PM Daily Market Commentary – 6/7/2017
Never to be one to skip past a potential holy grail, how might one generate – automatically via computer – such a grid? What's the algorithm?
I mean, I see lots of little lines on the chart, but if I only give you the data through 2011, will the uptrend grid look the same as it does now?
I'm always suspicious of this sort of thing because it appears to require future information to construct. Ex post facto you can definitely generate a fantastic grid that seems to perfectly predict (at least in the past anyway) what trades you should have made, but I want to see one generated as we step through time, from 2008-present, using an algorithm that you provide, and see if it can come up with the same grid you present today.
If you can't do that – the grid stuff is just a load of hooey. Er, I mean, it appears somewhat less useful as a predictive tool than I might have hoped. 🙂
Seriously. If this is repeatable, then with some effort I can generate these grids, and backtest their effectiveness as trading signals on my database.
Martin Armstrong has this concept of a "reversal" (both bullish, and bearish) calculated from major highs and lows. A bullish reversal is a price level which, if exceeded, will represent a change in trend. Like you, he also uses closing prices, but in a specific timeframe. According to him, reversal lines can act as resistance also. Gold has a major (monthly) bullish reversal at 1362. A monthly close above that price = we're off to the races.
Of course, he won't tell about how he generates the reversals, more is the pity.
I'm a total believer in the "hidden order in the markets" thesis, FWIW.
Dave, I drew that on Netdania in about 10 minutes (enlarge picture here https://i.imgur.com/B9vL67A.png). It's not computer generated. Admittedly the easiest place to find the angle yourself, is to use the closing prices in the most recent pennant. Gold is a bit easier to find elsewhere.
The argument is that all resistance and support lines for gold and silver are the same angle in two directions. I think it's more than 45 degree angle theory, but maybe it is just that.