Replies to post #18633 on Zeev's Turnips Patch-No Politics (ZEEV)

[Sir Realist]

Okay, here's a little elucidation on Gap Theory charting, LG:

1) First, there has to be cognizance that an uptrend or downtrend is underway. By counting days in NASDy charts since the bear began, I look for a continued trend LONGER THAN 12 trading days to determine if it's a faux trend or a reversal of the previous trend. Thirteen days indicates a reversal to me.

2) Once a trend is underway, all gaps should chart in the direction of the trend. Chart from the closing price where the gap began.

3) Gaps are not immediately useful. It can take 1 to 4 weeks for interim-term channels to be definable.

4) During short term rallies off a downtrend, or short term dips off an uptrend, the gaps that develop at those mini-peaks and mini-dips ultimately prove important for the longest periods. As the included charts demonstrate, when the dip lines and peak lines emerge that ARE PARALLEL to each other and to other gaplines from peaks or dips, a series of triple-lines appears above and below the longest trends.

As the charts show, the longest term trend remains a bear, and will till we climb above the top three. Right now, that's in the mid-1600s.

The bottom three help define where bull rallies can begin off the downtrend.

5) As you'll see, when the market gets near critical support points on the downtrend after a long rally like we had last fall, shorts cover furiously, and important gaps appear. From there to the next bottom, fresh mini-channels start appearing that may only be useful for 2-3 weeks.

Intro the charts: I used a 9 month and 12 month chart of NASDAQ with lines drawn from every gap I found. Because some are short before replaced by another, a few of the lines seem bent on a long term chart, but they are really two separate straight lines that meet midway.

Ultimately, all gap lines are not useful because by the time they are recognizable, the parameters break. However, I started picking up on this phenomenon in April when I was on a monthlong vacation, and they proved useful till early July. After July's muddle, I finally noticed the triple parallel long term lines that, had I been looking for them earlier, could have proven useful in seeing the bottom. (And as well, knowing where support points from the 1990s bull are helps one to look for proper intersects of the 3 year bear trend gap lines).

One last thing of significance is the burgundy downtrend line. This is the line that begins at the March 10, 2002 peak (5132) and ran across the peak of Sept 2000 and has been untouched till it was broken in early December 2001. I'm not sure that's an important breach overall. We've stayed above it since, but the overall trend keeps returning us to it, and we may do so in the future unless we break above the pink lines in the 2 charts. It may portend that 1192 is the final bottom that killed the bear, but I suspect we'll have to retouch it again to define that. Btw, the last touch was a little below 1600, so it may prove to be the impenetrable resistance (about 1580-1590)



I don't have it figured out 100% but there's enough here to show there's more than coincidence at work. Again, all hoots of derision are welcome.

(PS - I forgot to draw an uptrend off 1192 on these charts which displays a floor we've used recently. Refer to my earlier chart for that one.)

[Sir Realist]

An added note: gaps only define starting points. they get drawn across highs or lows in the channel defining process.