Iterative Refinement

[R/R]

Quote from Spydertrader:

You annotated a Point Three Up Channel which began as a Traverse. Since this Traverse widened to the Point where it then mirrored the demensions of a channel, one would then expect traverses to, once again, form inside it. Tapes build traverses, and traverses build channels. Once your traverse grew to the size of a channel, you then need a traverse to 'carry' price back across to the other side. The only other option is a 'rocket' (basically a long tape which keeps going). Extremely rare is the case where we see rocket up followed by rocket down.

So, since we know we need a traverse to carry Price back across this new (widened) channel, we must then have an up traverse before we can have a down traverse.

Also, Non-dominant traverses form in two ways: Point Three's and Lateral Movement.

- Spydertrader

Spyder, I would greatly appreciate a graphical reference to the chart points you are referring to in your above post from 05-15-08 05:20 PM EST. You make some very important points regarding the geometry of the market and one's expectations. I want to understand the application to the 14:30 area of 5/15.

Here is Ivob's post to which you were responding which contains his chart, but from the context of your statements I don't think this is the entire period of your reference, if at all:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1922687#post1922687

Here is Romanus' original chart of that day for reference:
http://www.elitetrader.com/vb/attachment.php?s=&postid=1925056

thanks in advance.

edit: having trouble with links

 

[R/R]

Quote from Spydertrader:

Start with the Break Out of the Lateral Formation on your chart (which developed on increasing red Volume. What must come next? Did it? What does such an event signal? What does the YM say at this Point in time?

Always know where you are with respect to the "right side" of the market. Where are you? Where does Price sit with respect to the RTL of the Up Channel?

Telling me how you viewed the market, at the time, doesn't allow you to figure out, what you missed in real time.

Bottom line: You assumed the trend had changed due to the Traverse TRL break on increasing red volume. As such, you convinced yourself Price was moving between Points Two and Three. Clearly an easy thing to do, but, now one must look for clues during debrief, missed in real time, in order to learn to avoid repeating the same errors in the future.

HTH

- Spydertrader

Spyder: If the error made here was to not prepare for other scenarios to play out than the one Ivob expected, then I fully understand your meaning.

If, however, at the point in time shown in the attached chart, one should not be expecting a pt2(S) to arrive soon and then a retrace to pt3(S), (which would violate the WMCN after the Lateral BO you referenced and immediate continuation down) then I (and likely others) am missing something in the context.

You said recently "Learn 'context' and how context 'filters' the signals provided by the market". Is this going on here?

Again, thanks in advance for any clarification.

 

[romanus]

Quote from dkm:

Lateral movement between pt2 and pt3 is seen as continuation because pt3 has yet to appear. After pt3 has been formed, lateral movement = change. We must consider context.

I don't think there's any logical way to consider lateral movement across multiple bars as anything other than continuation, since change is a single bar event, as in as long as you're driving you have a continuation. But once you stopped (change) you stay still (continuation). In other words change does not have a duration, where continuation does.
Even applying it bar to bar I don't see how it's possible for lateral movement to signal change:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1924249&#post1924249

Quote from Spydertrader:

... lateral movement which in and of itself doesn't meet the sufficiency test, and therefore shows continuation.

 

[Spydertrader]

Quote from R/R:

You said recently "Learn 'context' and how context 'filters' the signals provided by the market". Is this going on here?

In order for a Trend Change to have occured (and not simply increasing Volume due to a BO of a Pennant (or as in this case, a Lateral Formation), what must come next? More increasing red Volume.

Since WMCN did not materialize, we expect the Trend to change.

Three scenarios exist where increasing red appears within an uptrend without signaling a change in Trend.

This was one of those examples.

Note the following bar after the BO.

- Spydertrader

 

[Spydertrader]

Quote from R/R:

Spyder, I would greatly appreciate a graphical reference to the chart points you are referring to in your above post from 05-15-08 05:20 PM EST.

Without looking at ivob's chart, I cannot say for sure but it appears as if (for some reason), I answered the question based off a completely different time period of the day. If ivob could repost his chart, I could provide a better answer.

It may be as simple as I looked at the incorrect bars.

- Spydertrader

 

[R/R]

Quote from Spydertrader:

Without looking at ivob's chart, I cannot say for sure but it appears as if (for some reason), I answered the question based off a completely different time period of the day. If ivob could repost his chart, I could provide a better answer.

It may be as simple as I looked at the incorrect bars.

- Spydertrader

my post contained the link to his post and the embedded chart

 

[Spydertrader]

Quote from R/R:

my post contained the link to his post and the embedded chart

Clicking the link you provided does not bring up the chart posted by ivob (at least on my computer screen). See attached.

- Spydertrader

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1926318>

 

[romanus]

Quote from Spydertrader:

Since WMCN did not materialize, we expect the Trend to change.

Is Trend in this particular sentence refers to the down trend represented by red bar that broke out of the Lateral Formation on increased volume? Thank you.

 

[Spydertrader]

Quote from romanus:

Is Trend in this particular sentence refers to the down trend represented by red bar that broke out of the Lateral Formation on increased volume? Thank you.

Correct. More accurately: What one thought was a downtrend has now changed.

- Spydertrader

 

[TIKITRADER]

Unfortunately due to a health issue, I have spent a long week in the hospital and have just returned home. I look forward to posting daily charts again this week.

Spyder, thanks for the very kind words.