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NASDAQ; DAILY VIX AND NASDAQ 1/28/12 [2 Attachments] Reply-To: Divergence@yahoogroups.com X-Yahoo-Newman-Property: groups-email-ff-m Content-Type: multipart/alternative; boundary="----=_NextPart_001_0056_01CCDE7E.8B8B4EB0" ------=_NextPart_001_0056_01CCDE7E.8B8B4EB0 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit Attached two charts related to a method for objective determination of the nature and difference of impulse and corrective waves in the EW cycle with respect to their volatility. Many EW traders have difficulty in determining the difference between these two EW patterns. The answer to this important issue is recognition in the difference in "volatility" of price action of each phase, impulse or corrective. The rules for use of volatility in this determination are as follows: 1. When price traces impulse waves (1, 3 and 5) volatility will increase. 2. When price traces corrective waves (2, 4, A, B and C) volatility will decrease. Daily charts are used because they are ordinarily long enough to recognize either an impulse or corrective cycle. This study begins with a historical study of EWs in the daily NASDAQ. That chart study will be compared to the VIX (volatility of the S&P500 a surrogate for the NASDAQ) with respect to the difference between volatility and price/EW tracing. Print both charts for comparison purposes. NASDAQ and VIX; Monthly NASDAQ establishes a down cycle. Daily traces impulse waves 1, 3 and 5 marked with vertical lines lower. VIX study begins at the high of corrective wave 2 through impulse waves 3 and 5. During this impulse wave cycle lower volatility increased, the inverse of price action. Waves 3, 4 and 5 are recognized in the VIX index with appropriate divergences. Which inverse divergences are also observed in the NASDAQ. Price recently is searching for the high of wave B, the 7th wave in the daily EW cycle. No daily fractal has yet been traced. Wave B can exceed the former chart high. Wave B is a corrective wave and VIX traces lower volatility values as price moves higher. VIX has traced a fractal at Wave B which suggests price may be near or at the high of wave B in the NASDAQ and the VIX low. Comments; VIX may be used for comparison to all US equity indexes. Volatility is typically highest or lowest value incident to wave 3. Wave 1 volatility is feeble compared to waves 3 and 5 since most traders do not recognize this wave as a trend change. Wave 5 like waves 1 and 3 propel the market higher or lower. Wave 5 has less volatility than wave 3 as traced by RSI or MACD, thus tracing a classic divergence either higher or lower. Volatility index is an important objective finding regarding determination of the nature (impulse or corrective) of EWs in the equity index being examined. Wave B (right shoulder) can trace higher than the head (chart high in this example) and still retain its EW structure. Wave B has retraced .92 of the previous cycle. VIX and NASDAQ have not changed their directions at this time. Loren ------=_NextPart_001_0056_01CCDE7E.8B8B4EB0 Content-Type: text/html; charset=US-ASCII Content-Transfer-Encoding: 7bit  
[Attachment(s) from Loren Morlan included below]

 

Attached two charts related to a method for objective determination of the nature and difference of impulse and corrective waves in the EW cycle with respect to their volatility.   Many EW traders have difficulty in determining the difference between these two  EW patterns.  The answer to this important issue is  recognition in the difference in “volatility” of price action of each phase, impulse or corrective.   The rules for use of volatility in this determination are as follows:

1.    When price traces impulse waves (1, 3 and 5) volatility will increase.

2.    When price traces corrective waves (2, 4, A, B and C) volatility will decrease.

 

Daily charts are used because they are ordinarily long enough to recognize either an impulse or corrective cycle.  This study begins with a historical study of EWs in the daily NASDAQ.  That chart study will be compared to the VIX (volatility of the S&P500 a surrogate for the NASDAQ) with respect to the difference between volatility and price/EW tracing.  Print both charts for comparison purposes.

 

NASDAQ and VIX;

Monthly NASDAQ establishes a down cycle.  Daily traces impulse waves 1, 3 and 5 marked with vertical lines lower.  VIX study begins at the high of corrective wave 2 through impulse waves 3 and 5.  During this impulse wave cycle lower volatility increased, the inverse of price action.   Waves 3, 4 and 5 are recognized in the VIX index with appropriate divergences.  Which inverse divergences are also observed in the NASDAQ.

 

Price recently is searching for the high of wave B, the 7th wave in the daily EW cycle.  No daily fractal has yet been traced.  Wave B can exceed the former chart high.  Wave B is a corrective wave  and VIX traces lower volatility values as price moves higher.  VIX has traced a fractal at Wave B which suggests price may be near or at the high of wave B in the NASDAQ and the VIX low.

 

Comments;

VIX may be used for comparison to all US equity indexes.  Volatility is typically highest or lowest value incident to wave 3.  Wave 1 volatility is feeble compared to waves 3 and 5 since most traders do not recognize this wave as a trend change.   Wave 5 like waves 1 and 3 propel the market higher or lower.  Wave 5 has less volatility than wave 3 as traced by RSI or MACD, thus tracing a classic divergence either higher or lower.

 

Volatility index is an important objective finding regarding determination of the nature (impulse or corrective) of  EWs in the equity index being examined.

 

Wave B (right shoulder) can trace higher than the head (chart high in this example) and still retain its EW structure.   Wave B has retraced .92 of the previous cycle.

 

VIX and NASDAQ have not changed their directions at this time.

Loren

 

 

 

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Attachment(s) from Loren Morlan

2 of 2 Photo(s)

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