Mar 27/13' Inflection Point In Stocks --Trading Time and Market Symmetry

If we were to think about markets as ecological systems, involving complex yet orderly dynamic formations on a collective level, then we would have to consider the basic building block responsible for that outcome -- the individual decision maker -- a biological system -- with efficient rhythm and symmetry by design. Extending that metaphor into the price-activity inherent in stock market movement, driven daily by individuals, we must therefore look for the symmetry, anticipate the order and potential organization with the macro-formation. I would start by looking at the relationship between price and time as it relates to odds betting.

I want to look at the Nasdaq 100 Index from this perspective in the day chart below, going back to 2012, evaluating the duration and extent of all market swings to date. This can give us perspective on how we should be betting and position sizing as it relates to position/portfolio risk  -- as directional traders -- and how we can develop a systematic sense of market expectation. You can reference the numbers 1-5 which identify intermediate market turning points from 2012 to present, as long swings in the Nasdaq 100 index. 

Evaluating Extent and Duration as follows:

1-2: 

44 days, 343 Pts (H-L Swing)

2-3:

78 days, 438 Pts (L-H Swing)

3-4:

41 days, 379 Pts (H-L Swing)

4-5(?):

80 days, 316 Pts (L-H Swing)

1-3 (H-H):
121 days

3-5(?) (H-H):
120 days


Downswings Symmetry (H-L) 1-2, 3-4 = 41/44 days, 343/379 Pts

Upswing Symmetry (L-H) 2-3, 4-5(?) = 78/80 days, 316/438 Pts.
Intermediate (H-H) Symmetry 1-3, 3-5(?) = 121/120 days

Firstly, we can observe how the space-time relation has been a consistent factor in market swings going back a year. And we can observe how the current rally (4-5) is measuring in duration (vs 2-3 Upswing), but short in extent (316 pts (4-5) vs 438pts (2-3)) -- not perfectly symmetrical. But as Gann would say, time governs all price movement. So taking Gann's wisdom, is time up in 4-5? 1-3 H-H, 3-5 H-H = 121/120 days is also measuring. Using time (and Gann's insights) we can become better risk-managers with our trading capital and improve our anticipation of market turning points.