Modified Wyckoff Analysis introducing and integrating … · Modified Wyckoff Analysis introducing and integrating ... It has been improved and expanded on by Dr. Henry "Hank" O.

Modified Wyckoff Method Modified Wyckoff Analysis introducing and integrating

Long Wave Dynamic's

Ï Presented by Russell Wm Brower-Berkhoven,

Ï [email protected]

The Great Man Speaks!

“I am more and more impressed with the possibilities of history’s repeating itself on many different counts. You don’t get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high… In recent years certain compromise methods have been devised by which the investor can take some advantage of the stock market’s cycles without running the risk of an unduly long wait or of “missing the market” altogether. These are known as FORMULA TIMING PLANS.” Benjamin Graham, The Intelligent Investor

Introduction

Ï Based on the work of Charles M. Dow, Richard D. Wyckoff developed a comprehensive methodology of market analysis that remains tried, tested and true today. It has been improved and expanded on by Dr. Henry "Hank" O. Pruden of Golden Gate University (www.hankpruden.com).

Ï Long Wave Dynamics is a methodology based on the work of P. Q. Wall. improved and expanded on by David Knox Barker. (www.longwavedynamics.com)

Ï "3 Non Correlated Methods” Analysis is a methodology based on the work of Constance Browne. (www.aeroinvest.com)

Ï

PQ Wall and Long Wave Dynamics

Ï The late PQ Wall theorized that price was governed by 3 emotional states of operation. These emotion's are defined as Solitude (oversold), Normal (transition) and Frenzy (overbought).

Ï David Knox Barker expanded on this theory by applying Fibonacci Ratios to define the boundaries of these emotional states in price. Basic Grid Range 0-.382 Solitude (oversold), .382 -.618 Normal (transition) and .618 -1.00 Frenzy (overbought).

Ï Thesis: the ability to identify these emotional states of operation can be used in conjunction with other tools to help identify high potential turning points and price projections.

Modified Wyckoff Analysis

Ï Wyckoff Analysis provides framework and tool kit to filter and drill down high probability trades

Ï Suggests that all prices are determined by the minds of men

Ï That the hand of the “Composite Operator” shows itself in price action which can be acted upon using Wyckoff Laws and Rules, the 9 Buying/Selling Tests and Long Wave Dynamics

Long Wave Dynamics Ï Based on the work of PQ Wall's 3 equa-distant range theory

Ï Suggests that while all prices may be determined by the minds of men, not all things that affect men's minds are man made!

Ï Divides price into fields of emotion using Fibonacci Ratios

Ï Fibonacci Ratios can then be used to generate price as well as high probability time cycle projections

Technical Tools: Wyckoff + Long Wave + Dow Theory =

3 Non Correlated Methods

Technical Tools -

Ï Point and Figure Charts

Ï Wall Theory Charts

Ï Japanese Candle Sticks

Ï Elliott Wave Charts

Ï Fibonacci Ratios

Ï RSI, Stochastic and RSI Stochastic Note: Grid Ratios can be applied to most technical indicators or studies

Ï Long Wave Dynamic PriceGrid and Cycle Generator

Ï Bullish Percent to determine “field” position are the Bulls or Bears in control?

Wall Theory Chart Ï Identify extreme high and low using Fibonacci Grid

Ï Use Grid ranges to identify and determine the motive of the “Composite Operator's” hand

Ï Project high probability price and time targets for entry/exit or stop loss using additional LWD Grids to drill down and refine projections for Support or Resistance

Example: Fibonacci Grid and Ranges 0-.382 Solitude (oversold) the pro's at work Accumulate/Buy

.382-.500 Normal (transition) the Pro's in action Hold .618-1.00 Frenzy (overbought) the fleecing of the flock Sell

Symbol: Gld Study

Multiple time frame analysis used to “drill down” and study actions and determine entry and exit points

Ï Weekly Candle used to determine Mid term trend

Ï Daily Candle chart used to determine Short term trend

Ï Point and figure Charts to identify Accumulation/ Distribution patterns also used to confirm Elliot Wave counts and Wall Cycle Counts

Ï Point and Figure RSI to determine Index strength vs vehicle used strength.

Sample Charts: 3 yr Weekly GLD

GLD 6 Months Daily

GLD Point and Figure

Shakeout(?)

Normal

Frenzy

Solitude

Bullish Percent P&F Chart = Field Position based on % of issues giving P&F Buy Signals

Bullish Percent Chart provides useful information as to how strong an Index is at any given time. In this example we see the Gold Miners Index has entered the Frenzy Range (.618-1.00). As a general rule Buy signals are given below the 20% zone and Sell signals are given above the 80% zone. Although in this case there have been several great trading opportunities as the index nears its extremes!

Buy

Sell Frenz

y

Normal

Solitude

Symbol: IGT (tsx comex gold) Point and Figure RSI is generated in this case by dividing IGT (comex

gold) by TSX300 to determine whether target is stronger than benchmark index This image cannot currently be displayed.

RSI RSI Point and Figure Rising column of X's = IGT is stronger than the benchmark Index (Numbers indicate month signal moved) A reversal into column of 0's = IGT is weaker than the benchmarkIndex and may not respond well during a Correction

While not the sexiest indicator RSI P&F packs a lot of information when it comes to how our target respond vs their benchmark

Wyckoff Laws and the Nine Buying and Selling Tests

1. The Law of Supply and Demand – states that when demand is greater than supply,

prices will rise, and when supply is greater than demand, prices will fall.

Here the analyst studies the relationship between supply vs. demand using price and

volume over time as found on a barchart.

2. The Law of Effort vs. Results – divergencies and disharmonies between volume and

price often presage a change in the direction of the price trend. The Wyckoff

“Optimism vs. Pessimism” index is an on-balanced-volume type indicator helpful for

identifying accumulation vs. distribution and gauging effort.

3. The Law of Cause and Effect – postulates that in order to have an effect on you must

first have a cause, and that effect will be in proportion to the cause. This law’s

operation can be seen working as the force of accumulation or distribution within a

trading range works itself out in the subsequent move out of that trading range. Point

and figure chart counts can be used to measure this cause and project the extent of its

9 Buying Tests after a steep decline

Buying tests

9 Selling Tests after a steep rise

Selling Tests

Long Wave Dynamics: Time Cycle Projections

Ï LWD time cycles are generated by Fibonacci projections based on ideal Wall Theory time Cycle for investors of 141.9 days and for traders 35.475 days

Ï Allows for “heads up” of high probability potential turning points

Sample Wall Cycle Top Projections for GLD

Wall Cycle Top Projection

Ï Date Fibonacci Ratio Status

Ï 7/1/2011 61.803% Shorter than

Ï 7/17/2011 50% Shorter than Ideal

Ï 8/3/2011 38.196% Shorter than Ideal

Ï 8/24/2011 23.606% Shorter than Ideal

Ï 9/6/2011 14.589% Shorter than Ideal *Target Hit

Sept 6 Top chart

Projection target hit

Sample Wall Cycle Bottom Projection for GLD

Ï Wall Cycle Bottom Projection

Ï Start 1/7/2011

Ï Date Fibonacci Ratios Status

Ï 8/24/2011 61.803% Shorter than Ideal

Ï 9/9/2011 50% Shorter than Ideal

Ï 9/26/2011 38.196% Shorter than Ideal *Target Hit

Sept 26 Bottom chart

Projection Target Hit

Sample LWD Price Projections GLD

Ï Interactive Fibonacci Grid Price Projections

Ï Level 1 Grid

Ï High 229.83 High

Ï 218.44 0.94427

Ï 211.40 0.90983

Ï 200.01 0.8541 Previous Resistance/Target

Ï 181.59 0.7639 Resistance

Ï 151.78 0.61803 Support

The Final Act for Gold?- with 245 trillion in notional derivatives out there I calculate Gold is worth....?

The truth lies between $1516 gold and $12518 dow in order for a real bottom to be put in for the DOW the ratio must reach 1:1 or 2:1

Ï Current Ratio is 6.89 :1 from a high of 41:1

Ï possible scenarios:

Ï Gold Down Dow Up

Ï Gold up Dow Down

Ï Gold Down Dow Down

Daily Chart provides clues to triggers for entry/exit or stop loss position

Putting it all together Ï

• •

• • • • • • • • • • • • • • • • • •Analysis: R• S• I• =• • N•o•r• m• a•l• •(• t •r•a• n• s• i•t•i•o•n•)• •B•u•l•l•i•s•h• •b•i•a•s• •P•r• i •c•e• • =• •L •e• v•e • l • •1• •G• r •i•d• • •N•o•r•m•a•l• •(•t•r•a•n•s•i•t•i•o•n•)• •S•t • o• c•h• a• s• t• i • c• • =• • F• r • e•n• z•y• • (• o• v•e•r•b•o•u•g•h•t•)• •B•u•l•l•i•s•h• •b•i•a•s• •R• S•I • • S• t •o• c• h•a• s• t•i • c• • =• F• r•e• n•z•y• • • (•o•v•e•r•b•o•u•g•h•t•)• •B•u•l•l•i•s•h• •b•i•a•s• • •Conclusion: p•r• i •c• e• •s• e• e• m•s• • p• o• i•s•e•d• •t•o• •m•o•v•e• •u•p• • •Action: Buy/ Hold

Conclusion Ï New developments in price and time projection can be

incorporated into tradtional methodologies for excellent trading and investment results reducing draw downs and other “falling piano's”.

Ï For more information please contact:

Ï Russell Wm Brower-Berkhoven,

Ï [email protected]