ta charts, page-144

Hi Wayward1,

Car is in the garage. Eight airbags, so I did my job well. Thanks for your post. I ran extensions from the April 08 low to May 08 high and now understand the 08 period connection to the current 29c level.

I’m not sure if I’m misunderstanding, but you refer to my chart and the May period. May is a period I nominated as important to your chart. As I understand it, May is not relevant to my chart (early March is though). Leaving the dates aside, I have taken on board the implications of what you have said.

Re your words:
“Had the rejection of the 2012 lows occurred in 2011 then your model would fit much better. An ideal time ratio is to run back two cycles. A decline of 144 as an example will base for a period greater than 55 bars before entering 38.2 which a May entry complies with however fails when we run into June.”

I’m all on board with everything up until “…which a May entry complies with however fails when we run into June.” I’m not sure why 55 bars complies by May or fails by June.

Re your text, “the other issue is the fifteenth cycle from the )* high.”

You did not fill in the date, but I assume you are talking about 987 bars from the 1/2/2008 high. If so, I understood you fully.

You have been a great help to me. Perhaps I can add something from another discipline that might give you another perspective on volume analysis. TA’s only talk about volume arising from changes in supply/demand. The reality is that this can be broken down further. For a given price change there is both an income effect and a substitution effect on the demand side. Lower prices affect real income and increase the volume of purchases. Similarly, lower prices can induce a substitution effect out of relatively higher price stocks in favor of the lower priced ones (volume related to value and catch the knife buyers). This site (see diagrams 20 and 21) will explain further. Re 21, a fall in the price of share X, leads to an increase in volume as measured on the X axis. Shares are normal goods, so ignore any analysis on Giffen goods and inferior goods.

http://www.slideshare.net/salasvelasco/microeconomics-income-and-substitution-effects

Now reverse the analysis and consider a price rise. Income and substitution effects will detract from volume. This is part of the reason why impulsive up-trends can be driven without significant volume. New capital injections are required for each impulse, but the volume this creates is offset by the income and substitution effects that detract from volume. Combine this knowledge with value based analysis (Vol x price) and consideration of demand elasticity/inelasticity and volume takes on more meaning. Value is synonymous with revenue to a firm. Theory of the firm has said a great deal about revenue and it simply needs to be applied in a different context.

Too much technical analysis is accepted because it works. Higher understanding is required as to why it works. Only then will it become a respected discipline. Only then will it move beyond its largely exploitative retail roots because understanding often requires complexity to be addressed (and simplified where possible). Food for thought I hope.

My apologies to the thread for diverting from PLV only analysis.

Cheers

Bleasby.