MARKETS TRADE WITH

GEOMETRIC SYMMETRY
COPYRIGHT 2010 BY RAVEN CAPITAL
MANAGEMENT LTD
2
CORE FRAMEWORK
MARKETS TRADE WITH GEOMETRIC SYMMETRY AND A
NATURAL ORDER THAT CAN BE QUANTIFIED IN ALL TIME
FRAMES
MARKETS GET EXTENDED TO EXTREMES DUE TO CROWD
PSYCHOLOGY AND THE HERD MENTALITY
VOLATILITY REVERTS TO THE MEAN
MARKETS TRADE IN SQUARE ROOT RELATIONSHIPS
HIGH PROBABILITY REVERSAL ZONES CAN BE IDENTIFIED
WITH A POSITIVE MATHEMATICAL EXPECTATION OF
SUCCESS
3
THE PRIMARY TOOLS
The primary tools that I find most valuable
in identifying high probability key price and
time zones are:
1. SQUARE ROOT RELATIONSHIPS
2. FIBONACCI RATIOS, RETRACEMENTS,
EXTENSIONS, NUMBER SERIES
3. Pi [3.1416]
4
PRIMARY TOOL GUIDELINES
It is difficult to predict with any high degree
of success the extent or duration of a move
You can identify when a market hits a key
price and time zone where it will either
reverse, consolidate before accelerating to
the next zone, or just trade right through the
zone
This is why I always anticipate these zones in
advance, because when a market nears these
potential turning points you must look to
other technical evidence to see if a reversal
is indeed supported
5
SQUARE OF 9
Markets trade geometrically over time
Markets trade in square root relationships that
measure both price and time
The actual Square of 9 is essentially a square root
calculator, but I will explain how to accomplish
most of the same benefits using a regular
calculator
The objective is to calculate the Square of 9 levels
that are on the Gann Angles of 45, 90, 135, 180,
225, 270, 315, and 360 degrees
6
SQUARE OF 9
The scale below lists the Factors that represent the Gann major angles
Factors Angles
0.25 45
0.50 90
0.75 135
1.00 180
1.25 225
1.50 270
1.75 315
2.00 360
The best results are when you measure from significant market highs
and lows using the .25 point multiples, but you should also measure
using 1/8 point increments because sometimes markets will be in sync
with the 1/8 point factors.
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SQUARE OF 9
CALCULATION
1. Square Root of 667 = 25.826343
2. 25.826343 + .25 = 26.076343
3. 26.076343 Squared = 680 [45 Deg Angle]
The factor for the 45 Deg Angle price is .25, and
you would use the same calculation to find
the other angles using the specific factors for
each different angle
8
SQUARE OF 9
The factors remain the same, but the multiples
increase
The .25 factor is the .45 Angle, and 2.00 is the 360
Deg Angle, just as 2.25 is the 45 Degree Angle and
4.00 is the 360 Deg Angle as the multiples increased
My Square Root calculator on the next page shows
the multiple progressions using a specific price to
measure future price levels, the same as you would
do using the actual Square of 9
These same levels can be used to measure time.
9
10
11
12
SQUARE OF 9
The 10/11/07 bull market high was 1576, and the 360 Deg angle
measured from 769 is 1578.54 [factor of 12.00]
There are 1827 calendar days from the 10/10/02 769 low to the
10/11/07 1576 high, and the 180 Deg angle [factor 15.00] from
769 is 1826, so price and time were in sync, which is always
very strong symmetry
The 360 Deg angle [factor 14.00] from 769 is 1741, and 1741
measured in time from 10/10/02 is 7/17/07
The 7/16/07 SPX high was 1556, which declined -11.9% to the
1371 8/16/07 low
The 315 Deg angle [factor 11.75] from 769 is 1558.74 so there
was price and time symmetry
13
Square of 9
The Sept 1929 to July 1932 -90% SPX bear market depression
low was 4.40
You will get better results when you move the decimal for lower
price stocks, and in the case of the SPX that would be 440 as
the starting value.
The 90 Deg angle from 440 [factor 18.50] is 1558.37 and 135 Deg
angle [factor 18.75] is 1578.17, so you see the consistent
square root symmetry from any level to key market turning
points
The decimal is also moved for high price markets like the INDU
and Treasury Bonds
When starting with the 14,198 INDU high the starting value is
141.98, and using the 1/8 point scale you get a 6465 angle value
versus the 3/6/09 6470 bear market low, as you can see on the
next slide.
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SQUARE OF 9
15
FIBONACCI
As market technicians you are well aware of the
Fibonacci basics and number series, but you might
have doubts as to how important it is in your overall
market evaluation
I find the Fibonacci principles to be invaluable in my
work to identify high probability market turning
points
I am a believer, based on experience , in the adage
that Fibonacci rules Price, and Pi rules Time
16
FIBONACCI
The following chart of my Fibonacci
Calculator highlights the specific
retracement, extension, and ratio levels that I
find to be the most valuable in identifying
key price and time zones
Keep in mind, it is the combined symmetry of
Fibonacci, Pi, and Square of 9 relationships
that will be most beneficial to your market
evaluations
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FIBONACCI CALCULATOR
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19
FIBONACCI
The previous SPX chart for the 2002 bull market Fib
shows the 1576 high, and the high prior to that is the
7/16/07 1556 high. I failed to mark it, but it has
significant longer term square root symmetry.
10/10/02 [769] -7/17/07 = 1741 CD
The square root of 769 +14.00 [factor 360 deg] =1741
The 7/16/07 1556 high declined -11.9% to the 8/16/07
1371 low
3/24/00 [1553] -7/16/07 [1556] = 2670 CD
The square root of 1553 +12.25 [factor 45 deg] =2669
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FIBONACCI
The next chart highlights the long term
Fibonacci RT symmetry from 1576 to
the 1982, 1974, and 1932 lows
The SPX 665-605 zone was probably
the most symmetrical reversal zone of
all time, which resulted in the 667 3/6/09
bear market low
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22
FIBONACCI
The next chart outlines the Fib RT symmetry
from the 667 low to the 1219.80 high.
It also highlights the Fib ratio symmetry from
the 10/10/08 840 and 11/21/08 741 lows to the
3/6/09 667 low
Fib RT levels are in play both ways, and can
act as both resistance then support on a
pullback
23
24
FIBONACCI
The next SPX chart highlights the
symmetry of price and time using both
Fibonacci and Square Root
relationships
25
26
FIBONACCI
Markets will often trade in sync with the
Fibonacci number series
[3,5,8,13,21,34,55,89,144,233,377,610,
987,1597] etc
The Gann Angles are also very
significant for anticipating key time
dates and they are:
45, 90,135,180, 225, 270, 315, 360
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Pi 3.1416
Pi is one of the most common
constants in all mathematics, and is the
circumference of any circle divided by
its diameter
Pi is the most powerful tool to
determine longer term time symmetry,
especially when used with the 8.6 year
cycle developed by Martin Armstrong
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8.6 YEAR CYCLE
It is a global business cycle model, but it also very
precise for catching significant market turns in all
kinds of different markets
Armstrong discovered this cycle and it is known as
the Economic Confidence Model
Pi [3.1416] x 1000 = 3141 days which is the 8.6 year
cycle
Armstrong starts the cycle at 1929.75, so you can
start there and calculate the subsequent 8.6 year
cycles and see the precision of major events
30
8.6 YEAR CYCLE
Armstrong determined that the 8.6 year cycle exists in nature.
He sites 3 examples which are:
1. From 1989-365AD [1624 years] there were 63 major earthquakes
and 1624/63 =25.77777778 [3 x 8.6 = 25.8]
2. There were 26 financial panics in the 224 years from 1683-1907
and 224/26 =8.6153846
3. The 8.6 year frequency is also found in the Precession of the
Equinoxes on which the Mayans based their long calendar,
which is slightly less than 26,000 years, and 25,800
years is 3,000 8.6 year cycles
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8.6 YEAR CYCLE
The 8.6 frequency is also in sync with
Fibonacci in that 224/26 =8.615384615,
and 8/13 is 0.615384615 which is the
same decimal of the 8.6 year
calculation.
Also, the square root of 5 =2.24 and
2.24 x 100 =224 years
32
8.6 YEAR CYCLE
The 8.6 year cycle breaks down into 3
individual waves with a time duration of 2.15
and 1.075 year periods for 1 leg
Six Waves of 8.6 years combine to form the
51.6 year major cycle
The chart of the Economic Confidence Model
on the next slide demonstrates the 8.6 year
wave cycles from 2002.85 through 2028.65
33
34
8.6 YEAR CYCLE
For a cycle to be valid it has to be consistent over all time
periods like 8.6 years, months, weeks, and even days and
hours for day traders
The 8.6 year cycle using the full and half multiples of 8.6 from
previous significant market highs and lows is what you will use
for identifying key market turns, both major and minor, in
addition to the Economic Confidence Model dates, which are
measured from 1929.75
Pi [3.1416] has been used like Fib ratios to measure price and
time, but in the 8.6 year cycle you move the decimal and you
look at periods of 3.14 years and months, in addition to 31.4
years and 31.4 months. The multiples of Pi are also used the
same as it is with the 8.6 cycle
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8.6 YEAR CYCLE
In the next few slides I will highlight the symmetry of
the 8.6 year cycle and Pi measurements.
1987 low-3/24/00 1553 top = 3141 TD
7/20/98 low-2/24/07 [Sat] = 3141 CD, and the 1462
2/22/07 high declined -6.7% to 1364
The 10/10/02 769 low-2/23/07 is 1597 CD, which is a
Fib number count, so the combination of 3141 and
1597 was strong symmetry
36
8.6 YEAR CYCLE
The 10/4/74 bear market low to the 3/6/09 bear
market 667 low is 12,572 TD and 4 x 3141 = 12564 TD
[ 4 x3141.6 = 12566 TD]
The Sept 1929 high to the July 1932 Depression low
was 34.4 mo [4 x 8.6]
The 9/16/29 high to the 7/20/98 bull market high was
25,144 CD [8 x 3141]
1981.35 [last 51.6 year cycle] +17.2 years [2 x 8.6]
is 1998.55, which is the 7/20/98 bull cycle high
37
8.6 YEAR CYCLE
17.2 months [2x8.6] from the 10/11/07 1576 bull market high to
the 3/6/09 bear market 667 low is 3/10/09, which is just 2 TD
past the 3/6 667 low [3/6 was a Friday]
13 months from the march 667 low to the April 2010 1219.80
high, followed by a decline to a 1040.78 low as of 5/25/10
The 13 months is Fib number symmetry, and the .618RT from
667 to 1576 is 1229, so that is significant price and time
symmetry, especially in a market that was +83% from the 667
low
Continued on next slide
38
8.6 YEAR CYCLE
All of this symmetry was anticipated long in advance, and at the
1219.80 high and .618RT zone the market was extremely extended
by any measure, so it was a very high probability turning point
The NYA topped out first on 4/15/10, and the rest of the major
indexes on 4/26/10
There was also very significant April symmetry based on the 8.6
year Economic Confidence Model chart
2007.15 +3.14 years = 2010.29 = 4/15/10
2009.3 +1.075 = 2010.375 = 4/17/10
9/11/01 4/18/10 = 3141 CD
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8.6 YEAR CYCLE
From the 1932.72 depression low to 2010.1 is
77.4 years [9 x 8.6]
The 2010.1 SPX low was 1044.50 on 2/5/10,
so it was a low with powerful long term
symmetry
1998.55 was the previous 8.6 cycle date prior
to the 2007.15 date [8.6] It was the exact
7/20/98 1190.58 bull cycle high
40
8.6 YEAR CYCLE
The Great Depression was a 13 year decline
from 1929-1942
The 13 year decline was followed by a 17.2
[2x8.6] year rally into the 1966 high when the
Dow first hit 1000
From the lowest monthly close in 1970 there
was a 31.4 month rally into the high of
1/11/73 establishing the major high for the
1970s
41
8.6 YEAR CYCLE
The 51.6 year [6 x 8.6] major cycle date is
1981.35 which is the exact 4/27/81 bull
market top in the Dow
The 4/27/81 high preceded the decline to the
8/9/82 bear market low
The 1982 cycle low was the beginning of the
secular bull market that ran just over 17.2
years to the 3/24/00 SPX 1553 secular bull
market high
42
8.6 YEAR CYCLE
The Nikkei hit its all-time high on 1989.95
which is an 8.6 year cycle date
The index hit its most recent low 13 years
later in early 2003, and its most recent high
on the 2007.15 cycle date, which is 17.2
years from 1989.95 [2 x 8.6]
On a monthly level that is 206.4 months or
[4 x 51.6]
43
8.6 YEAR CYCLE
There was a 17.2 month decline in
interest rates from June 2007 to Dec
2008 as the $TYX went from a 54.08
high to a low of 25.18 in the flight to so
called quality
The next to bottom in March 2009 after
a 17.2 month decline was the equity
market
44
8.6 YEAR CYCLE
The 2000 NASDAQ bubble top was
preceded by a 17.2 [2 x 8.6] month
advance from the 1998 bear market low
The 2000 bubble top was followed by a
Pi decline of 31.4 months into the 2002
bear market low
45
KEY POINT
There is much more to this subject matter, but
certainly not enough time to cover it all today.
I have highlighted the basics of the primary tools
that I favor to measure price and time, in order to
identify high probability market turning points
It was a shot gun approach because I wanted to
show you in many different examples that it is not
about coincidence because the markets do trade
geometrically
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SUGGESTIONS
I use a simple but effective date calculator that you can purchase for $25 at
www.leithauserresearch.com
The calculator enables you set up your own Sequences like the Fibonacci
number series, Gann angle series etc, as well the normal days between dates,
days until a specific date, day of the week etc
It enables you to calculate both calendar and trading dates
If you would like my Square of 9 calculator I will email the file to you [gratis]
and you can save it to your desktop. You can email your request to me at
haggs91@yahoo.com
I have followed Martin Armstrong since he first started publishing over 30
years ago. I suggest you Google him and it will lead you to a fascinating story
that is quite hard to believe, but you will find his essays compelling.
Use the combination of Fibonacci, Square Root, and Pi to enhance your work