Long Term Euro Cycle

Is the Euro run over? Attached below is a weekly chart showing a Gann grid adjusted to squaring a range of time going back to Oct 2002. The closing of this past week put price right on the 360° of time and 495° of price. I would be expecting a pretty significant correction from this point pretty close to the 1.30 area in the short term. I've got 1.8280 marked off as the first target. The cycles of time have been fairly accurate and I've circled in yellow where price turned. At least within a few bars. 6/8 ain't too bad and if price turns within the next few weeks it will be 7/8 correct.

The red moving average looking thing is a price cycle forecast showing this past week as a major turning point. This price cycle shows one inversion,but the turning points were correct even though direction wasn't. The next turn isn't unitl the end of January. There is a bump around the end of November beginning of December. Again, inversions happen and I'm not sure how forecast them, but the primary key is the forecast change of direction and not necessarilly literal direction.




Below is the continuation of the last Gann Grid. Price peaked again at 56 bars and might prove to be the top for a while.

Manual Gann Grid Continued

Continuing the grid from last Friday, price continued to react to the 56° of time. The high for Monday morning peaked right on the 56th bar from the previous verticle division. The high for Wednesday also peaked at 56° of time. Once a pattern has been established it's not uncommon for the same theme to play out over a good section of time.

On the first chart, the magenta vertical line shows the forecast high for time. The 2nd shows how it played out. The 3rd chart shows the high for Wed.

Idealized 9 Month Cycle

There is a great article on cycles at www.decisionpoint.com. The article breaks down a nominal 8 year cycle down to an idealized 9 month cycle. Within the 9 month cycle are two phases of a 20 week cycle and 4 phases of a 10 week cycle. Techincally, a complete cycle is in 2 phases. A positive phase and a negative phase or your typical sine wave.


I went back to a major swing low in Feb. 07, 1993 on the GBPUSD weekly chart to start the cycles. This past week culminated in the arrival of all 3 cycles. Attached below is a weekly chart showing such. The blue verticals are 10 weeks, magenta 20 weeks, and brown 9 months. This 9 month cycle could also be considered a Natural Cycle for obvious reasons. Either way, the article is an excellent guide to cycle trading. http://www.decisionpoint.com/TAcourse/Cycles1.html

Manual Gann Grid Technique

There is a technique I forgot to mention the post about creating a Gann Grid from scratch with Metatrader 4 tools. The technique is basically using the grid to find future squarings of price and/or time from the price action contained within the grid.

The initial move from the start of the grid went up to 135° of price and went out to just over 180° of time. Do the following:

1) Count out 135 bars and mark it.

2) Count out 180 bars from the high and mark it. The move went over 180° of time by a few bars, but 180 is close enough. The 180 puts time out near 360°.

The initial move defined a later move from beginning to end. It doesn's always work out that way but it's worth marking. The other thing worth noting is the price range the Euro is in. 1.3436 is the 135° from our start price. Move the decimal over on the price a couple of spots on price and you're 2/10 away from 135. So doing bar counts in that 135 area from any high or low will probably show some reaction.



Coming up to current events, I had created a new grid and the same techniques will be applied. Again, a EURUSD 30 min. chart is used.

Beginning a grid from a pivot low at 9/04/07 14:30, price had risen up to 90° of price in just over 45° of time. 56° of time to be precise. So using those numbers of 90° and 56°, price peaked 90° of time later after the Nonfarm Payrolls report from the measured peak. From the vertical lines of 45° and 90°, measure over 56° in time and price peaked at those marks.

Natural Cycle Update

The Natural Cycle has arrived. I was thinking price was going to drop down into it, but the opposite happened and price has peaked at the arrival.

The safe method of trading a cycle event is to find confluence with other indications. Also, wait until the top or bottom has proved itself to be a top or bottom, ie wait for a pullback or wait a couple of days to see if a change in direction is in place.

I have a few other indications that this recent peak is a top and I have some sell stops waiting to trigger. But as always I start small so in case I'm wrong the loss is small.

The Ellipse Part 2

The ellipse is one of my favorite shapes because it describes so much in the universe. Cycles are proven to be ellipticical in nature. The orbits of the planets, of solar systems around galaxies, sub atomic particles, and so forth, are all elliptical.

My first encounter with the ellipse in financial markets was through Brad Cowan and his book, "Four-Dimensional Stock Market Structures and Cycles ". According to Cowan, the major and minor axis form tetrahedral geometry structures and that the advances of price are contained within the ellipse.

The basic shape of the tetrehedron is the equiliateral triangle which I showed in a previous post to be a significant shape that shows up in market charts. So understanding the equilateral triangle it's easier to understand the placement of the ellipse on the chart.

Going beyond Cowan, my research has led me to form some interesting conclusions. Where the tetrehedron is the 3D version of the triangle, the 3D version of the ellipse would be the torus. But the torus isn't just a static object. It rotates around an axis twisting and turning to its center. So because of this 4 dimensional behavour, in essence a straight line within the torus can not be represented on a 2 dimensional chart as a straight line. There is time and motion dimensions not accounted for.

For example, if you were to hold a magic marker in your hand perfectly still for 365.25 days, the orbital path of the earth would carve out a torus in space around the sun. However, the Earth rotates on an axis tilted to 23°. While you would be perfectly still drawing what to you would be a straight line in space, the end result would be a line anything but straight to an observer out in space. If the observer in space attempted to draw what he saw on a 2 dimensional chart, the patterns of the lines would be large when they were close and small when they were far due to 3d perspective coupled with the elliptical orbit of the Earth.

That is just a fraction of the nature of the torus. There's also the vortex, but I'll save that for another time. But think about what is taught in junior high geometry. The circle, ellipse, parabola, and hybperbola are all cross sections of the cone. Does the cone not look like a solid form of the vortex? So do circles, parabolas, and hyperbolas, show up in the markets, too?

Cycles of 45 and 144

Almost exactly a year ago I had calculated some cycles of 45 and 144 calendar days from a point in December of 2004. I had totally lost track of this chart and found it tonight. I wish I would have been using it the past year because it has held up extremely well. Notice the aqua lines cherry picking tops and bottoms. Trading nothing but those lines alone could have paid off handsomely.

Of course it's all hindsight and I took most of this year off from trading. But fate would have it that there is a blue line coming up later this Sept. I've got some other cycles in that general area as well. Plus time is advancing just past a 45 count.

There's also a triangle forming, so we'll see how it pans out. Triangles are hard to judge but whatever price is doing at that line, I'll be watching it to reverse the other way.The first two shots were taken a year ago showing the cycle behavour back then. The third is the current standing situation.

The Square of Nine image is the actual chart I used to get the idea of plotting the 144th count. The number that will eventually pop up is 216 which is 144 away from 360. 360 can be broken up evenly in many ways. The more common are squares and trines which are fourths and thirds respectively. But there are a host of other numbers that come out of 360 evenly and it's not against the law to use numbers that don't. Although numbers that fit into multiples of 360 do hold. 360 x 2 = 720. 144 goes into 720 five times. 5 is a very signifcant number as well. Square root of 144 is 12 which is Universal. 144 is also a Fibonacci number. The digits add up such that 1+4+4 = 9. 9 is highly significant and so on and so on.

Nested Geometry

Nesting geometric shapes can provide turning points and vectors that define a path for price. A vector differs from a trend line in that a trend line usually defines consecutive highs or lows of price whereas a vector defines 2 points; a high to a low, a low to low, or a high to high.

The chart below starts with selecting a range which is highlighted by the red line. That red line defines one side of an equilateral triangle. Two lines are created from the angle of that line. One of them is 60° difference to define the second side of the equilateral triangle. The other is 30° difference to define the apex of the second nested equilateral triangle. Each circle is defined by the perimeter of the triangles or the interior of the triangles.

Some key things to note is how price ran straight up the 30° angle vector and terminated at the apex of the 2nd triangle. Also notice how price also ran down the outside of the outer circle reversing at the apex of the primary triangle.

It's also easy to get carried away. Last year I made something that ended up looking like a crop circle. Of course my buddies had to poke some fun and the 2nd chart below is Akuma99's interpretation. The third chart shows price taking off like a rocket at the end up the pattern.

Natural Cycles

In the style of Gann this post is going to be some what cryptic. Some of the best cycles to use are Natural Cycles. Mainly because they are easy to project into the future as well as the past when they are found.

Nature squares the circle. The image on the left describes 1/2 the amount of the cycle. It also describes the nature of the cycle and the nature of one of the cycle's key components in at least two ways.

The chart below shows the GBPUSD daily chart going all the back to late 1980. The red verticle lines mark off 32° of this particular cycle. Each olive colored line is 1°. The key degrees are 32° and halving down to 1°.

Price doesn't always conform perfectly to Natural Cycle but it's usually within 1-2 degrees. Below is an up to date 4 hour chart showing how relevant the cycle remains.

Squaring a Range of Time

In this post I'll go over an easy method of squaring a range of time using the tools in Metatrader 4.

As shown in the previous post about squaring a range of price, squaring the path of price can reveal future patterns of price behavour in price and time.

For this example the EURUSD 1 hour chart is being used. The first step will be to square the chart or set the scaling one to one which is done in the chart properties. It really isn't necessary, but it keeps the squares square as the chart advances and the range of price causes the scaling to fluctuate. Depending on the instrument and time frame it may be necessary to either switch to a different time frame, compress the spacing between bars, or both.

I scrolled back through the chart and just picked an arbitrary range. The time range will be 6/5/07 14:00 to 6/13/07 11:00 for a range of 140 bars. Use the cycle tool on those points to create the cycle going forward.

From the pivot bottom count up instances of 140 pips and mark with a vertical line. The range has now been squared to 140 x 140. 140 is now 360° in price of time of the previous range.

I like to break the rang up into halves so add verticle at 70 bars and a horizonantal at 70 pips from the pivot bottom.

Next up is the Gann grid. I put the end point on the 70 bar/70 pip intersection or the center of the 140 square. Then add horizontals at the intersections going up and down.

The chart below shows how price reacted at points of time and price. Also notice how the diagonals or 1x1 lines acted as trend lines as wells as support/resistence.

The grid can be divided smaller by adding more verticals and horizontals at the intersection points.

Bullseye on the Dollar Index

Wow, every now and then even I get lucky. Back on Aug. 16 in this blog I posted some targets for the Dollar Index. The first mark hit right on the nose. Price spiked up to nail the 'X' that was placed two weeks ago. The second chart below shows new targets in addition to the those already there. I don't think all of them will hit. They're just possibilities. But the main thing is that I think the dollar is still going to rally. Based on the time and price cycles.

A Built Case on Euro Direction

After sitting aside for a few days while price moved North against my previous analysis, I started to build a case to be on the right side for the next move. Luckily, my pip net strategy kept the loss small and to one trade.

The first piece major piece of the puzzle is simply a trend line. Going back to the Manual Gann Fan created on the Euro 30 minute chart, price has failed to penetrate a trend line. That trend line also provides the stop loss area.



The next piece is a "Natural Cycle" I keep track of. It doesn't always hit dead bang on the vertical lines but hits often enough and usually within a reasonable window of a few days either side. Keeping track of the swings reveals an interesting pattern. Price looks a little early, but close enough to call it a swing top based on a perponderance of the evidence or however you spell it.



Like the ellipse, the parabola is a powerful geometric shape. And like the ellipse it is also a conic section. In fact, the parabola can even be considered half of an ellipse. The method I use I picked up from a friend, Soso. No image for this one, but it's pretty easy to visualize. Basically imagine the cup/handle pattern, but with a bowl instead. Look for instances of symmetry for the lowest or highest point of the parabola.

The final piece to talk about here is the Gann Square of 144. 144 is 12 squared. It is also a Fibonacci number. Gann said that those were very important numbers because they show up in the Bible a lot. 12 is also the number of signs in the Zodiac of which Gann was very versed. I have two instances of the chart. One for calendar days and one for trading days. It's always tough to know which is going to matter the most, but both are at key lines or angles.



There is actually one other piece. The US Dollar Index is still playing out in the ellipse from a few posts back. Notice how price is at the ellipse boundary and also the 90° mate to the root ellipse axis. If it holds, it has no where to go but up. (That means down on the Pound and Euro. Up on the Yen, Loonie, and Swiss Franc.)

Countdown and Ellipse Update

The Pound Ellipse failed. That rarely happens. Especially with that many points of contact. However, when the pattern does fail the time mark usually holds which it looks like it might. Going back to a natural cycle wave count method, I should have seen that there was a conflicting signal with the ellipse.

Ironically, a Euro ellipse I had drawn going to the upside that I thought would fail is playing out. Again, I should have acted on the conflicting signal and the 2-1 vote against the pound. Luckily, only one of the orders triggered for a loss. That's the good thing about using stop and limit orders.

On further analysis the fib bar count did work. I just missed the sign to look upward. I was too caught up in the ellipse pattern to think otherwise. 7 of the 8 previous bars were down and the last bar was down, so why I was looking to go short, is beyond me. The reversal was clearly going to be to the upside since the consolidation seemed to absorb any downward momentum. If I get time, I'll post some charts that all seem to be on the same side this time. Squares of 144, more ellipses, and the dollar index. I've got some short orders waiting on the down side on both pound and euro.

Gann Annual Forecast

WD Gann used to put out forecasts every year and they were usually spot on. I read somewhere that his technique was to just go back x amount of years and put up the actual chart lines from previous years. So I just tried it out with GBPUSD daily data. I went back 5 years to 2002, 10 years to 1997, and 20 years to 1987 and plotted them out in Excel.

Pretty interesting results. 2002 and 1997 were a little early on the high compared to 2007 and the recent drop. 1987 was a tad late and inverted, but the magnitude is definitely there.

Here is a link to his 1929 forecast: http://mysite.verizon.net/bonniehill/pics.aux/gann/Forecast1929.jpg

Squaring a Range of Price

For this post I'll show how to create a Gann Square using the stock Gann fan. This time the method used will be squaring the range. The chart will be a EURUSD 15 min. chart with the start and time being 8/22 3:15 GMT. The range to be squared is the most recent swing from high to low up to that point which covered 69 pips. The average daily range for the EURUSD pair is around 100 pips. So the square will be based on 69 x 2 or 138 to hopefully contain upcoming price movement within the square. Also, recall from the Gann Grid post that price moved in ranges of about 135 degrees or pips so 138 should be near spot on.

First, square the chart by setting the scale fix One to One in the chart properties. Mark off the bottom of the range with a verticle line at the bottom of the swing and horizontal lines on the bottom, top, and then an equal amount of the range higher. Mark off 69 bars and 138 bars in the future with vertical lines.

Next, add the Gann Fan tool to the bottom corner going forward. set the ratio to 1. Being a squared chart, a ratio set to 1 creates a perfect 1x1 or 45°. Add another Gann Fan to the top the upper corner going forward. Set the ratio to -1 to have the fan going downards. Because of the future chart scaling, the 1x1 angles of the fans might not hit the future corners perfectly. That's ok because as Metatrader adavances, the scaling becomes correct. It's a stupid bug, really.

Now mark off the intersections of the fans with vertical lines. Price usually reacts at those intersections. Sometimes just for a bar, other times it's a significant prce change of direction.

As you can see, price completed the square in both price and trime. The intersection lines provided a few clues to when price might react in time. In a future post, I'll go over squaring a range of time.