MAP Analysis Part 5 – Combining EW & Cycle Forks To The Correct Pivots – A high probability predictive trading model!

In MAP Analysis Part 1  I demonstrated as systematic approach to wave counting as a high probability method on multiple pivot scales using the foundation stone of all Elliot Wave theory – the motive wave. This overcomes the short comings in the industry of the current practice of the use of endless corrections possibilities that leave a 50% chance of prices going up or down,

In MAP Analysis Part 2 I discussed very basic wave theory where it was viewed in the context of predictable cyclical human behavior. I have also correlated much common technical analysis pattern terminology in relation to Elliot’s motive wave so that from quick pattern association we can increase our probabilities of determining where prices are heading.

In MAP Analysis Part 3 I reinforced my belief that the driver of the cycle is predictable human behavior, of which the primary levers are ignorance, greed and fear, and through understanding our natural reactions we can break our cycle of predictability and stop being profited on by others, and we can profit from peoples predictable behavior. Andrews and  Babston amongst others used Newton’s Action and Reaction theory as explanation of price movement.

In MAP Analysis Part 4 I provided an example of the basic trading lines that if applied to the correct pivots provide a probabilistic wave trading model, as opposed to random trend line analysis which is so commonly practiced in the industry currently

In this part I want to present how Alan Andrews simple pitchfork can be used in conjunction with Elliot’s motive wave to provide a highly predictive as well as probabilistic trading model with a wealth of information which far exceeds the best technical indicators. Also, as I use selected pivots that are derived from cycles, rather than any pivots, together with combination feel cycle fork is a much more accurate description of my application of Andrews original pitchfork.

To reduce my risk of being one of the 3P’s I have said I only trade indices. That way I overcome becoming a victim of share pumping, dumping or any other third party marketing schemes as well as false and misleading advertising.

That way I also reduce the risks and volatility associated with the insider information and inadequate regulation as amply demonstrated by the JPM results and its subsequent 7% drop on the news!

So I will use the SPX to demonstrate how using probabilistic pivot combinations as derived in the complete MAP series analysis presented (and outlined in The Euro as an example of my Techniques) so far on different time scales you can fulfill your duty of social responsibility to reduce your risk of being taken for the 3P’s and vote with your money to get peaceful change!

Andrews claimed that 80% of the time prices reverted to the ML. I use the forks on the same pivot scale to see what to expect on that pivots scale, so in this case monthly (orange) pivots 1,2 and 3 (The pivot numbering is in accordance with Elliot’s foundation stone – the motive wave). So we start with a failure?? Or do we? Those that have understood the basic cycle theory presented based on the 3P’s. know that there is interaction between waves when they meet at a point time. So the basic fork actually is giving us the ML of interacting waves. I am sure Alan Andrews was fully aware of this, and dealt with it in terms of action and reaction (as opposed to my human behavior cycle) and he devised rules to adjust the forks such as the modified Schiff fork, warning lines and sliding parallels to name but a few! I am sure given our technology, and much like Elliot would have come to the same conclusions that I am suggesting! His original course is available free on the internet. Just do a search for Alan H Andrews – there is a gold mine of free information!

If we draw in the sliding parallel (SP) and warning line (WL) 1 we get the following which reinforces what I said in above highlighting the importance of using pivots methodically if you want to derive information from them – you need a system whereby you can apply probabilities rather than just drawing random lines!

Once the next same pivot scale pivot is made, we then draw in the new fork as shown below joining the last 3 pivots. This gives us the ideal wave target where the ML (median line) and the MLL (Median line lower parallel) intersect as highlighted with the orange circle, which is clearly not possible so we have the ideal wave target as shown near the SP and WL1 intersection with the 345 (fork pivot definition points) ML. You will also notice that I have used a gold fork for the 345 fork – because under EW motive waves I have high probability end top on this scale as the monthly pivot -1 is lower than pivot 4.

The 345 fork is in the direction of the expected new trend which is down. The 345 fork has a very high probability of pivot 1 making it to the ML, which indeed as Andrews stated is 80%, As we will see later when we go into smaller pivot scales this is a fantastic pivot combination fork!

It gives us our new normal trend direction on the new trend channel of the normal wave expected trading range. 3P’s Panic control.

Price movement can be easily seen – the rapid drop to the 2009 low towards the ML, and the subsequent slower rise since to the MLU (Median Line Upper parallel) Also what is obvious is how much steeper weekly ( red pivot scale ) wave 3 is! All predictable under the 3P’s - Panic behavior. So we have a clear momentum indicator and the only one I have come across that is forward looking!

As prices reach the Median line or parallels we have a clear indication of price extremes – overbought and over sold conditions of which there are numerous indicators but none of which give you the information so clearly with definable probabilities and again projecting forward!

What also is very obvious if that just with what we have done so far well chosen trendlines – become useful support and resistance lines – the 234ML was a resistance line to the 2007 top. Its MLL was is a resistance line to the current weekly pivot 3 (which is near the intersection of the last W( Pivot scale – Monthly, Weekly, Daily, 4Hourly, Hourly) 345 fork, and as one scale down Daily pivot 3 has not made it past there is an extremely high probability that prices will not rise above this resistance line for many years to come – unless we change our behavior and break out of the 3P’s.

What is also clear is the head and shoulders pattern on the monthly pivot scale, and the bear flag (0-4 bear break line) which is derived by joining pivot 0 and 4 – This line is the most reliable trend change indicator on every pivot scale with the exception of wave failures (less than 20%). So for all the bears on a monthly pivot scale the technical are bullish with the exception of Elliot’s motive wave which has filled its criteria of a monthly pivot scale top as detailed below.

Now that we have the big picture we are going to move down a pivot scale to Weekly pivots for a clearer understanding of waves within waves and further pivot combinations that give us highly predictable potential pivot locations to show how critical pivot selection is if you want to derive tradable information so as in part 4 where I demonstrated how to apply basic trendlines be used with EW analysis I will use the same methodology but using simple forks, and will be looking from the 2009 low. We will be doing it on a daily pivot scale chart (you need to work in multiple pivot scales to find the appropriate correlations), I would not expect weekly correlations using quarterly bars, etc. Those shown in the table in Part 2 are the combinations I use.

Below I have shown the ideal expected pivot location, together with wave validation criteria, and the 0-4 break line (pivots 0 and -4 in a bear market for a bull break line). This needs to be done as part of your risk management on whatever pivot scale you are trading.

By now applying cycle forks we can start to see waves within waves, in this case weekly pivot scale (red) within the monthly pivots scale forks (gold and orange). Retrospectively we can see D1/W1 and D2/W1 (daily pivots 1 and 2 of weekly pivot 1) being made at the W345ML, and D3/W1 and D4/W1 being made on the W345MLU. Also obvious is the presence of subwaves in weekly waves 1, 2, 3, 4 and 5 and that wave 2 is simple compared to wave 4 resulting in an expanding pivot formation. Also what is clear is the support and resistance offered by the forks, and the concentration of pivots around the ideal wave target – or volatility! The same occurs on smaller time scales.

Now understanding that when waves interact at a point in time the resultant wave pivot can be anywhere between 0 and .2 times its frequency we use WL1 and WL4 to define our expected cycle trading range, and now we have defined our trading limits should we be trading on a weekly pivot scale!

Retrospectively we can see that the MML (Monthly Median Line) has been made which Andrews said has a 80% probability – but be warned only if you know which pivots to use!!

Also we can see we would have had no need to panic as this wave off the 09 bottom has shown no unexpected price action within our probabilistically defined trading parameters trading weekly pivots 3P’s.

However just look at all those ups and downs we could have traded! So moving down to the daily pivot scale (purple) apply the same principles of multi pivot scale analysis. Once W1 is confirmed we draw W451. We also draw D345 to give us our new trading parameters – but on a daily pivot scalel. This greatly reduces our expected trading range as shown for W2 with its ideal and zoomed in parameters! (we will go through smaller pivots and more combinations and techniques as we look in more detail from last Octobers lows – you can then apply the methodology to whatever pivot scale you want). Basic wave theory tells us waves go from one extreme to the other so Had Andrews had out technology I would safely say he would have upped the probabilities to over 80%! Also shown is the SP of W345MLL – between our daily trend channel.

So prices will be moving to the latest ML as shown below, and we have clearly defined trading parameters to control our 3P’s. Also note we are now in our third wave level Monthly, Weekly and Daily! Waves within waves!!!

Also note the value of old support and resistance lines – Look at last Octobers lows! Good trend lines DO NOT come from random pivot selection!

This is a bit messy! What other information do we have? Our EW parallel which further reduces out trading parameters as shown below and greatly tidies our picture!

Once pivot 2 is confirmed we draw fork W012, update our D345, put in our EW and cycle fork parallels and SP’s. I know this looks messy and that is why I use colour coding! What is most important though is that you can see we have two trend forks – the W012 and new D345. Waves within waves! So we have highly probabilistic trading parameter so we can control our 3P’s and have managed risk and emotions!

You will also notice a big ideal target area – we have a confluence of multi pivot scale support and resistance lines so highly probable to expect increased volatility as prices approach this area! Also you will notice pivot 2 was made below the D345MLL. This means it is highly probable to expect additional sub waves!  Using the same methods explained so far on the next pivot scale down 4H, you would have been within 4H trading parameters despite it falling outside of the current D345 daily trend! Also you will if you look back at the previous chart note that D1 and D2 are made around the previous ML!  Once D1 and D2 are in that allows us to draw D012. By drawing the EW cycle fork from D0 to D1 and sliding it to D2 gives us 2 ideal targets for pivot 3, with the intersection of D345 and D012 from which we draw 2 horizontal lines between where pivot 3 is expected as shown below. Again this is confusing so I will tidy it up in the following drawing. You will notice that this also is the intersection of D012 MLU and ML with D345MLU!

Simplified! By now you will have notice I actually use target lines, the reason is simple – waves move in 2 dimensions and I am working off the last unknown reaction points! I could draw a second target box for the alternative parameters but they are only required if there is a not a clear wave count.

Do the same procedure on the 4H pivot scale and you will find the D3 falls within the specified limit defined. Once D3 is in draw your D123 fork and your wave 2 EW parallel. In addition add in you EW D13 parallel and move that to D2 and tidy it up to give the following target area for D4, and pivot falls within 1 day of its ideal intersection of D345ML and D123ML, but Also on the D0123SP MLH to D3, as well as the EW Parallel!

The normal wave ideal target for pivot 5 is the 345ML and 123MLU SPML to 3. Draw you EW parallels and look where the 4H123 MLU pivot 5 target line – its MLU – all within clearly defined trading parameters!

So was the subsequent price action unexpected or was it predictable based upon a different interpretation of research done over 100 years ago??? Remember waves within waves, within waves! Weekly pivot scale – red, daily pivot scale purple, 4H pivot scale blue!   You decide! Looks like the elephant may be back from tea!

You may have noticed I have provided you with pure technical analysis without reference to any news or substantiation from any other source or influence – oh and it still works 100 years later! NOTHING HAS CHANGED and we still let our governments control the economy and money!

For a wonderful history and background of Andrew’s and Babston’s work see the recent article How to Predict the Future. Remember your 3P’s  

PUT PRINCIPLES ABOVE PROFIT – MAKE PRINCIPLED PROFITS – That is what sustainable capitalism is where the rubbish should be allowed to fall by the wayside to innovate new ideas to generate new wealth!

10 Responses to MAP Analysis Part 5 – Combining EW & Cycle Forks To The Correct Pivots – A high probability predictive trading model!

  1. Marc,
    I’ve been a follower for a few months and keep checking for further updates. I’ve read everything on your site and it’s good stuff. I hope to ‘make this time different.’. What type of charting software do you use? I’m on an iPad and it is limited.
    Pete

    • mapportunity says:

      Hi Pete,
      I use eSignal. I have tried many and it is the best I have come across and they are extremely helpful and have included a number of suggestions I made which I have found useful. I have not done anything lately but will start to update again as looks like some action coming up!

  2. nelsonell says:

    Hi Marc

    Thanks for your comments and I will go through your suggested actions and get back to you when I have more thoughts and queries.
    I would like to ask about your recent article on the oracle regarding the Dow, in relation to a prior article. On 24th May you posted an article on the Dow, advising that the long term top is in on it. On 1st May, in Part 3 for MAP wave analysis, you used the SP charts for discussion. Under the 4th Chart down, when you were discussing Bull and Bear flags, you said that you still felt that we would see a high later this year. I am conscious that they are separate markets, but also know they are highly correlated in their behaviours. Given the top now appears in on the Dow, do you still feel we may still see a further high on the S&P later this year, or has this view been altered by the chart behaviour since then?
    Thanks again for your comments and insights. I will be deep in study for the next few weeks so may not answer till then if you respond, but will frequent the site to keep abreast of new postings.

    Best Regards

    John

    • mapportunity says:

      Not sure if you clicked follow but new updates should then go to your email.
      Dow has complete wave pattern.
      Russel and S&P need one more high – but one monthly pivot scale have met MAP Wave criteria, not yet on Daily pivot scale. I am expecting another high – looking like late Summer, but DOW should only put in a retest of the high – right shoulder, pivot -2!
      If you look at DAX is 1 subwave ahead and FTSE 2 subwaves ahead.
      So from technical analysis that is the picture – if you then add circumstantial evidence it makes sense – UK been further down the road with loosing manufacturing than Germany and US (DOW).
      Added Silver and Gold today.
      On my chart look at long (red) and short SMA (black) and you can see the waves within waves.
      Ask anytime – more interaction the better.
      Marc

  3. sisyphusstone says:

    Hi John,
    Just looked in at Marc’s post and saw your comments and again trust Marc won’t mind me making a couple of observations.
    I found the best place to learn about Pitchforks/Median Lines is through Tim Morge’s site. If you google Morge + Median Lines you’ll find him. He has a wealth of material there that should answer all your questions. A sliding parallel is simply an off-set line parallel to the median line typically used where price may push a bit beyond a lower ML parallel and then if price retraces towards the ML you want to watch a second sliding parallel placed the same proportionate distance below the ML as this often acts as the ML. This can often be the case where price has gapped and equals the ‘sheer’ amount of the gap.
    My experience of pivot selection has been that there is no definitive rules and you just have to ‘get a feel’ by experience – Marc may disagree! Morge uses red for down-sloping forks and blue for up-sloping as a visual aid. I also use a dashed line for a Schiff, or modified Schiff, fork as a reminder.
    Marc’s use of the 0-4 line is new to me, but the logic suggests that you haven’t missed any opportunity by having to wait for the 4th wave’s low to form since you will be looking either to fade the extreme of the 5th wave (if aggressive) or trade a break of the 4th wave’s 4 extreme (if more conservative).
    As to turning points, may I suggest you have a look at Richard Wyckoff’s methodology and Volume Spread Analysis (VSA). Both are synergistic and look at price action and volume signatures to interpret what the ‘Smart Money/Big Money/Insiders’, call them what you will, are doing. The key is to remember that they will always ‘buy low’ and ‘sell high’, so, for example, when you see high volume bars, in the appropriate place, it is signalling that they are buying from/selling to weaker (typically retail!) hands. An example of this would be when you get a wide range down bar to new lows on high volume and then the market promptly reverses. The ‘SM’ has just moved the market down to shake out weak hands so they can buy their position at the lowest prices possible knowing that they are about to mark prices up. Search for VSA + Tom Williams/Gavin Holmes and you will find plenty of material there to give you an insight regardless of whether you use their software.
    The beauty of Pitchforks is that they are a leading indicator and VSA is telling you what price is doing at that point in time, so you would be looking for SM buying as price approaches a lower up-sloping ML parallel for example, to give you confidence that the MLP will act as support. Remember; virtually all other indicators such as rsi, stochastics, momentum, MA cross-overs etc. are all lagging indicators and will give as many false signals as accurate ones. Personally I rarely use them now. Morge also teaches methods for trading off MLs including risk and stop-loss management.
    Hope this helps a bit.
    Regards
    David

    • mapportunity says:

      Thanks Dave no problem! More discussion the better we can all learn! One thing to look out with the pitchfork also is for spikes on parallels – basically they often are wash out lows so if there is a 5 wave count then often prices resverse sharply such as they have done today!
      Also Dave I have put the median line site in further reading. If you add links etc or things you find useful just post them in comments and I will add them to the list with links if poss.
      Hope you finding it useful!
      What do you mainly trade?

    • nelsonell says:

      Hi David

      Thanks for your input, both you and Marc have given ideas for some significant hours of study. I will look into your suggestions further and get back to you once I have had time to research and process the various lines of enquiry.
      Thanks again and will be in touch.

      Best Regards

      John

  4. mapportunity says:

    Andrews work is fantastic but either he did not pass on his secrets or it has been misinterpreted! As you will wee if you search around the net the main problem is which pivots to use! Unfortunately I wasted a lot of money on doing the andrewscourse where they claim to teach you everything you need to know to trade Andrews and Babston! I constantly asked which pivots but never got an answer! Fortunately I am inquisitive and started researching myself and developed this pivot selection method outlined in part 1 which works very simply and clearly down to daily pivot selection where it is then obvious which pivots to draw forks from – it turns out this is the foundation stone of Elliot Wave Theory!
    The Andrews course does not work on a 5 pivot theory. If you look at the euro example you will see the fork combinations and ideal target intersections including using sliding parallels. The Schiff fork is essentially a best guess fork used in wave 3 where one would expect to find extensions. However if you just use the EW method described in Part 4 where you connect the 2nd and 3rd last pivots in 2 dimensions and slide the parallel to the last you get what I call the modified MAP cycle fork without the ML.
    Warning lines – because until a wave is completed I start with the assumption of a normal cycle wave formation. However you never know if wave 2 is the simple or alternate so the first WL would give you the alternate wave dimensions. Yes WL is same distance as ML to MLU or MLL. Basically extra ½ wave either side to make 2 times normal wave.
    On a single pivot scale it is simple and as you correctly point out multiple time scales is much more difficult which is why I colour coordinate! But even that is messy! The problem is that you get interaction between different scale waves so it is useful when trading with smaller scale pivots as it tells you if a bounce is likely at ML or whether going to far parallel! Not found an easier way yet!
    0-4 break line correct on each pivot scale. In http://mapportunity.wordpress.com/analysis/some-investment-ideas/10-trades-17-years-compounded-35-per-year/ I show a fork from pivot 0 and the previous 1 scale down pivot then for your 3rd point move it so that the ML is on pivot 5. This then gives you another good break confirmation

    Basically on daily pivots your probabilities are 80% 5 waves and then 80% to ML, so you have an extremely high probability of making 50% of the move on a daily scale! If daily pivots move at least 5% and you have on average 10 a year you should make at least 25% with very low risk!

    In my experience Andrews stuff is not used predictively because of the problem of pivot selection. There are many references on the net that highlight this problem! Even his much acclaimed ORE is only used confirmatory and again in my experience is rather random with the reversal points it picks sometimes being only 10 minute pivot scale!

    Work through it a few times and just bear with me a bit. I am just trying to set up the big pictures – and probably best if I just keep those down to daily pivot scales and please ask where it is not clear so that I can get better explanations and descriptions to make this simple English!

    Marc

  5. nelsonell says:

    Dear Marc

    Thank you for all your time and effort in putting together your recent articles on MAP waves. I have been reading the articles on market oracle, and found you site through that. I haven’t read through the articles on your site, but presume they are analogous, and will read through them shortly.
    I have a few questions about what you have written, but will use the latest article on the oracle of May 16th titled “Turning Andrews Pitchforks into predictable MAP Cycle Forks, MAP analysis Part 6” to go through the queries, and pose some more generic ones at the end.
    In first paragraph under the first chart you allude to Andrews work. I have a copy of his work which you mention later in the article. I have not read his work yet. I understand his pitchfork, but don’t understand the variations, such the Schiff fork etc. I presume these are all explained in his book unless you advise otherwise.
    In the paragraph immediately under this you mention sliding parallels and warning lines. Are these covered in Andrews’s work, or are these terms you use? Are sliding parallels and warning lines always drawn at the same distance from the MLL or MLU as the MLL or MLU is drawn from the ML?
    In paragraph below the 2nd chart, you advise that a new fork can be drawn when the next pivot is in. Is it normal practice to draw a new MAP wave/fork with each new pivot that is formed? How do we relate each new fork to the last, as this would eventually mean that the number lines on the chart will increase, making it visually more difficult to interpret.
    In the last paragraph below chart 2, you mention the 0-4 trend break line, which is a high probability trend break line. This would however mean that for the relevant wave, we would have to wait for pivot 4 to form before we can draw this line. Are there any other methods for early warning apart from dropping pivot scale?

    I also have some general queries. You have mentioned on occasion that it works if you pick the right pivots. What is the best way to pick a pivot? In one of your earlier articles, you gave guidelines in picking pivots, in terms of their quantitative relations to each other. Are there any other ways? One of the problems with EW analysis, as you’ve mentioned, is that there are constant disagreements and readjustments regarding the pivots and counts. As long as the quantitative relations mentioned are observed when doing pivot numbering and counting, will the MAP waves and Forks always be drawn and interpreted correctly?
    You’ve mentioned wave failure, which is less than 20%. What is wave failure?
    When drawing pivots, which price detail is used? When trying to eyeball wave beginnings and ends, I sometimes switch to a line chart rather than a bar chart, which makes it easier to see if the general motion is down or up in more complex moves. However, the line chart has only closing prices. When finding the end of a wave, the pivot itself, can you use a closing price, or is the ultimate wave extreme, ie the high or the low depending on an up or down wave respectively, the best value to use?
    Regarding the median line, what is its nature? You’ve said that price returns to it 80% of the time according to Andrews. On looking at the charts, a lot of the time the price is straying away from it and bouncing back. Is there any way of knowing how the price is going to relate to the median line and the parallels based on its prior behaviour?
    How do the different pivot scales relate to each other? Classical technical analysis says the larger the scale, the more powerful. I would presume it is the same with waves, in the longer timeframes, waves and forks will turn back the shorter ones, in as much as the ripples on the shore will not stop the tide. But it is true over time that even the larger support and resistance levels are broken, and very few if any markets are where they were 20 years ago. Is there any way of interpreting behaviour at wave confluence points? Is there any way of determining the likelihood of turning points actually occurring rather than just the likelihood of their location in price?

    I am aware that I have asked quite a bit, so I’ll understand if I don’t hear from you straight away! I would like to thank you again for your articles, and would be grateful for any comment you can give.

    With Best Regards
    John

  6. mapportunity says:

    How to do it the final part out now. The idea is for sensible debate – please leave personalities for other sites!
    Profitable trading!
    Now I can get back to updating projections!

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