Calculation of price targets: what really works (09/2005)
Principally, market forecasts can be reduced to 2 factors: time and price. In my work time is playing the main role as time can be predicted much more reliably and with a higher precision. Nevertheless, in this article I want to discuss the "other side" and examine which astrological and non-astrological methods do work best and when.
First, why is time so important? There are several reasons:
(1) By and large, price is given much more consideration by the mass then time, from a contrary perspective this is a sign of a wrong perspective of the mass.
(2) The markets are heavily manipulated in today's environment (e.g., see a recent paper by Sprott Asset Management, the Plunge Protection Team was founded in March 1988, executive order 12631 signed by US president Ronald Reagan), and the big boys are creating a mess, e.g. by producing wrong outbreaks. While in the 60ies and 70ies trading outbreaks apparently was a great strategy you easily get a rap on the knuckles today. In contrast, time is in my experience much less vulnerable to manipulations and thus considerably more trustworthy.
(3) Whether price calculations will work or not mainly depends on the market environment. The all-deciding and yet hardly ever asked question is if there is a strong trend present or not. This can be gauged with the aid of the traditional methods of technical analysis, e.g. the ADX (Average Directional Index) or a combination of longer and shorter MA's (moving averages).
(a) In a strong trend market almost all methods I am aware of are working poorly as support and resistance levels are broken without consideration; the market can easily extend moves, e.g. it might break 4 resistance zones and then stop at the 5th. The only consistent method in my experience is watching psychologically important price levels.
example oil (powerful bull market since 2001): it rose from a low in May this year to the round number $60 where is stalled for some time, then advanced to the next round number $70 where it again reversed (at least temporarily).
example Dow Jones Industrials (DJI): The DJI needed several years to convincingly break the levels of 100, 1,000, and 10,000.
(b) In weak trends many methods are useful because the market usually stalls with the first support or resistance. Depending on the precise definition of "consolidation" it's clear that the markets are consolidating up to 3/4 of the time (the old 80/20 rule).
Here the Bollinger bands (in the daily, weekly, monthly chart) have proved as very useful and yet very simple tools to detect key price levels. Note that the Bollinger bands are mostly maximum targets that are not always reached.
Example silver: silver has been consolidating since December 2004 (ADX falling) with the price approaching the upper and lower Bollinger bands a couple of times (not always touched).
Apart from this general rule other approaches are taken into consideration as well, e.g. the Andrew's Pitchforks, the moving averages, retracement levels (e.g. 50%) and of course the traditional trend-lines. To be precise, I project the actual support somewhat below the trend-line as in today's manipulated markets a false break is more the rule than the exception - followed by a return into the trend channel.
To my knowledge, astrology is contributing very little to the art and science of calculating price targets, actually there is only one widespread method, namely transforming the planetary positions into monetary units to get support and resistance levels. I'd like to explain that with the aid of an example: gold was in a secularSecular means historic trends of 5-30years. bear market from 1980 until 1999/2001 which ended on 2/13/2001 at $253.75 (triple bottom 1999/2001). On this day Pluto was at 255° (15° Sagittarius), so the degree position was equal to the US$ price (+/- 1-2$).
The astrological standard zodiac is a breakdown of the geocentric-ecliptical longitude (360°) in 12 equal parts each 30°: 0-30° Aries, 30-60° Taurus, 60-90° Gemini, 90-120° Cancer, 120-150° Leo, 150-180° Virgo, 180-210° Libra, 210-240° Scorpio, 240°-270° Sagittarius, 270-300° Capricorn, 300-330° Aquarius, 330°-360° Pisces
This example also demonstrates the tendency for the markets to be reversed by the assigned planets, for instance gold is ruled by the sun and Pluto, the currencies by Neptune and Venus etc, and these planets are often the key.
I use this approach to determine the planetary resonance of price levels. In a couple of hundred cases it was clearly confirmed that intermediate-termintermediate term means a time horizon of 1-3 months. trend reversals are characterized by a good planetary resonance (error probability P=10-15%), i.e. the price extreme has to correlate with the planets. This perspective becomes crucial when the market is approaching a turning point (Amanita pivot) and could form an intermediate-termintermediate term means a time horizon of 1-3 months. term peak or bottom. So the prices are examined and the quality of the planetary resonance is calculated, if the resonance (connection of prices to the planets) is very weak, it can be outruled with a probability of P=85-90% that the intermediate-termintermediate term means a time horizon of 1-3 months. high or low was already set, and at least a re-test is necessary. The reverse, however, is not true, i.e. a good planetary resonance is a necessary but not a sufficient condition for an intermediate-termintermediate term means a time horizon of 1-3 months. reversal (CSQN concept).
I have found out that the best way for an analysis is to consider the whole "family", e.g. the oil family comprehends Brent spot, Brent and Sweet Light Crude Future, heating oil etc., the bond family consists of TYX; TNX, T-Note Future, Euro Bund Future.