycle can also be interpreted as a 47 (Lucas) month cycle and if it extends it becomes a 55 month cycle.

Merriman is the only timer I know that has statistically proven his geocosmic signatures. If you are curious I suggest you check out the work he's done in every time frame as well as the independent work in gold and silver. The challenge of course is his margins of error can sometimes be wide (11 trading days) which we all know is an eternity in market terms.

Arch Crawford
has an excellent track record over 30 years but like Bradley is prone to big misses. Recall, he was looking for a crash after September 20th which never materialized. But there's a reason people follow him.

Oliver Velez
at Pristine has come up with a timing method for intraday time periods which he calls microtrading reversal times. They've noticed that the market turns at certain times everyday trading day. They are on the right track but not using any Fibonacci based system are prone to larger margins of error. Their methodology calls for nine reversal periods in the trading day. Of course they are at specific times and as is demonstrated here, intraday turns hit on Fibonacci or Lucas intraday windows.

Delta Method as taught by Welles Wilder. They have an interesting methodology which uses lunar cycles. I bought his book years ago and attempted to solve for intraday Delta. I could never figure that out but instead came up with Lucas and everything else done here. It's an interesting methodology but runs into trouble when markets invert. There is an intraday cycle that repeats every few days and Velez as an observer is on to something although I doubt he has solved intraday Delta.

Robert Taylor's
method shows great promise. He has a method of using gravity to determine larger trends and has correlated moves in the Dow since the Great Depression with gravitational forces. His method is fascinating but unless you are a rocket scientist you aren't going to figure it out yourself. There are also others that use the tides with varying successes.

I also believe the sacred geometric methods show great promise but there still is a lot to learn about them. I believe the person that actually solves the ever changing equation for spiraling markets (probably a mixture of advanced trig and calculus) will really be on to something. It may be solved in certain time frames but how many different time frames are markets really dealing with?

has used a Fibonacci based calendar day system that other Fibonacci analysts have used to varying degrees. They were the inspiration to the work done here. However, they've never really expanded on their work to much smaller time frames. And they didn't figure out Lucas as Prechter only gives Lucas a couple of paragraphs in his studies. Calendar days obviously works and actually has a concurrent calculation to trading bars. From my observation over thousands of hours in real time studies down to a 1 minute chart, trading bars are more accurate.

All of these methods work but have different margins for error. It just depends how much precision you want and how important timing is to your game.

By: Jeff Greenblatt

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