Friday, July 13, 2012

Pattern Inversion

Some time ago I discovered that many bull run patterns can be inverted, giving roughly the same shape. I have used this many times to get a general projection for well-behaved instruments, such as the DOW. But I have forgotten about this "technique" until just today, when I was looking at gold, and it popped out at me.

Gold Futures
Imagine that you could pivot this image about the point right at about mid-2010. Then you can see that the red circled areas are inversions of each other, and the same with the yellow circled areas. The yellow circled areas even have the same "shelf", holding a stable upper bound through 2008-2009, corresponding to a stable lower bound in 2011-2012. Bumps 3-2-1/1-2-3 correspond in the yellow circles.

Extrapolating then, if this pattern continues to hold, we should see gold taking off very soon since all 3 bumps are now complete.

This "technique" is not recommended for price estimation, just the direction of movement and very rough time scales.

Cowan uses pattern inversion, but in a different way - he compares one segment of the market with a different flipped (mirrored - not pivoted) segment. Other than that, I have never seen anything like this done. Have you?

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