In a minute, I have something serious to talk about... but for now, I'll start on the lighter side.
Remember those flashcards I misplaced? Guess what... they turned up. About three days later, my wife walks into my office area with the envelope and says "not that I think you're a doofus, but here's your flashcards". OK then. I guess they were here in the house, right where I left them.
Now on to the serious stuff.
I believe I've come to a important realization regarding the fundamental basis for Drummond Geometry (DG). Before I purchased the course, we of course corresponded as I had lots of questions about the material. One of the questions I wanted to ask but never did was along these lines: How does
DG deal with news events that move markets? I didn't ask because I never found a way to word it in such a way you would know what I meant. Maybe that was because I really didn't know, but, in any event, I think I've answered this on my own and I'd like to know what you think. First, though,
some background...For quite a few years now, I've been following a company called Force Protection (stock symbol FRPT). It's had quite
the wild ride... at the end of 2005 you could have backed up the truck and bought all you wanted for less than $1.00. This year (in May I believe) it peaked at $31.16; today (18th) it closed at $5.91. It got hammered after-hours ($4.23... it's intraday '07 low is around $4.50) because of
'news'. Back then I was smart enough to 'back up the truck', if you will... the bad news is, I bought more this year on the way down (I'm well under water now on the whole lot). Anyway, last week during a moment of particular distress I decided to do an exercise. Here's where this gets
interesting... I plotted a yearly high-low-close chart for the last 4 years ('04 through '07). And the PL Dot for thecurrent bar is located at... 6.01. Now (keep in mind, I'mstill studying my flashcards...) the closest line I could fit to locate resistance for the current yearly bar was a 5/2 line. The 5/2 down line shows resistance at approximately $32.50; again, FRPT peaked in May at $31.16. So, it appears as if FRPT has gone through a yearly PL Dot refresh. So I start thinking, in May this thing peaks at $31, and it simply was not going to go any further because it's constrained bythe energy flow. So, what causes the energy to 'reverse course'... it's the news! Let me tell 'ya, for the last 6 months it's been one negative thing after another for this
company. All of this begs the question, does the energy flow drive the news, or does the news drive the energy flow? This appears to be the classic case of the tail wagging the dog. In other words, if the energy has peaked in one direction, it's peaked, period and one can anticipate news forthcoming
that will force the directional change. So, as these thoughts are coming to me last week, I literally can't get out of my chair. Besides thinking 'where were you when I had a small fortune in my hands', I thought that, if I'm right about this, then DG is even more brilliant than I had imagined and that I'm just blown away by the time and the effort that had to have gone into this to bring it to the point where it is now.
Again, I'd like you're thoughts on all of this, and I look forward to your reply.
E.B.
Some Thoughts
Re: Some Thoughts
Thanks for this...
Glad the flashcards turned up....
As to the issue of "news" and Drummond Geometry... yes, it is often the case that the charts reflect perfectly the external events, and that predicted levels are often flagged by some "news" event that seems to have an influence, except that we knew about this turning point ahead of time, etc etc...
The theory says that energy is universal, and that these phenomena of energy terminations and pldot drives can be seen in many areas outside of technical analysis of the markets. So in theory it is not the central banks that drive the markets but that both the central banks and the markets are reacting to more fundamental ebbs and flows of energy. If one looks about the world there is a lot of evidence that this theory might be correct. Many things can be plotted on charts and we find DG patterns emerging from them. Experiments have been done with sunspot observations, with records of personal moods, with medical and biological records on various matters. However none of this research was carried out using rigorous scientific discipline and so it remains at the level of extremely interesting anecdotal observations. At the moment I am of the belief that this theory cannot be proven absent a lot of work with controlled experiments. But a rigerous proof is also unnecessary for our purposes. I do believe that this concept of energy ebbing and flowing and reaching natural terminations and then either retracing or spilling over into a new range is an extremely useful theory with a lot of fundamental applications. But in the end, the extent of this truth, the universality or non-universality of this concept of energy flow does not matter for the trader. For the trader, the important point is to recognize that the markets do react to our predicted levels of support and resistance, the levels predicted by DG, and that these reactions have definite and recognizable patterns that can be take advantage of to our great benefit.
I took a look at FRPT and can see why you've had some fun trading that! Long term DG charts would indeed be helpful. I note the weeekyl exhaust now setting up for likely retracements....
Glad the flashcards turned up....
As to the issue of "news" and Drummond Geometry... yes, it is often the case that the charts reflect perfectly the external events, and that predicted levels are often flagged by some "news" event that seems to have an influence, except that we knew about this turning point ahead of time, etc etc...
The theory says that energy is universal, and that these phenomena of energy terminations and pldot drives can be seen in many areas outside of technical analysis of the markets. So in theory it is not the central banks that drive the markets but that both the central banks and the markets are reacting to more fundamental ebbs and flows of energy. If one looks about the world there is a lot of evidence that this theory might be correct. Many things can be plotted on charts and we find DG patterns emerging from them. Experiments have been done with sunspot observations, with records of personal moods, with medical and biological records on various matters. However none of this research was carried out using rigorous scientific discipline and so it remains at the level of extremely interesting anecdotal observations. At the moment I am of the belief that this theory cannot be proven absent a lot of work with controlled experiments. But a rigerous proof is also unnecessary for our purposes. I do believe that this concept of energy ebbing and flowing and reaching natural terminations and then either retracing or spilling over into a new range is an extremely useful theory with a lot of fundamental applications. But in the end, the extent of this truth, the universality or non-universality of this concept of energy flow does not matter for the trader. For the trader, the important point is to recognize that the markets do react to our predicted levels of support and resistance, the levels predicted by DG, and that these reactions have definite and recognizable patterns that can be take advantage of to our great benefit.
I took a look at FRPT and can see why you've had some fun trading that! Long term DG charts would indeed be helpful. I note the weeekyl exhaust now setting up for likely retracements....