Gothic Church Towers

Some of you may remember a discovery I made on the fractal pattern front a few weeks ago – it was a repeating pattern on my A/D ratio chart which seemed to be a precursor to market reversals of varying degrees. Due to its visual appearance I named it the Gothic Church Tower pattern – which is henceforth shall be known as. You can attribute the naming to an early childhood in rural Austria – we have plenty of Gothic churches there.

Although I am not religious I always admired their stunning beauty and in particular the historic context in which they were created. Now it seems they may even be profitable – who knew! Guess I finally found religion! 😉

Originally I was merely following the NYSE A/D ratio – like most traders do. However, I quickly realized that this ratio was suffering from the same limitation as the TRIN – it’s not very expressive on the short side as the bearish spikes are all contained between 0 and 1.0. I tried to alleviate this problem by creating a SuperAD indicator which was normalized – but that turned out to be a textbook example of an ‘improvement’ that failed to solve the problem – the patterns started to disappear in a lot of noise. The ‘solution’ was to simply add a second indicator, which of course is the NYSE D/A ratio – simply the inverse. We look at both to discover patterns that point toward possible market reversals.

Well, early on I only looked for the Gothic Church Tower pattern on the A/D ratio – and various examples (and their price conclusions) are highlighted on the second tab above. However, for some reason I must have had scales on my eyes as I did not notice that the very same pattern seemed to show up on the D/A ratio tab as well – and it is at least as reliable. As a matter of fact we had another one just a few days ago just before we ramped into what most likely will be Soylent Blue.

I for one find this extremely fascinating. In my never ending quest to discover harbingers of turning points it seems we now have yet another weapon in our arsenal. My apologies for not figuring this out earlier – but hey – better now than never! I am sure that this chart will serve as very well going forward.

Cheers,

Mole