Jump to content
Sign in to follow this  

Wyckoff Logic

Recommended Posts

That all looks eminently sensible @Caseynotes and roughly confirms to EWT and other similar cycle theories.  I do use the concept of an "Ice Line" when identifying a breakout from a consolidation such as the Accumulation of Distribution phase when I can't find another charting method (e.g. H&S neckline).  I particularly use an ice line off a double top/bottom, which fits the theory above well.  It would be interesting to see this on some actual markets in long term time-frames to see how well it tracks.  I suspect that the theory diagram is idealised so recognising the pattern on real market data would be open to interpretation, as everything is of course.  I would expect such real markets examples to map onto a classic EWT analysis and Charting analysis such that the the Accumulation and Distribution zones represent end of Bulls & Bears phases, which will conform to either a 1-5 motive or A-B-C retrace  (as trend channels) and depending on the time-frame each consolation phase (H&S, Triangle etc) will either be preparatory to a new major trend or a continuation of the existing overall trend.   So net, no surprise to me, this theory fits well with EWT and Trend Following rather than as an alternative.  Just a different way of saying the same thing and seeking to do the same thing, which is profit from a trend and/or trend change.

The only problem (if problem it is, maybe just health warning...) is the notion of the "logic".  While it makes sense I have often observed that the markets can at time exhibit illogical behaviour, the over-exuberance of bubbles for example, which may still conform to the pattern but in a hard to fathom and observe way.  What would this pattern look like on Bitcoin for example?  The Accumulation phase is clearly there (I called it incubation phase on my recent post) but the Distribution phase would be far from classic I imagine, hence the need for interpretation.

Share this post


Link to post

Oh completely agree @Caseynotes, that is what makes it all so interesting to me.  If several people (or the market players in general) come up with different models using different logic but all conforming to the same market movements over the long term then, to me, it means there is validity to analysing these markets using said models.  Really matters little which ones (or combinations in my case) one uses so long as one understands how they can be used in context to support a trading idea.  But of course one must back test and practice using the models/theories within a methodology for both recognising and executing a trading idea.

Share this post


Link to post

That's true @Mercury, Wyckoff was a contemporary of, and just as famous back in the day, as Charles Dow and Wyckoff himself took Dow theory and expanded on it. So many modern models and theories have the same root origin.

Share this post


Link to post

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Member Statistics

    • Total Topics
      7,234
    • Total Posts
      35,854
    • Total Members
      45,831
    Newest Member
    Richardoyle
    Joined 17/08/19 16:42
  • Posts

    • Going back to my FTSE analysis I see things as follows: 2 scenarios present themselves, other than fresh ATHs that is: 1) the move down to the turn on Thursday was a wave 1 (blue) off a larger scale wave 2 (purple) that should retrace, maybe in a complex fashion with a lot of whip saw price action maybe not, let's see; 2) the recent rally and drop to a new low was a 1-2 (red), which indicates a much stronger leg down is immanent. The #2 scenario would only be valid if price holds below the previous high (circa 7300).  I favour the #1 scenario. There was PMD on the 4H chart at wave 1 (blue), which suggests this is a turning point.  Also the 4H chart shows a 1-5 wave down to the 1 blue, which would be motive and suggests a trend change to the bearish side. There was strong NMD at wave 2 (Purple) which is consistent with a large scale retrace move. Just as with the US large caps, after the stop and turn up there was a sharp retrace drop to the Fib 76/78% zone before the current rally.  As the FTSE was in out of hours at the end of the week this market has not rallied as hard as the US markets.  Also we may yet see fresh ATHs on US large caps while the FTSE100 only puts in a counter trend rally. If we do see fresh ATHs on US large caps and only a retrace on FTSE and probably Dax and Nikkei as well then comparing these markets will be instructive for calling that top on US large caps.  We may, alternatively, see only a retrace on US large caps too if the top of the market in already in. Conclusion: we can anticipate a bullish period on all major indices BUT should guard against a quick reversal on FTSE 100 that would set up scenario #2.  Either way this market looks to have topped out so the coming months though to the Autumn will be critical to deciding things on all indices, and likely quite a few other markets. I am Long the FTSE 100, coincident with my Dow Longs and will swing this up for now but my bearish bias for the long term will keep we watchful for a break down of this rally and I will not be pyramiding this one, far too risky until things are resolved.
    • "....more broadly we have seen currency wars but these have not really captured the imagination of the MSM yet" Actually I'd argue we have had currency wars for some years already. History shows it goes in the following order: Currency war, Trade war, War. (Regrettably).  If I recall correctly the market falls of early 2015 (about 20% down) were blamed on Yuan being devalued by Chinese manipulation. Way before Trump! "....we suddenly get a super massive set of central bank policies that drop rates to zero" Again I'd say that has been going on for some years. Arguably you could say about 35 years since the Plaza Accord. Once fiat became unaccountable (no gold standard) the politicians proceeded to spend, spend spend =debt,debt,debt. Expect MMT  (US Democrats pushing modern monetary theory) to allow them to continue in that vein. Again history says these currencies will all eventually disappear, like species, approx 95% no longer exist.  Broadly I agree with what you say. The present financial system is critically sick that's for sure. It has propped up assets with huge doses of QE and zero rate interest policy (expect more of that when the ECB meets next month). You are correct about the size of stock markets. If the global market was a horse the bond market would be three legs of it! I digress.... However, if you are faced with massive debts then here are your options: 1) Default - Argentinian/Zimbabwe style. Not likely, at least until all other options tried - as that's the end game. 2) Grow the economy at a fast enough rate to meet and exceed future repayment obligations. In a global low anaemic growth environment? Unlikely. 3) Inflate like mad. It's the only viable option. You could, reasonably say, that after 3 massive QE sessions and ZIRP and now  NIRP that deflation is winning. Arguably it's all been a waste of time / money. Where's the kitchen sink? Presumably more of the same and then some helicopter money? It seems to me that this is more in line with Japan (targeted 10yr bond rate = 0%) which someone said in the 90s was  "...the dress rehearsal. The rest of the world will be the main event". Trying to get inflation without destroying the USD global reserve status is unlikely in my opinion and you can't help but feel that some sort of Bretton Woods global RESET will eventually emerge. It's certainly what Russia, China, Syria, Iran, Turkey etc are angling for.....and their central banks have been big buyers of bullion recently. That's why I'd recommend holding gold. Not as a trading strategy (which is what I appreciate this forum is). Nice sharing these thoughts with you>
    • So it looks like my crazy set of channels on the Daily chart is still holding well.  The breakout of the last channel line, which coincides with a nice zone of lateral S/R was retested but failed as I noted in my previous post.  I got Short off an initial rejection from this zone and Resistance line with a tight stop but price never came back so nicely in on a couple of Short positions and stop protected at BE.  Price moved back through the monthly lower channel line (purple) and put in a quick daily candle failed retest and dropped away.  It is possible we could see another retest of this resistance zone before any further move but a break below the 5760 level would be indicative that the Bear has resumed and obviously a break of the previous low around the $56 mark would once again bring $50 into focus.  
×
×