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12 Dec 2009 16:35:13 -0000 X-Authority-Analysis: v=1.0 c=1 a=ayC55rCoAAAA:8 a=qV0mfD4mAAAA:8 a=RGNkLmNzAAAA:20 a=4w9q55WaAAAA:8 a=CjxXgO3LAAAA:8 a=SQ-VObAFD6QlGbag6GMA:9 a=6f6VTFxmJPvpPy0IA9YA:7 a=Ggc1OQ9GMW_5l67U7mGGeDIyDPAA:4 a=FtuB-VGVCuEA:10 a=Efwj4qSePvMA:10 a=ao4RW71Vw8YA:10 a=xfz2HNhcifzdVfex:21 a=MiNHHrlyJZj_m4NT:21 a=SSmOFEACAAAA:8 a=Y2VNeNrzAAAA:8 a=yMhMjlubAAAA:8 a=TW66zc2HAAAA:8 a=HQ31llbKAAAA:8 a=G_5s8neSAAAA:8 a=SpLjhweGiLQ3vYdE77UA:9 a=YgAu4_wX7a5cL_sfhU4A:7 a=8UDDsASZYPE8PFFx6Q4v2aNA9AgA:4 a=p4gOmB6N_3fAIzC-:21 a=Jp7IJbSAhbzxqP5Z:21 a=fEGr4CpRC-b7n6vmYxkA:9 a=tE4o9hWIuvKwMXG4El-SxkBkP_0A:4 a=HXjIzolwW10A:10 a=Ac3p1LWO_0ZTar0z:18 X-Cloudmark-Score: 0 X-Received: from [65.32.89.208] ([65.32.89.208:1560] helo=nunswen0cecy73) by hrndva-oedge03.mail.rr.com (envelope-from ) (ecelerity 2.2.2.39 r()) with ESMTP id 7C/27-16719-036C32B4; Sat, 12 Dec 2009 16:34:59 +0000 To: "'Nguyen, Mike'" References: <00b301ca739b$19a8abd0$4cfa0370$@rr.com> <20091204190251886.NQKZ1964@cdptpa-omta04.mail.rr.com> <004701ca7525$cd12c6c0$67385440$@rr.com> <916205EB9D0A854C8CD7A51C8D67D60B01826F2F@exch.college.local> <006e01ca78f6$32733760$9759a620$@rr.com> <916205EB9D0A854C8CD7A51C8D67D60B01826F9A@exch.college.local> In-Reply-To: <916205EB9D0A854C8CD7A51C8D67D60B01826F9A@exch.college.local> Message-ID: <000601ca7b49$0ca995b0$25fcc110$@rr.com> X-Mailer: Microsoft Office Outlook 12.0 Thread-Index: AcpzmxipLxlBfPojTHyIWWRyMCBKdQBeERFgAAQZV6AAy3n8EAAonk9QAE1UnmAARGqPcA== Content-Language: en-us X-Originating-IP: 71.74.56.124 X-eGroups-Msg-Info: 1:12:0:0:0 From: "Loren Morlan" X-Yahoo-Profile: lorenmorlan X-eGroups-Approved-By: rosstodd via web; 12 Dec 2009 18:23:05 -0000 Sender: Divergence@yahoogroups.com MIME-Version: 1.0 Mailing-List: list Divergence@yahoogroups.com; contact Divergence-owner@yahoogroups.com Delivered-To: mailing list Divergence@yahoogroups.com List-Id: Precedence: bulk List-Unsubscribe: Date: Sat, 12 Dec 2009 11:34:59 -0500 Subject: [Divergence] RE: Programmer for Your indicator [1 Attachment] Reply-To: Divergence@yahoogroups.com X-Yahoo-Newman-Property: groups-email-ff-m Content-Type: multipart/alternative; boundary="----=_NextPart_001_0008_01CA7B1F.23D38DB0" X-Antivirus: AVG for E-mail 9.0.716 [270.14.104/2560] ------=_NextPart_001_0008_01CA7B1F.23D38DB0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Mike, =20 =93Elliott Wave Principle=94 by Prechter is necessary for an understanding = of the EW cycle and our work now for an indicator which may be able to identif= y some of the EWs. =20 I attach a daily chart of Cable. =20 Point X, at which the EW count begins is identified by a specific series of different divergences. This point may not be confirmed until subsequent to the low of Wave 2.=20=20 =20 Fractal highs and lows will be used in all divergence issues. I use Stoch. because it is best in my opinion for this purpose although I also look at MACD but do not include that indicator in this discussion. =20 The indicator must remember the Stoch. values at fractal highs and lows as noted on this chart for all divergences recognition functions. You shoul= d be familiar with both classic and reverse divergences and their implications. If you need articles pertaining to each please advise and I will forward. In this regard I have posted separate articles by Pring and Star and they are available in the files section of the MT4 board. = =20 =20 The first RND recognizes a lower fractal price at Wave 1 high while the indicator value is higher than the next previous fractal price high, marked on chart. Thereafter price moves lower to a fractal low higher, point 2 than the fractal low at point X. Point 2 low is compared to a prior higher fractal low to the left of point X, and results in a CPD. These two different divergences identify Wave 2 low and confirm point X as the starting point of a new EW cycle in this period. Wave 2 low introduces the probable longest Wave 3. Wave 3 is the most frequently and extended wave a= s shown here, although not always. =20 Wave 3 fractal high will always result in the highest Stoch. value in the E= W cycle. An indicator must remember Stoch. values during the complete EW cycle. Extended Wave 3 or 5 will always result in a CND as noted in this chart. During Wave 3 formation Stoch values will ordinarily remain at or above its 20 line. An obvious problem is that the highest Stoch. value may only be determined as a historical event which does not necessary mean the high price value. Often price moves higher subsequent to the highest Stoch= value. =20 Wave 4 low generally reports a Stoch. value below its 20 line but not always. Generally there is a RPD at 4 low as shown in this example. This divergences introduced Wave 5. Ordinarily Wave 5 price high is higher tha= n Wave 3 price high but not always. There must always be a CND between Wave 3 and 5. Stoch value at Wave 3 high must always be higher than Wave B Stoch. value. =20 There are 4 corrective patterns, the easiest to recognize is a zig zag, A, = B and C pattern (waves 6, 7 and 8). There are other much more difficult corrective patterns which in my view cannot be programmed. This price pattern suggests that we will see a combination double or triple zig zag correction, one that cannot be programmed.=20=20 =20 The first 5 waves are easiest to recognize. The last 3 or more corrective wave patterns are impossible to program because of their uncertainty in my opinion. =20 In this chart I am long during expected Wave B. This Wave should not be traded unless the trader closely monitors a long position. As a general proposition Wave B is to be avoided since it is a false rally. =20 The best that any indicator can do is historically document certain points in the EW cycle except for Wave 2 low. A trader can make a good living trading only wave 3 in various pairs. Generally one or more pairs is somewhere in wave 3 on a daily or weekly basis. If your indicator does nothing more than identify Wave 2 low it will be a success. Thank you for your interest in coding this indicator. =20 Loren =20 =20 From: Nguyen, Mike [mailto:Mikey@college.ucla.edu]=20 Sent: Friday, December 11, 2009 1:26 AM To: Loren Morlan Subject: RE: Programmer for Your indicator =20 Hi Loren, =20 I definitely understand what you are talking about. Trying to determine whe= n a wave start or end can be very subjective, depending on who you ask. I've often thought about where to start, how to programmatically approximate the beginning/ending of a wave and which wave it is. I think counting backwards from the current bar to detect the first instance of Waves 3, 5, A, and C i= s a good start, it will help remove the subjectivity.=20 =20 Do you think programmatically calculating the peaks and valleys of the AO i= s a good approximation? Or should I start looking at the indicator you sent out before, the 3_level_ZZ_semafor_TRO_Modified_version.mq4 indicator? When you eyeball the 3_level_zz indicator, is it accurate enough? Maybe we can use this to start out from? =20 Mike =20 =20 =20 =20 _____=20=20 From: Loren Morlan [mailto:gmorlan@tampabay.rr.com]=20 Sent: Wednesday, December 09, 2009 9:37 AM To: Nguyen, Mike Subject: RE: Programmer for Your indicator Hello Mike, Thank you for the offer, I will think about this issue. =20 As you have noted in my charts I use Elliott Wave analysis to trade Waves 3= , 5, A and C in various time periods. I do not think it is possible to accurately capture this analysis in an indicator. I do however think it is possible to identify the lows of Wave 2 and 4, both of which introduce the best two motive waves for trading in the initial EW cycle. It is much mor= e difficult for an indicator to trade the corrective patterns subsequent to Wave 5.=20=20 =20 Traders often limit trading to only Wave 3 and 5.=20=20 =20 If you have any interest in such an indicator please advise. Loren =20 From: Nguyen, Mike [mailto:Mikey@college.ucla.edu]=20 Sent: Tuesday, December 08, 2009 6:27 PM To: gmorlan@tampabay.rr.com Subject: Programmer for Your indicator =20 Hi Loren, =20 I feel you=92ve freely shared your knowledge and I=92ve learned a lot from reading your emails. The least I can do is try to reciprocate and offer to program your indicator (to give back what I can).=20 =20 I work at UCLA and have a BS in computer science. I=92ve been developing on the MT4 platform for about 3 years, have written several COT indicators (an= d its own web service to power those indicators), my own news indicator, and = a dozen other indicators. If you feel that you want a indicator written to your specifications, we can have a conference call and try to make that happen (free of charge of course). =20 Please let me know if you are interested, I would like to help where I can. =20 Happy Holidays, =20 Mike =20 =20 =20 =20 =20 =20 =20 From: MetaTrader_Experts_and_Indicators@yahoogroups.com [mailto:MetaTrader_Experts_and_Indicators@yahoogroups.com] On Behalf Of Loren Morlan Sent: Friday, December 04, 2009 1:08 PM To: MetaTrader_Experts_and_Indicators@yahoogroups.com Subject: RE: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and divergence analysis =20 =20=20 Sometimes discrete stocks, gold and other commodities. No, I have no regular blog except this board and the divergence board.=20=20 =20 I do not know enough about coding or the abilities of a programmer to express an opinion re an indicator. It would however seem to me that anything I can do mechanically can be reproduced by a programmer. Since I know how to analyze/trade I am not going to pay a programmer to reduce this method to an indicator. =20 Loren =20 From: MetaTrader_Experts_and_Indicators@yahoogroups.com [mailto:MetaTrader_Experts_and_Indicators@yahoogroups.com] On Behalf Of Peter Wu Sent: Friday, December 04, 2009 2:03 PM To: MetaTrader_Experts_and_Indicators@yahoogroups.com Subject: RE: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and divergence analysis =20 =20=20 Loren, =20 Your EW analysis is dead-on. Great work! Do you have a blog for people to reference? Also, do you analyze the stock market? Wish your knowledge and skills can be implemented into an indicator. =20 Regards, Peter =20 _____=20=20 From: MetaTrader_Experts_and_Indicators@yahoogroups.com [mailto:MetaTrader_Experts_and_Indicators@yahoogroups.com] On Behalf Of Loren Morlan Sent: Wednesday, December 02, 2009 2:02 PM To: Divergence@yahoogroups.com Subject: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and divergence analysi= s =20 =20=20 Multiple period charts are attached. =20 Monthly Elliott Wave analysis is most important because it controls EW coun= t in shorter periods. Whenever a truncated EW pattern is observed it is because a longer period has prevented the shorter pattern completion. =20 The stochastic oscillator is used in these chart examples although other oscillators like RSI, CCI, MACD may also be used. =20 Point =93X=94 cannot be confirmed as the low until subsequent to point 2 = of the Elliott wave cycle. There must always be a pattern of RND and CPD to identify a trend change incident to a new Elliott wave cycle. The first RN= D at the high of impulse Wave 1 identifies aggressive buying activity of long traders incident to a new EW cycle. This RND suggests lower price incident to formation of corrective Wave 2 fractal low which generates a CPD suggesting higher price incident to impulse Wave 3. Wave 3 is typically th= e longest but is never the shortest Wave.=20=20 =20 Wave 3 is the most often extended wave but not in this example. Wave 3 always has the highest oscillator value and later forms CNDs between Wave 5 and B highs which are present in this chart. Often Stochastic remains abov= e its 40 line during Wave 3 formation as shown in this example. Corrective Wave 4 fractal low is identified when oscillator values fall at or below 20 and form a RPD, an introduction to impulse Wave 5. Wave 5 (Stochastic values above its 40 line) formed a double top and CND introducing impulse Wave A which is corrective of the prior up cycle starting at point X. Like Wave 4, oscillator values fall at or below the 20 line and form the neck line of the upright head and shoulder pattern being traced currently. Although not marked there is another RPD at A low and a previous lower low which suggests higher price incident to formation of corrective wave B, the high of which is not yet conclusively identified. It is possible that pric= e will test Fibonacci 78.6 at 1.52443 or higher including another double or triple top at Wave 5 high.=20=20 =20 The most recent HA candle traces a green bar within the body of the candle, with a current close higher than its open. Stochastic green line remains above its red line which is suggestive of higher price. =20 Six of the eight EWs have been traced by price. Wave B, the seventh Wave i= s not conclusively finished. The eighth and final Wave C of the EW cycle has not yet commenced.=20 =20 Weekly period identifies the 1, 2, and 3 corrective waves of Wave B. Corrective have 3 waves, impulse have 5. Formation of wave 1 results in a RND which introduces Wave 2 corrective of Wave 1. The low of Wave 2 results in a CPD which introduces Wave 3 B, (stochastic above its 40 line) the high of which is not yet conclusively established. The last weekly H= A candle is blue with a green bar within. CND is traced incident to this candle which may or may not mean lower price. =20 Two relevant Fibonacci retracement studies suggest price may find a high at either 78.6 or 127.2. The green lines are standard deviation channel lines= Price is at the upper line which may suggest lower price within that channel. =20 In the weekly period divergences identify Wave 5 high. First, stochastic traces a RND between the double top. Second, the double top then forms a CND which is the correct order to identify a top. Like point X low in the monthly chart first a reverse divergence appears then followed by a classic divergence locates that low. =20 4 hour chart uses a standard deviation channel (SDC) consistent with that period. Most recent fractal highs failed to reach the upper channel line and results in a CND. There is also a longer term CND at the most recent high, see the chart. Prior to this divergence a RPD is traced by stochastic. Price has generally traded within the channel. Price may well test the lower line or lower. =20 4 hour EW analysis is almost identical to the monthly analysis. EW and price patterns traced in the longer time periods are often repeated in the shorter periods and vice versa. In the event the EW cycle is truncated or incomplete in the 4 hour it will because longer term traders in the weekly and monthly prevent its completion. If the 4 hour EW C completes price should minimally test the neck line or lower. =20 1 hour EW analysis again looks similar to the 4 hour and monthly. Price in this period is tracing Wave C, the low of which is not conclusively established. If Wave C does not complete as anticipated a longer cycle will prevent its completion.=20=20 =20 A new SDC is placed in this period with a projected low at the lower line o= r lower. The same sequence of divergences locates X low in this period as was used in the longer periods. =20 Comments; =20 Pesavento and Gartley price patterns should also be considered incident to the above analysis. =20 The most common mistake regarding EW analysis occurs because the trader fails to consider longer EW cycles which ultimately control cycles in shorter periods. This is the reason patterns truncate or actually fail to complete their expected cycle. As noted above Wave B high in the monthly has not been be conclusively established. A short trade present in this chart is higher risk and of shorter duration depending on the hourly period channel lines. The short trade is against the monthly up cycle and must be closely monitored.=20 =20 It is important to recognize that head and shoulder price patterns are most helpful in correct counting of the EW cycle in any period considered. Wave 3 always reports the highest oscillator value and always forms a CND divergence with Wave 5 and later Wave B highs. Wave 4 low always result in an oscillator RPD. Point X, point of beginning may not be conclusively identified until subsequent to formation of Wave 2 low. That event also results in a CPD which follows a prior RND. This pattern of reverse and classic divergences is repeated in all periods studied for both tops and bottoms.=20=20 =20 Loren ------=_NextPart_001_0008_01CA7B1F.23D38DB0 Content-Type: text/html; charset=ISO-8859-1 Content-Transfer-Encoding: quoted-printable  
=20=20=20=20=20=20 [Attachment(s) from Loren Morlan included below] =20=20=20=20=20=20

Hi M= ike,

&= nbsp;

R= 20;Elliott Wave Principle” by Prechter is necessary for an understanding of the EW cycle and our work now for an indicator whic= h may be able to identify some of the EWs.

&= nbsp;

I at= tach a daily chart of Cable.

&= nbsp;

Poin= t X, at which the EW count begins is identified by a specific series of different divergences.=A0 This point may not be confirme= d until subsequent to the low of Wave 2.=A0

&= nbsp;

Frac= tal highs and lows will be used in all divergence issues.=A0 I use Stoch. because it is best in my opinion for this purpose although I als= o look at MACD but do not include that indicator in this discussion.

&= nbsp;

The = indicator must remember the Stoch. =A0values at fractal highs and lows as noted on this chart for all divergences recognition functions.= =A0=A0=A0 You should be familiar with both classic and reverse divergences and their implications.=A0 If you need articles pertaining to each please advise and = I will forward.=A0 In this regard I have posted separate articles by Pring and Sta= r and they are available in the files section of the MT4 board.=A0=A0=A0=A0=A0=A0=A0 <= o>

&= nbsp;

The = first RND recognizes a lower fractal price at Wave 1 high while the indicator value is higher than the next previous fractal price hi= gh, marked on chart.=A0 Thereafter price moves lower to a fractal low higher, p= oint 2 than the fractal low at point X.=A0=A0=A0 Point 2 low is compared to a prio= r higher fractal low to the left of point X, and results in a CPD.=A0 These two diff= erent divergences identify =A0Wave 2 low and confirm point X as the starting point of a new E= W cycle in this period. =A0Wave 2 low introduces the probable longest Wave 3.= =A0 Wave 3 is the most frequently and extended wave as shown here, although not alwa= ys.

&= nbsp;

Wave= 3 fractal high will always result in the highest Stoch. value in the EW cycle.=A0 An indicator must remember Stoch. values during t= he complete EW cycle.=A0 Extended Wave 3 or 5 will always result in a CND as n= oted in this chart.=A0 During Wave 3 formation Stoch values will ordinarily rema= in at or above its 20 line.=A0 An obvious problem is that the highest Stoch. valu= e may only be determined as a=A0 historical event which does not necessary mean t= he high price value.=A0 Often price moves higher subsequent to the highest Sto= ch. value.

&= nbsp;

Wave= 4 low generally reports a Stoch. value below its 20 line but not always.=A0 Generally there is a RPD at 4 low as shown in this examp= le.=A0 This divergences introduced =A0Wave 5.=A0 Ordinarily Wave 5 price high is h= igher than Wave 3 price high but not always.=A0 There must=A0 always be a CND bet= ween Wave 3 and 5.=A0 Stoch value at Wave 3 high must always be higher than Wave B St= och. value.

&= nbsp;

Ther= e are 4 corrective patterns, the easiest to recognize is a zig zag, A, B and C pattern (waves 6, 7 and 8).=A0 There are other much mor= e difficult corrective patterns which in my view cannot be programmed.=A0 Thi= s price pattern suggests that we will see a combination double or triple zig = zag correction, one that cannot be programmed.=A0

&= nbsp;

The = first 5 waves are easiest to recognize.=A0 The last 3 or more corrective wave patterns are impossible to program because of their uncerta= inty in my opinion.

&= nbsp;

In t= his chart I am long during expected Wave B.=A0 This Wave should not be traded unless the trader closely monitors a long position.=A0 As a g= eneral proposition Wave B is to be avoided since it is a false rally.

&= nbsp;

The = best that any indicator can do is historically document certain points in the EW cycle except for Wave 2 low.=A0 =A0=A0A trader can= make a good living trading only wave 3 in various pairs.=A0 Generally one or more = pairs is somewhere in wave 3 on a daily or weekly basis.=A0 If your indicator doe= s nothing more than identify Wave 2 low it will be a success.=A0 Thank you fo= r your interest in coding this indicator.

&= nbsp;

Lore= n

&= nbsp;

&= nbsp;

From: Nguyen, Mike [mailto:Mikey@college.ucla.edu]
Sent: Friday, December 11, 2009 1:26 AM
To: Loren Morlan
Subject: RE: Programmer for Your indicator

 

Hi Lore= n,

 

I defin= itely understand what you are talking about. Trying to determine when a wave start or end can be very subjective, depending on who= you ask. I've often thought about where to start, how to programmatically appro= ximate the beginning/ending of a wave and which wave it is. I think counting backw= ards from the current bar to detect the first instance of Waves 3, 5, A, and C i= s a good start, it will help remove the subjectivity. 

 

Do you = think programmatically calculating the peaks and valleys of the AO is a good approximation? Or should I start looking at the indicator = you sent out before, the 3_level_ZZ_semafor_TRO_Modified_version.mq4 = indicator? When you eyeball the 3_level_zz indicator, is it accurate enough? Maybe we = can use this to start out from?

 

Mike

 

 

 

 

From: Loren Morlan [mailto:gmorlan@tampabay.rr.com]
Sent: Wednesday, December 09, 2009 9:37 AM
To: Nguyen, Mike
Subject: RE: Programmer for Your indicator

Hell= o Mike,

Than= k you for the offer, I will think about this issue.

&= nbsp;

As y= ou have noted in my charts I use Elliott Wave analysis to trade Waves 3, 5, A and C in various time periods.  I do not think it = is possible to accurately capture this analysis in an indicator.  I do however think it is possible to identify the lows of Wave 2 and 4, both of which introduce the best two motive waves for trading in the initial EW cycle.   It is much more difficult for an indicator to trade the corrective patterns subsequent to Wave 5. 

&= nbsp;

Trad= ers often limit trading to only Wave 3 and 5. 

&= nbsp;

If y= ou have any interest in such an indicator please advise.

Lore= n

&= nbsp;

From: Nguyen, Mike [mailto:Mikey@college.ucla.edu]
Sent: Tuesday, December 08, 2009 6:27 PM
To: gmorlan@tampabay.rr.com
Subject: Programmer for Your indicator

 

Hi L= oren,

&= nbsp;

I fe= el you’ve freely shared your knowledge and I’ve learned a lot from reading your emails. The least I can do is try to reciprocate and offer to program your indicator (to give back what I can). =

&= nbsp;

I wo= rk at UCLA and have a BS in computer science. I’ve been developing on the MT4 platform for about 3 years, have written several= COT indicators (and its own web service to power those indicators), my own news indicator, and a dozen other indicators. If you feel that you want a indica= tor written to your specifications, we can have a conference call and try to ma= ke that happen (free of charge of course).

&= nbsp;

Plea= se let me know if you are interested, I would like to help where I can.

&= nbsp;

Happ= y Holidays,

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From: MetaTrader_Experts_and_Indicators@= yahoogroups.com [mailto:MetaTrader_Experts_and_Indicators@yahoogroups.c= om] On Behalf Of Loren Morlan
Sent: Friday, December 04, 2009 1:08 PM
To: MetaTrader_Experts_and_Indicators@yahoogroups.com=
Subject: RE: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and diverge= nce analysis

 

 

Some= times discrete stocks, gold and other commodities.  No, I have no regular blog except this board and t= he divergence board. 

&nbs= p;

I do= not know enough about coding or the abilities of a programmer to express an opinion re an  indicator. = ; It would however seem to me that anything I can do mechanically can be reprodu= ced by a programmer.  Since I know how to analyze/trade I am not going to = pay a programmer to reduce this method to an indicator.

&nbs= p;

Lore= n

&nbs= p;

From: MetaTrader_Experts_and_Indicators@yahoogroups.com [mailto:MetaTrader_Experts_and_Indicators@yahoogroups.c= om] On Behalf Of Peter Wu
Sent: Friday, December 04, 2009 2:03 PM
To: MetaTrader_Experts_and_Indicators@yahoogroups.com=
Subject: RE: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and diverge= nce analysis

 

 

Loren,<= /span>

 <= /span>

Your EW= analysis is dead-on. Great work! Do you have a blog for people to reference? Also, do you analyze the stock mar= ket? Wish your knowledge and skills can be implemented into an indicator.=

 <= /span>

Regards= ,

Peter

 <= /span>

From: MetaTrader_Experts_and_Indicators@yahoogroups.com [mailto:Me= taTrader_Experts_and_Indicators@yahoogroups.com] On Behalf Of Loren Morlan
Sent: Wednesday, December 02, 2009 2:02 PM
To: Divergence@yahoogroups.com
Subject: [MT_E and I] EUR/USD, 12/2/09, Elliott Wave and divergence analysis

 

 

Multiple period charts are attached.

 

Monthly Elliott Wave analysis is most important because it controls EW count in sho= rter periods.   Whenever a truncated EW pattern is observed it is beca= use a longer period has prevented the shorter pattern completion.

 

The stochastic oscillator is used in these chart examples although other oscillators like RSI, CCI, MACD may also be used.

 

Point  “X” cannot  be confirmed as the low until subsequent= to point 2 of the Elliott wave cycle.  There must always be a pattern of = RND and CPD to identify a trend change incident to a new Elliott wave cycle.&nb= sp; The first RND at the high of impulse Wave 1 identifies aggressive buying activity of long traders incident to a new EW cycle.  This RND suggest= s lower price incident to formation of corrective Wave 2 fractal low which generates a CPD suggesting higher price incident to impulse Wave 3.  W= ave 3 is typically the longest but is never the shortest Wave. 

 

Wave 3 is the most often extended wave but not in this example.  Wave 3 alw= ays has the highest oscillator value and later forms CNDs between Wave 5 and B highs which are present in this chart.  Often Stochastic remains above  its 40 line during Wave 3 formation as shown in this example.&n= bsp;  Corrective Wave 4 fractal low is identified when oscillator values fa= ll at or below 20 and form a RPD, an introduction to impulse Wave 5. &nbs= p; Wave 5 (Stochastic values above its 40 line) formed a double top and CND introducing impulse Wave A which is corrective of the prior up cycle starti= ng at point X.    Like Wave 4, oscillator values fall at or bel= ow the 20 line and form the neck line of the upright head and shoulder pattern being traced currently.  Although not marked there is another RPD at A= low and a previous lower low which suggests higher price incident to formation = of corrective wave B, the high of which is not yet conclusively identified.  It is possible that price will test Fibonacci 78.6 at 1.52443 or higher including another double or triple top at Wave 5 high. 

 

The most recent HA candle traces a green bar within the body of the candle, wit= h a current close higher than its open.  Stochastic green line remains abo= ve its red line which is suggestive of higher price.

 

Six of the eight EWs have been traced by price.  Wave B, the seventh Wave = is not conclusively finished.  The eighth and final Wave C of the EW cycl= e has not yet commenced.

 

Weekly period identifies the 1, 2, and 3 corrective waves of Wave B.  Correct= ive have 3 waves, impulse have 5.  Formation of wave 1 results in a RND wh= ich introduces Wave 2  corrective of Wave 1.  The low of Wave 2 resul= ts in a CPD which introduces Wave 3 B, (stochastic above its 40 line) the high= of which is not yet conclusively established.    The last weekl= y HA candle is blue with a green bar within.  CND is traced incident to thi= s candle which may or may not mean lower price.

 

Two relevant Fibonacci retracement studies suggest price may find a high at eit= her 78.6 or 127.2.  The green lines are standard deviation channel lines.  Price is at the upper line which may suggest  lower price= within that channel.

 

In the weekly period divergences identify Wave 5 high.  First, stochastic traces a RND between the double top.  Second, the double top then form= s a CND which is the correct order to identify a top.  Like point X low in= the monthly chart first a reverse divergence appears then followed by a classic divergence locates that low.

 

4 hour chart uses a standard deviation channel (SDC) consistent with that period.  Most recent fractal highs failed to reach the upper channel l= ine and results in a CND.  There is also a longer term CND at the most rec= ent high, see the chart.  Prior to this divergence a RPD is traced by stochastic.  Price  has generally traded within the channel.   Price may well test the lower line or lower.

 

4 hour EW analysis is almost identical to the monthly analysis.  EW and price patterns traced in the longer time periods are often repeated in the shorter periods and vice versa.   In the event the EW cycle is truncated or incomplete in the 4 hour it will because longer term traders i= n the weekly and monthly prevent its completion.  If the 4 hour EW C completes price should minimally test the neck line or lower.

 

1 hour EW analysis again looks similar to the 4 hour and monthly.  Price= in this period is tracing Wave C, the low of which is not conclusively established.   If Wave C does not complete as anticipated  a longer cycle will prevent its completion. 

 

A new SDC is placed in this period with a projected low at the lower line or lower.   The same sequence of divergences locates X low in this period as was used in the longer periods.

 

Comments;

 

Pesavento and Gartley price patterns should also be considered incident to the above analysis.

 

The most common mistake regarding EW analysis occurs because the trader fails t= o consider longer EW cycles which ultimately control cycles in shorter periods.  This is the reason patterns truncate or actually fail to complete their expected cycle.  As noted above Wave B high in the mont= hly has not been be conclusively established.  A short trade present in th= is chart is higher risk and of shorter duration depending on the hourly period channel lines.  The short trade is against the monthly up cycle and mu= st be closely monitored.

 

It is important to recognize that head and shoulder price patterns are most helpful in correct counting of the EW cycle in any period considered.  Wave 3 always reports the highest oscillator value and always forms a CND divergence with Wave 5 and later Wave B highs.  Wave 4 low always resu= lt in an oscillator  RPD.  Point X, point of beginning may not be conclusively identified until subsequent to formation of Wave 2 low.  = That event also results in a CPD which follows a prior RND.   This pat= tern of reverse and classic divergences is repeated in all periods studied for b= oth tops and bottoms. 

 

Loren

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