“Those who have knowledge don’t predict. Those who predict don’t have knowledge.” Lao Tzu, Chinese philosopher, 6th century BC


Tuesday, 27 January 2015

Simple Gartley Jan 27 2015

I'd like to bring up an analysis that I find intriguing and something that we as traders have not looked at or don't look at too often. 

As technical analysts we tend to use indicators and fib ratios that are most common, but there are more parameters that we don't use that are helpful also.  Below you can see the following fib ratios being used in the Gartley pattern.

As you can see above circled is the common .618% retracement, but in addition the .786% which was discovered by Bryce Gilmore and wrote about it in Geometry of the Markets in 1989.  He arrived at these Fib. Ratios by taking the square root of them..

1.618 = 1.272%
.618 = .786%

By studying this pattern, Bryce Gilmore along with some astute Gartley followers like Larry Pesavento discovered that .618 and .786 occurs most often as a retracement from a top or bottom.  These findings was compiled by Ross L. Beck and he wrote a book The Gartley Trading Method.  I recommend reading this 175 page book.

Currently, I was surprised how the price action represented this analysis in both ES futures and SPX cash..

Look for yourself...

Although, the Cash SPX fell short of the target the futures market reached it before dropping back.  This would be considered a success in my books.

To top this analysis I took the smaller move the past few days and took the Highs and Lows and also found a .786% retracement.

Lastly Beck wrote something that made sense:
"Another reason that I prefer the 78.6 percent level is that the trading public is typically unaware of this . Level, as it does not appear in the defaults of most Fibonacci retracement drawing tools. Therefore, there is contrarian value in using this level. In addition, by the time a market arrives at 78.6 percent, most of the typical 61.8 percent Fib traders have been stopped out."

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