Fibonacci/Pitchforks/Trend Lines/Gann Angles and

other charting tools

Though Timing Solution is not a technical analysis software, we have added to it a set of charting tools. They
are situated on the left side of the Main window - because they are tools that are not statistically verifiable. See
this set of buttons; you are able to draw the most popular charting elements here:

Let us draw one of them, Andrews pitchfork. Follow these steps (they are pretty much the same for all charting
tools):

For this particular tool, three mouse clicks define its anchor points (the anchor points are marked by yellow
bars):
For any other charting tool, the appropriate instruction defines its anchor points.If "Snap" button is pressed, the
program automatically sets the anchors on the nearest highest high or lowest low:

You can move the anchors this way:

Many tools can be modified. See how to modify our pitchfork:

The Andrews pitchfork requires three anchor points. Some charting elements require two anchor points only.
For example, to draw the Fibonacci grids simply drag the mouse from one anchor point to the other one:
As with the pitchfork, using the RIGHT mouse button, click on any yellow anchor bar to modify your
Fibonacci grids (colors, price/time grids, marks):

In "Retracements" tab you can add new line and set the color and width for any of these lines:

Clicking "Panel" button:

 you will get the :Charting Panel" window:

Here you can save or download our charting elements, delete them, make a copy of any charting element,
lock/unlock them.Question:What Relative Price Oscillator is more preferable? Answer:Lets consider some
chart that covers the time span of 4 years:

Here you can see the up trend movement since 2003. Looking at the details of this chart, you can see the waves
that last for several months each.Magnifying this chart for 3 months period, you can observe the price charts
that take place within several days:
From another, side if we consider this data set in the perspective of the recent 20 years, you can see that the
2003 swing is a part of some bigger waves:

When we speak about waves inside the waves, we are referring to the fractal nature of the stock market.
When you start to make the forecast model for any financial instrument, first of all you have to decide what
wave will be researched and what is the typical period of this wave. The Relative Price Oscillator (RPO)
deals with this issue.Lets create the relative price oscillator with the period of 50 price bars. Follow these steps:

MA1, MA2, and MA3 are parameters and components of the formula for this RPO:
The RPO(1,50,50) catches the waves that are about 50 price bars. It looks like this:

The most important feature of this oscillator is that it makes these waves horizontal. This is very important: if
we look at the waves in Nature, it is much simpler to describe (and thus forecast) water waves on the lake than
waves in the water flow that runs from the mountain (the mountain in this case is the analogy for the market
trend).
We can make this wave smoother if we would like to reveal cycles that last for several months; in this case,
we are not interested in small details inside this wave:

To eliminate small waves, we use MA1 parameter that makes this wave smoother:

Look at these two waves together: red curve represents not smoothed oscillator RPO(1,50,50), blue line stands
for smoothed oscillator RPO(10,50,50):

As you see, the smoothed (blue) oscillator eliminates small waves.

Another thing that is typical for moving averages is the lag effect. Timing Solution has a special algorithm to
calculate RPO with minimized lag effect. See these lines on the same screen: a line for Close (the black line)
and two different RPOs: RPO (1,50,50) and RPO (10,50,50):

The shift effect is practically eliminated.

So, for practical usage, keep the MA2 and MA3 parameters equal; they define the typical period of the
revealed wave, while the MA1 parameters indicates its smoothness:

Important: To calculate MA1 (the moving average), we always use the Symmetric 2 algorithm. Thus we
eliminate the lag effect typical for classical moving averages.

If you use Symmetric algorithms in RPO window with MA2=50 (as an example), the real period of the wave
will be less than 50 price bars (due to math reasons):

,
However, I would recommend to use Exponential algorithm here.

The period of RPO should be compatible to the typical period of the swing that you are looking for.
See these two RPOs displayed on the same screen: the blue line represents RPO (3,10,10) and the red line is
for RPO (10,200,200):

As you see, the shorter RPO (3,10,10) sees the waves inside the month:

while the red line represents the RPO that is more oriented to see the waves inside the year:

As a compromise, I often use the oscillator with 50 price bars period, RPO(1,50,50):
But you can try your own variations.

Also I would like to remind that you can change the thickness and color of any created oscillator. You can
remove them as well by clicking this button:

All these operations can be performed through this window:

You can also modify the parameters of created indicators while you are in the Main window by clicking on the
indicators identifier:
If you click this button: these indicators will be
used by default. It means that when you download the new price chart these indicators will be created
automatically. This feature is useful if you often use the same indicators.

Stock market waves in the light of the Moon

Everybody agrees that the stock market follows some waves, but not everybody believes that it is possible to
predict these waves. The stock market rises up to the sky and drops down to earth; since the beginning of the
stock market, everybody wants to be able to anticipate these waves - otherwise the price for mistakes is too
high. In this small article, I would like to introduce some new techniques and our team findings in regards to
stock market waves. All results are based on solid grounds of statistical analysis and are performed by Timing
Solution software.The most known theory on stock market waves is Elliot Wave Theory suggested in 1939. I
think everybody is familiar with the classical pattern that consists of five upside waves and three downside
waves. Like this:

The most important question is the height of the swings of these waves, because these swings' turning points are
the moments when the trader makes his/her decisions (it is an ideal situation). Another statement of Elliot Wave
Theory is that stock prices follow to Fibonacci series (1-2-3-5-8 ..). This simple and clear principle provides
some clues regarding stock market timing. Usually the Fibonacci ratios apply to wave heights (like a ratio
between up and down swings). Look at this picture

Here we are interested in defining the height of the upswing 2-3. We assume that the height of this swing is in
good ratio to the previous downswing 1-2. In other words, we may draw several resistance lines based on half
weight of the previous wave, its 100%, 38.2%,61.8%, etc. We can make it 161.8% as well. If the data pass one
of the lines, it might stop at the other. There are a lot of possible varieties there. However, the main assumption
is that the end of the swing hits one of these levels. Thus, we can say that these levels provide us some clues
regarding trend change points. The same approach can be applied to time forecast based on the wave's
length. And this approach is very intriguing. It has occupied the human mind for centuries as it proclaims the
existence of some universal law of Mother Nature that rules the rabbits' reproduction, the shape of the seashells
and the stock market geometry as well! In terms of the twentieth century science, we can say that stock market
waves have the quantum nature and we may consider the turning points as some kind of energetic levels using
the analogy with quantum mechanics principles. But the commonly asked question still exists: "How and when
can we apply these ratios? What ratios are more preferable and when? How can we rely on them?". In this
article you will find some answers to these questions and some unexpected results as well. Let's go ...

Research

As an example, we will look through the data for Dow Jones Industrial Index from the year 1885 up to
February, 2006. As a tool, we apply the newly developed module in Timing Solution software; its name is
"Turning Points Analyzer". Actually, the answer to the question above will be received immediately after
downloading the price history and running this module. In a few seconds, you will get this histogram:

This histogram represents the distribution for the ratios between heights of up swing and down swing. We
calculated the 4.6% zigzag exactly as A. Merrill did that (see Filter Waves Basic Theory, A. Merrill, NY,
1977). This zigzag has shown 900 turning points within the data interval; we used them to calculate ratios
between swings. The purple stripes represent the classical ratios most used in technical analyses. The meaning
 of this histogram is: the highest and the narrowest peaks here correspond to the ratios this market (i.e., DJI in
our example) "likes" more. As you see, one of them is 1.38:

It means that 138% up trend swing is pretty typical for the stock market:

If you do not like working with the histogram, just pay some attention to red stripes located under it:

Each pair of down and up swings is shown on this diagram by one vertical red stripe. For example, there is one
stripe at the 1.64 position. It means that there is only one down-up swing pair with the ratio between up and
down trend swing equal to 164%. When we have several pairs at the same level, we can speak of a zone of
trend change. Thus, we are able to locate active zones where the stock market "likes" to reverse its trend (some
of these active zones are marked by yellow bars). Meanwhile, there are relatively quiet, calm zones where the
stock market prefers following the current trend. This idea is worth to play with. Actually, when I started
developing this module I expected to get one of the two possible variants of the histogram:
1) the boring kind of a bell histogram, something like this:

Practically, it would mean that there are no selected ratios. The trend can change at any price level, and
Fibonacci levels simply do not work;
2) if the classical ratios work we should get the set of peaks around purple vertical lines. It would mean that the
stock market prefers the "good looking" price levels to change its trend.

The histogram above not did confirm any of these statements. When I saw it first time, I decided that there was
some mistake somewhere in the program, and I spent some time checking all parts of it to be sure that the
program works OK.As usually, the Mother Nature does not provide us with the completed answers to all our
questions. We just move from one enigma to another. Solving one problem, we come across another, and
always it is so unexpected! It is how we grow up in our knowledge and understanding.The strict statistical
analysis shows that the stock market does follow some ratios, and the most interesting fact in respect to stock
market waves is that the Moon has very strong impact on them. To be exactly, these waves are different for
rising Moon and descending Moon. And it is quite naturally, because people's emotions have a great impact
on the stock market while, from the other side, the Moon phases have impact on human emotions. It is easy to
prove the first statement that price waves "like" some ratios more than other ones. The histogram calculated for
different zigzags always contains different peaks; it means that the stock market does not move in a chaotic
manner, some market geometry presents here. To make reliable verification of this fact I have calculated the
ratio histogram for 21 different zigzags with different time periods:

Here the same histogram for up moving swings is shown in different ratios: ratios for price and ratios for time.
You can see what ratios are more important; the worth of classical ratios is obvious here as well. Make your
conclusions yourselves.But the most interesting thing has happened when I have started to research zigzag
ratios together with Moon phases. Skipping all details and concentrating on final results only, I can say that the
histogram becomes more informative if we consider separately the waves in respect to the rising and
descending Moon. In other words, the market geometry strongly depends on Moon phases. The picture below
represents these histograms calculated for rising Moon:
As you see, these histograms are more informative because the peaks are more localized, they are not so messed
up as on the previous picture. Mathematically, the narrow high peaks mean the presence of some information,
while even diagram means its absence. It is the same like you asked somebody where the office of Mr. Brown
is located - you can get the answer "somewhere in Toronto" (which is true though not enough informative),
while the answer "Toronto, north of Young, east of Clark" provides more helpful information. To be sure that
this certainty is caused by the Moon phases and not some artifact, I repeated the same thing using random
values instead of the real Moon phases. In this case the information just disappeared. The certainty of this
histogram allows to use it as a good helping tool for traders. Practically, it means that we can locate the most
active price levels where the trend changes are more probable. More info regarding this see below.Also we can
state that the classical ratios work better for time forecasting than for price. As you see in "Time Ratio
Distribution", three purple vertical lines hit three strong peaks. These ratios are: 1 (the duration of an up swing
is equal to the duration of a downtrend swing), 1.618 and 4.236. As per Elliot Theory, we used these values
38.2%, 50%, 61.8%, 100%, 161.8%, 200%, 261.8%, 300% and 423.6%. But in Timing Solution you can add
any ratios. They will be shown as vertical lines. It is very interesting how astronomical factors move the stock
market. It looks it is a mistake to research their influence in the terms of direct impact (something like the
statement that the price goes up around the New Moon). In many cases, statements like that one do not work.
From other side, we cannot exclude them from our consideration - the most reliable models with long term
forecast horizon that I have got are based on astronomical models. I believe that we should consider the
astronomical influence in the terms of information. In the example above, we have not got a correlation
between turning points and Moon phases. The stock market does not adjust its clock with the Moon phases. But
it looks like the market geometry depends on Moon phases. The rising and descending Moon provokes the
stock market to follow different patterns, and its influence is much more deeper than just simple timing of the
turning points.

The Tool for the Trader

Actually, it is very simple. Download the price history and run "Turning Points Analyzer" module. In a moment
(as always) the program will perform the huge calculations regarding the statistical analysis of your data, and
you will get this:
It is an output ready for use. In the right side of the price chart, you can see the colored diagram that represents
the most probable price levels where the trend will change. Red regions mean a high probability, the blue ones
stand for the low. Besides, you can figure out the risk degree. The blue zones indicate that the price can change
its trend on these levels as well. Seldom, but it might happen. His Majesty Fundamental Factor can destroy any
market geometry. Providing more detailed analysis, you can draw these support (blue) and resistance (red)
bands:

Even if you have not enough price history and not enough turning points to provide the proper statistical
analysis, you can got a valuable information based on previous turning points:
Here we have six price levels calculated from ratios for six previous swings.If you have enough historical price
information to calculate high probability zones, the major cluster usually provides a very valuable information
regarding future price movements.Look how it works! I have downloaded the S&P ASX 200 for 1983-2006.
You can see two the most important clusters there - potential turning points zones. The price chart definitely
shows that the price is "stumbling" around these zones. Between them the price movement is pretty
straightforward. The momentum is high, while around these zones the price loses its momentum.

What concerns the most typical ratios that rule the stock market, this question requires special and systematic
research. As far as I know there is no other software that is able to deal with this task but Timing Solution.
Now it is possible to provide the mathematically correct analysis of this issue.
The first glance definitely confirms that these ratios:

a. exist;
b. they depend strongly on analyzed financial instrument;
c. it is very important to choose the most informative zigzag.

As a preliminary result of the research for upward swing ratios (ratios between the height of the upward swing
and the previous downward swing), we can point out three typical clusters:
1) Very strong cluster corresponding to the height of the up trend swing equal to 93%-98%. In other words, the
stock market "likes" changing its trend just before the previous top (2%-7%). Maybe this factor can be
explained by specifics of charting. Anyways, the previous top can be used by traders as a basis for drawing the
resistance line. Also, the fact that this level is always less than 100% can be explained by traders' psychology -
this is a broken resistance line phenomenon. See this advice right from some trader's article: "If support is
broken an uptrend, the uptrend is suspect. (http://www.RealMoney.com)". If thousands of traders would think
the same and decide that this support line is going to be broken, it will definitely happen (so called "self-
fulfilling prophecy").

2) The 120%-130% level.

3) Around 140%.

The pictures below show high probability diagrams for four different financial instruments. They point out the
most interesting clusters for trading:

Dow Jones Industrial 1885-2006

S&P 500 1950-2006

 Microsoft 1986-2004

S&P ASX 200 1983-2006

All diagrams indicate that the 93%-98% cluster is pretty strong for all these instruments. The other clusters
vary for different instruments (like 122%-127% cluster is very strong for Dow Jones Index, S&P ASX 200 and
possibly for Microsoft shares).

Support/Resistance Lines in Timing Solution

In October 31, 2006 upgrade, the new charting tool is presented Advanced Support/Resistance:

This module allows you to draw a great variety of different price levels (support, resistance, pivot points,
equilibrium points). You can easily create any price level calculated by some special way.
Moreover you can perform the visual back testing of these levels to figure out how these price levels work.

Let me show the abilities of this module.

Suppose you need to analyze some piece of price history. It may be a week, or 3 weeks, or several years; the
program is able to deal with any time frame.
You would like to calculate the pivot (balance) point for this price history interval. Here it is: HLC=(Highest
High + Lowest Low + Last Close)/3
Then you may calculate the support level as 2*HLC-Highest High and the resistance level as 2*HLC- Lowest
Low. These are the most popular levels.

You can do it very easily with Timing Solution:

1) Click on this button ;

2) And drag the mouse covering the interval for your research:

The program automatically will perform all necessary calculations. In other words, it will find the highest high
and the lowest low points for this interval and then make the math calculations. The picture above shows these
levels as teal, red and blue lines. The arrow shows the analyzed interval; figures at its beginning mean the
number of price bars covered by this interval (358 in our example):

The important thing to remember is that any time you modify this interval (the arrow), these levels will change
as well.

Now look at Properties window for this charting tool:

This edit box shows the lines we draw.
The line
HLC:Teal means that the program draws the pivot point = (Highest High + Lowest Low + Close)/3 for the
analyzed interval. To display this line, the teal color is used.
Next line, 2*HLC-H:Blue, means 2*Pivot-Highest High line displayed as a blue line.
And the last line is the red resistance line, 2*Pivot-Lowest Low.

The variety of support/resistance lines is huge. What if you would prefer to work with your own line? You may
would like to calculate the resistance line as Pivot + Highest High + Lowest Low and you may like to see it as a
yellow line. Not a problem; it is very easy to do. Simply type this and click OK button:

Here your line is:

IMPORTANT NOTE:

Sometimes the lines may lie beyond the analyzed price scale so they are invisible. Using these two buttons, you
can expand the price scale:
Another example. Suppose you may want to create two pivot points: one of them is based on the price history
for the current week and the other is based on the data for the previous week. In this case, you need to use the
special notation for the pivot point (HLC). Remember this:
CURR_WEEK_HLC stands for the current week (which is not finished yet);
PREV_WEEK_HLC stands for the previous week (i.e., the week before this one).

In this case, you will see this record:

Or you may would like to calculate the pivot points for the last and previous price bars:
One more example. You might would like to see a special point (let us call it the equilibrium point) which is
calculated as the geometric mean for two pivot points: for this month and for the previous month (the geometric
mean is the square root of the product of two values).
Use this formula:

Sqrt(CURR_MONTH_HLC*PREV_MONTH_HLC
):Teal
Similarly, you can record different types of support/resistance line. To make your life easier, we have created
the standard library where you can choose pre-recorded lines. To add any of these lines to your list, click on this
button:

You will get this list:

Check the lines that you would prefer to use.

Also, these two buttons are helpful if you need to save/download your set of lines:
Visual Backtesting

To calculate any line is not a big deal. The most important question is how to be sure that these lines are worth
your attention. In other words, we need to see that the lines calculated by the chosen method served actually as
support/resistance. This is why we do visual backtesting.
Let me show how to do this with Timing Solution.
Suppose you have decided to calculate the support/resistance lines based on the price history of the current and
previous trading weeks. In total, you have chosen 6 lines: two pivots, two supports and two resistance lines:

The program collects all price bars for the current week and the previous week; then it calculates the lines using
these data:
As you see, there is just two price bars available for this week, so the program calculates three lines for these
two price bars. The previous week contains five price bars, and we use them to calculate another set of three
lines (three lines for each week).

The problem is that these lines are tied with the last available price bar. It means that when new price points
will come, the actual positions of support/resistance lines will change. Thus, for backtest purpose, we need to
stop the data stream at some moment.
To do backtesting set this option:

Under this setting, the current/previous week will be tied with LBC (learning border cursor) position:
It takes as the current week the week that ends at LBC position, not the week ending at the last available price
bar. THIS IS VERY IMPORTANT.

In visual backtesting, we move the LBC position and watch how these lines change. Here I use these notations:

So the recommended strategy of testing is:

1) Set the LBC at the beginning of the interval we want to backtest (use this button).
2) Then shift LBC position one price bar ahead. I recommend using this button:

It simultaneously shifts the viewed interval. Also use shortcut Ctrl-L key.
Notations

H - Highest high for covered interval

L - Lowest low for covered interval
O - Open for covered interval
C - Close for covered interval
HLC - (High+Low+Close)/3 pivot point for covered interval

AH - Average High
AL - Average Low
AO - Average Open
AC - Average Close

LAST_BAR_H - High the for last price bar

PREV_BAR_H - High for the previous price bar

CURR_DAY_H - Highest high for the current day (use for intraday data)
PREV_DAY_H - Highest high for the previous day (use for intraday data)

CURR_WEEK_H - Highest high for the current week

PREV_WEEK_H - Highest high for the previous week

CURR_MONTH_H - Highest high for the current month

PREV_MONTH_H - Highest high for the previous month

Similar notation is used for Low(L), Open(O), Close(C), HLC

Gann fans draws Gann fans, like this:

You can use different angles there ("Angles ratio" parameters), display mirrored lines:

This is a sample of the price mirrored fan:

You can also use square or square root scale for these fans:

Fibonacci grid allows to draw grids like this:

Define in the options window a type of the grid (price, time or both), display/do not display reversals grids:

You can enable/disable retracements or define your own retracement:

For example, if you plan to work with 70% retracement, type 70 and click "+" button here:

If you need to change the color or thickness of any retracement line, you can easily do that making a double
mouse click on the retracement that has to be modified:

You can set separate color for each retracement as well.

Fibonacci ellipses allows to draw ellipses like this:

The radius of these ellipses correspond to Fibonacci proportions. As with Fibonacci grid charting tool, you can
use your own proportions for these ellipses.

Pitchfork

This is a sample of classical Andrews pitchfork; in Timing Solution you can draw it with three mouse clicks:

Here are all possible variations of this pitchfork asked by Timing Solution users:
 You can place any text or data mark with these charting tools

Geometrical figures

Geometrical figures are here (see the menu above). You can make different combinations of them:
Free Ellipse
Spiral
and it's variations: