UPDATED 20060402

COMMENT #108

(LTC0601 INSTRUCTIONS)

1. These are the instructions for the April-September edition of "The 2006 $upertrader's Book of Linear Time Cycles".

2. This edition continues the same 66 markets studied in the previous edition and the special study of monthly Dow Jones Industrial cash index prices from 1900 (symbol D1) that is in addition to the regular cash index study (DI) and the continuous futures contract (DJ).

3. New additions are the International Stock Market Index (IE) and American Stock Exchange Gold Bugs Index (BG).

4. The book includes four colored sheets and 71 numbered pages, 75 total.

Inversion Cycle Listings

5. The four colored sheets list the monthly/weekly "Inversion Cycle Index" projections while the 71 numbered pages include a title page, a brief instructional overview, a list of the markets in the study and their symbols on page 3, an individual cycles sheet for each market, and the usual disclaimers at the end.

6. Let's go to the Inversion Cycle Index sheets first.

7. The markets followed are presented in two sections, "Tangibles" and "Intangiles".

8. In each section, the markets in the study are arranged by columns with one column per market.

9. This allows one to easily locate the projected turns for any one market.

10. Further, vertical lines are included to separate the markets by complex.

11. The stock market complex has been further segregated into Dow components, other large cap, small cap and foreign sectors.

12. The interest rate sector has similarly been segregated into foreign, long term and short term sectors.

13. Grains have also been presented in such manner that one can either segregate the wheat from the rest or not, depending on how one wants to view various relationships.

14. In the leftmost column of each of the four sheets are listed the weeks of the study period.

15. Immediately below is the date of each week's Friday occurrence.

16. Each week consists of two rows, an "MIC" (Monthly Inversion Cycle Index) row followed by a "WIC" (Weekly Inversion Cycle Index).

17. Hence, for the first week, we see that Friday occurred on "1230" or 20051230.

18. We can similarly identify all the remaining weeks of the study period.

19. Let's go now to the information for Week #0 of the "Intangibles" section.

20. Note that, in the MIC row, we only see 2 of the 69 markets and a different set of 6 in the WIC row.

21. Since there are 34 markets in the "Intangibles" section and 34 in the "Intangibles", the 2 listed in the MIC row are actually 2 of a potential 34 in this section.

22. These numbers are fairly typical of the MIC and WIC listings.

23. What they are showing is the markets projected to turn during the listed period.

24. For the information in Week #0, the projected period was for December in the MIC row and for the week ending Friday, 1230 (Week #0 of 2005) for the WIC row.

25. On the other hand, in the "Tangibles" sheets, we see 9 of the 34 markets listed in the MIC row and 4 in the WIC row.

26. When the number of projected turns for any one week are particularly high, the date in the leftmost column is highlighted in yellow with red used to highlight the weeks of highest concentration.

27. When high levels of projected turns are common to both the "Tangibles" and "Intangibles" sheets for any one week, the WIC letters are highlighted in yellow for that particular week with the highest concentrations in the study again highlighted in red.

28. Though rare, about 15 percent of the time, the projected change will actually experience price acceleration.

29. Usually, the projection will result in a clear price reversal of trend or, at the least, a pause in the existing trend.

30. A projection of Monthly Degree of Trading should result in a reversal that may be later seen on a monthly chart of prices while one of Weekly Degree of Trading should be seen weeks later on a weekly price chart.

31. For instance, if we inspect the first entry, "S", of the first "0" row in the "Tangibles" sheet, we see that this market was expected to experience an important turn of monthly Degree of Trading in December, 2005.

32. Such projected trend changes experience a toleration of 1 period, so a turn of significance to monthly price charts would necessarily include the single months preceding and following the centered month in our example.

33. The multi-month high on 20060104 thus aligns with the projected trend change of our example.

Alignments

34. Three months is obviously a long time in the markets, and that's where the WIC (Weekly Inversion Cycle Index) information comes in.

35. The WIC projections narrow the most likely periods of time WHEN the monthly changes are likely to occur.

36. Such examples are noted by the vertical boxes that highlight the listing of a particular market in both the MIC and WIC rows.

37. It is during this period of time when the projections for a particular market are said to ALIGN.

38. When such duplicate listing occurs, the market symbols are not only listed in both rows, but are boldened to further alert us to the importance of the listing and are also vertically "boxed".

39. The reason why is because this is the monthly/weekly Inversion Cycle Index ALIGNMENT which is one of the most powerful of market forces we can learn to follow.

40. Usually these overlaps or ALIGNMENTS occur during the same week.

41. Because the end of one month/beginning of another often occurs in the middle of a week, however, an allowance is often made when a listing occurs in the MIC row of the ending month and a weekly projected turn in the WIC row of the next month; and vice versa.

42. Since the other listings in the MIC and WIC rows are single, stand-alone listings, they are not listed in both rows and are thereby not expected to contain the power of the monthly/weekly ALIGNMENT.

43. These single market listings are thus not vertically "boxed".

44. Nor is their market symbol boldened.

Clusters - Boxed Entries

45. Now let's discuss the concept of "clusters".

46. This phenomena occurs when two or more markets from the same complex experience projected turns.

47. Clusters are of several types and are expected to be of much greater importance than a stand-alone listing which occurs independently of other markets in the same complex.

48. A horizontal box in the WIC row marks such listing and alerts us to a "cluster" of projected turns from markets of the same complex for the indicated period.

49. For most traders, the WIC projections are likely to be of greater importance than the slower-moving monthly projections.

Clusters - Color Highlighted Entries

50. If the boxes (clusters) alert us to projected turns from the same complex in the WIC rows, the colors alert us to clusters which are not as "tight" as those in the boxes, but which are, instead, spread out over several weeks.

51. The repeated color allows for easy identification of these "sloppy" clusters which "snake" over two, or more, weeks.

52. Note that the colored clusters are independent of the boxed clusters noted in any one WIC row;

53. … and that these colored clusters are only for weekly projected turns and not the monthly.

54. Further, because they are not "concentrated" as are the boxed "clusters", they are of less importance than are the boxed listings in the WIC row even though the colored highlights are, well, more colorful.

Monthly/Weekly MIC and WIC Clusters

55. The final and most important cluster occurs when there are two or more monthly/weekly Inversion Cycle Index ALIGNMENTS for the same period in the same complex.

56. The vertical bold boxing and bold lettering identifies the individual monthly/weekly Inversion Cycle Index ALIGNMENT for each market.

57. The green coloring alerts us that more than one market from a particular complex is experiencing the MIC/WIC projected turn for the indicated period.

58. These ALIGNMENTS are all highlighted in green, regardless of complex.

Cross-Reference of MIC and WIC Projected Turns

59. The information on the Tangibles and Intangibles sheets is cross-referenced with that on the cycles sheet.

60. The markets are identified by MKT NMBR in the COMMENTS at the on-line trading tutorial.

61. The important monthly/weekly Inversion Cycle Index ALIGNMENT on the Tangibles and Intangibles sheets for any one market is also posted on the cycles sheets in the WIC and MIC columns for each individual market and is there identified by asterisks.

62. Once the market number is located, we need simply go to that number which is listed at the top of each cycles sheet along with the name for the market.

63. The cycles sheets are arranged by group so that those markets in each group are all together.

Linear Time Cycle Indexes

64. Whereas we use the Tangibles and Intangibles sheets to locate turns projected for the current week of the year, and to locate clusters of projected turns from the same market complex, we use the cycles sheets to analyze information specific to a particular market.

65. The Linear Time Cycle Index high and low projections in the MLC (Monthly Linear Time Cycle Index) and WLC columns (Weekly Linear Time Cycle Index) fluctuate between +100 and -100 over the data period.

66. Projections for the markets with the least amount of data - such as the Dow Jones futures, German Bund, and so on - should be less reliable, of course, than those with longer data histories - such as Dow Jones cash, and so on.

67. The cycle information should not be confused with Fourier, spectral and other such traditional cycle analysis, as the math is different and more robust.

68. The cycle indexes, which are shown in the MLC and WLC columns, are each composed of many different and individual cycles hidden in the data.

69. The indexes report those periods WHEN the cycles in an individual market are expected to be producing highs or lows in price.

Cycles Sheet Colored Highlighting

70. The coloration used in the MLC and WLC columns is important.

71. Green is associated with expected low prices and red with expected high prices.

72. One should note that, whereas the inversion indexes project change-in-trend, the linear time cycles project highs and lows.

73. What this suggests is that, DISREGARDING ALL OTHER FACTORS, we would want to focus our attention in the weekly column on the red periods for sells and green periods for buys.

Relationship of Price to the Projections

74. The final arbiter of the value of the linear time cycles is whether price is moving UP INTO a projected high or DOWN INTO a projected low.

75. If not, the projected linear cycle information is simply disregarded until such time as price again reverts to the cyclic projection.

76. This is different than with the Inversion Cycle Indexes where the action of the market itself is again the final arbiter.

77. If price is moving UP into a projected MIC or WIC change period, a high is expected to form.

78. Vice versa for a low, of course.

79. Since the action of the market itself is the final arbiter, the action of the market itself will sort such things out at the time of the projection.

80. This is what we search for in using the Inversion Cycle Index and Linear Time Cycle Index - ALIGNMENTS of the information and the actual price of the market itself in relation to the projections.

Trend Columns

81. The TREND column is used to identify those periods when both the MLC and WLC indexes are suggesting price movement in the same direction.

82. The large "B"s and "+"s indicate those periods when both indexes are moving upwards, thereby suggesting trending prices.

83. "S"s and "-"s for declining trends.

84. The small "b"s indicate when cyclic bottom "fishing" is expected to occur.

85. Vice versa for "s"s, of course.

86. "O" means "out" or the end of the indicated periods whereas "N" means that the indexes are not ratifying each other.

87. This cyclic bottom/top "fishing" normally precedes emergence and assertion of the next TREND.

Trading Tutorial

88. Limited discussion and explanation is provided at the on-line trading tutorial at http://www.supertraderalmanac.com/trade_of_the_week.htm along with application to real-time market situations.

89. A couple of emails from the Chart Service providing real-time application of the information will be emailed with this edition (but not mailed - so make sure your email address is current).

Chart Service

90. The daily chart service was introduced in July, 2004 for the advanced enthusiast.

91. The following example is typical of such service.

92. The chart shows daily prices for the Russell 2000 and was chosen because this market was used in the Special Report for the April-September edition of "The 2004 $upertrader's Book of Linear Time Cycles".

93. The 2004 report marked the end of the advance at the April Wave A high shown in the upper left corner.

94. The red brackets shown in the chart in the upper right corner identify the monthly and weekly Linear Time Cycle Index projected highs (see the MLC and WLC columns on the cycles sheet), the green brackets the MLC and WLC projected lows and the blue brackets the MIC and WIC projected turns.

95. The rest of the information reflects the concept followed at the Trading Tutorial site which is that trading information of lesser importance should be construed in such manner as to ratify the much more important Inversion Cycle information.

96. Price would proceed to decline by more than $25,000 over the next 15 trading days which easily covered the annual subscription cost of the service.

97. If more explanation is desired, one need only go to COMMENT #624 at the site which was posted 20041229.

98. The COMMENT explains the nuances of what was going on at the time in this market.

99. Other examples are also shown in each Almanac at the back of the book.

100. You can sign up for the CHART SERVICE here - http://www.supertraderalmanac.com/almanac/order_form.htm.