I actually don’t have time to make this post as I am working on a project I need to get done this week. But when I saw this chart I got mightily excited and I think you guys will as well. Check it out:
You might want to click on it for the large version. In case you’re not seeing it – there appears to be a repeating fractal in the NYSE Advance/Decline ratio. And it’s not just a fractal – it’s one at just the right moment – at the onset of corrections. The last one was painted early this year just as we dropped in a big way. A less pronounced one but still recognizable was painted just ahead of a one week drop, still pretty profitable though if you caught it (ES subs did). Of course all of them eventually bounced back, but that is a different story.
And it’s not just the form – the intensities almost exactly line up – including the low readings after the ‘M’ formation. Yesterday the ratio closed out at 0.17 – today it registered at 0.25. Assuming the pattern continues we should see a ‘small M’ formation while the tape slowly runs lower, followed by head fake and then a final wave down. Once/if we get there we’ll be looking at divergences on my NYSE Advanced/Declining Volume chart which I shared over the weekend.
I find this chart extremely exciting. IF we can capture fractal patterns in various market sentiment indicators which align themselves with fractal price patterns then we may have found the missing link to Elliott Wave Theory – the ability to recognize reversal points and to correlate it with various wave count candidates. The implications of being able to do this would be ground breaking to say the least.
Alright – that’s all I have for tonight, but I think this one chart is worth watching. Any input/ideas or other interpretations welcome.