The Blue Series of SP500 futures is the outcome of my experience in a small but powerful movable traders internet chat group, "No Brain University" or NBU, between 1999 and 2004. I'll write more about NBU another time, but the result was a highly disciplined application of the principles of Gann and Andrews in real time trading of stock index futures and index options.
The Andrews Median Line or "range bisect" (NBU) takes an important SP500 market range in price and time and draws a line through its 50% point in price and time from the opposite extreme price of the immediately previous range of similar degree or magnitude. It is never a trend line except in future action. The first chart in the Blue Series shows the major bisects in the bear market from 2000 to 2002/03, and in the early part of the bull market thereafter. (Click on the small images for a full-sized pop-up chart.)
On these charts the ranges being bisected and the bisects are the thicker colored lines. We'll ignore the thin lines at this time.
The first important range is the yellow line connecting the April 2000 low and the September 1, 2000 high and the bisect is drawn through the exact midpoint in time and price (5 day per week charts) from the March 2000 high. All data was in place once the September 2000 high was confirmed, and the line could have been drawn as early as October 2000. The thick yellow bisect is precisely where the first major leg of the bear market stopped in March 2001.
The second (green) bisect divided the time-price range from that March 2001 low to the March 2002 high, drawn from the extreme point of the previous range at September 2000. These lines were in place as soon as price dropped off the March 2002 high, and the bisect caught the July 2002 as precisely as the prior bisect caught the March 2001 low. Note that the September 2001 low played no role in and wasn't advertized or predicted by a bisect as it was due to events totally exogenous to the market.
The next bisect is the red one from the March 2001 low through the price-time range from the March 2002 high to the October 2002 low. this bisect had rotated upwards, signalling that the bear market momentum was waning, but it remained powerful upside resistance though the end of 2002 and early 2003. The August and December 2002 rallies and the January 2003 were stopped cold by that bisect. It was not until April 2003 that SP500 broke through and kissed the bear market bisects goodbye. All but one.
That bisect was Big Blue of the Blue Series. Big blue bisected the first leg of the bear market from the September 2000 high to the March 2001 high, drawn from the April 2000 mini-crash low. Except for minor penetration of Big Blue in the March 2002 patriotic rebound rally, Big Blue was nearly forgotten until 2004. Then in a long, long year of consolidation, Big Blue held firm from January to June 2004 and beyond in a series of batterings.
In the summer of 2004 it became clear that there was another still active range bisect. That was a bisect of the same March to October 2002 range but this time from the September 2001 low. the black bisect had put a damper on upside action in the summer of 2003 and came back to retest it several times until November 2003. It was forgotten until August 2004 when SP500 futures came down to rest upon the black bisect and reverse: an impressive reconfirmation that the bear market was over.
However, it was still not clear that Big Blue was done. SP500 bounced down off Big Blue one last time in September 2004.
Finally in the week of October 7, 2004, Big Blue was bested but SP500 got capped again.
By November one could see open ground, as not only Big Blue but other shorter term bisects were bested.
It looked like SP500 was headed for the new yellow bisect up at 1250 in December 2004.
What we see since December is another frustrating consolidation.
The new red bisect runs from the March 2004 high through the range of the August 2004 low to the New Year's 2005 time-price range, and the recent mid April low bounced up off it. So far so good.
Note that at this time (May 10,2005) Big Blue and the black bisect of 2003/2004 are both right about at 1100 or a point or two below. These are the key bisects of the bear and bull markets. These are the supports which need to hold or be quickly regained if penetrated.
This is how bisect analysis works in practice. You can see other lines and support/resistances on these charts. Some of these are also legacies of NBU for another time.
NB: All charts in this series are of constant 3 month forward SP500 futures (perpetual or "perp") and are charted on a constant 5 day week including holidays for scaling accuracy.
Recent Comments