MONTHLY SUPPORT/RESISTANCE

Can you see all the long traders trying to figure out what hit them right now. I mean, why is the Euro/Dollar bouncing down so hard right now. Bush is talking but he hasn't said anything that would cause this!

Well, when a man/woman is walking through a jungle should he keep his eyes fixed straight ahead while he is walking or should he be scanning for danger in all directions. In the market jungle you have to look up and down. This is just a situation that illustrates what I tell you when I say the major wave trumps the minor.

Remember in my post last week when I told you the monthly trumps the weekly, the weekly trumps the daily and so forth.

Okay, when you look at the monthly chart I have provided it is no mystery going on here. The market rose today and hit a monthly top. Traders who bought at this level two years ago have been waiting all this time to break even.

Large traders. Of course, who else can hold a losing position this long, throughout a draw down that deep. Hedge funds, banks, rich individuals.

You don't even have to look at an order book to know that there are massive short positions waiting here. If you were them wouldn't you.

That's all I'm going to say about it but since it occurred it gave me an opportunity to show you what I'm talking about. And that doesn't mean the market will stay down, but you need to understand the logic that there will be at least a bounce off this long term resistance level the first time it's hit.

If you're trading off the monthly charts a bounce like this is no big deal in the scheme of things. But if you're trading off the daily or shorter a bounce like this can panic or stop you out of your position.

Don't trade with tunnel vision. These are the types of things we can focus on once we can get through the basics. I see that I can only give you small bites but I did mention it in an earlier post so it at least gives you an opportunity to see what I was talking about. It's one thing for me to tell you something but the real value is when you can see the truth in what I'm saying.

Jerry

HOMEWORK 4-27-2007

I know I promised to follow up on 3 bar equilibrium today but we have to take advantage of this current market configuration (pivot) as it is occurring. I believe due to the psychology of primacy and recently provides you with the best learning experience so from time to time I will postpone a lesson/s if you will be better served.

For those who responded to the homework assignment. You can see how price at this time has bounced up off the pivot test as if scripted by L.C.M.

HOMEWORK

1. Now, this bounce up off the pivot could have been anticipated because…

A. The test bar closed on lower volume

B. The test bar also formed a bear pivot on lower volume

C. The bear pivot formed by yesterday’s close needed to be tested

D. There was an intraday pivot, (1hr & 30min) bounce up above the green pivot test line on the chart I sent you last night.

E. All of the above

2. The green line on your chart represented…

A. Support line for today’s trading
B. Resistance line for today’s trading

WHY?

3. When a down bar closes below the low of the prior bar on lower volume, we should expect the next bar to…

A. Either stop or slow the down move
B. Continue the down move

WHY?

4. The yellow line on your chart represented…

A. Resistance line for today’s trading
B. Support line for today’s trading

WHY?

I know it seems like a lot but you’ve got the whole weekend. I don’t expect a response until Monday. But, I will respond before Monday if I get your answers before Monday.

P.S. ANSWERING THE OTHER QUESTIONS FIRST WILL HELP YOU WITH QUESTION 1.

When we are young majic is all we believe, till we are conned by those who deceive, then what we know is all we can see, blowing majic away like wind and leaves.

By what we know we're tossed to and fro, who to turn to, which way to go?when we remember that we are all child-ren, then once again we find a friend.

If we can forget what we 're taught to know, the face of revelation again will show. Ideas unknown we now can get, things forgotten we unforget.

Childish heart swallowed by consuming debt, too hard to believe because we fret, all that we believe is all we can get. And when the circle becomes complete, we find the child they tried to beat.

When faced with the choice, to just survive or truly live we remember that MAJIC IS ALL THERE REALLY IS...

Jerry

TRADING MAJIC

MAY YOU BE LED BY THE MOST HIGH AND HAVE A BLESSED WEEKEND.
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POP QUIZ

Pop quiz

THE EURO/DOLLAR FELL TO DAY BECAUSE

A. The pivot bar formed on lower volume
B. Yesterday’s bar closed below the high of the pivot bar on higher volume
C. Pivot point has not been tested
D. Price bounced off three bar equilibrium
E. All of the above

Study guide:

1. Counter-trend targets – page 7, L.C.M.

2. 3 bar equilibrium PAGE (18, 19, 20 RECENT BOOK UP DATE). STUDY ATTACHED CHART – supplied with the recent update (bar 4).

Once we are familiar with the information on 3 bar equilibrium (3 bar for shorthand) which has already been provided, that will be our focus, to fill in the gaps, errors and/or omissions in the material provided.

When you turn in your homework I will know where you are and the direction I need to take with future instruction. If you do not turn in your homework, congratulations, you have made me very proud because you have graduated and are out there making loads of cash. That means, L.C.M. is working just as advertised and I have another satisfied customer.

REMEMBER: INVEST YOUR TIME BEFORE YOU INVEST YOUR MONEY.

Cheers, Jerry
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EURODOLLAR 4-26 2007

Have a look at our updated reference chart I've provided today. Do you see anything about today's action that does not fit in with your basic L.C.M. PIVOT AND VOLUME RULES? If not I'd like to hear from you.

But be advised that I will answer you by referring you to the material already supplied to you in the book, in your book updates, and in our current lesson series.

Then, after reviewing that information, tell me SPECIFICALLY what it is about the point you do not understand. In light of the volume of information you have been provided, a simple, Hey Jerry, I don't understand pivots just does not wash. Tell me specifically what it is about the information about pivots/volume you have been provided that you don't understand.

I know my writing skills leave something to be desired but in any given lesson there are going to be things you do understand about it and things you don't understand about it. Give me a book page number, or update page number, or lesson number. Something...

I'm so busy I no longer have the time to do the research for you.

Sincerely, Jerry

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PIVOT LESSON 3-A

Pivot lesson 3-A has been delivered to your mailbox. If you did not recieve it let me know.

Jerry
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PIVOT LESSON 4 -DELAYED

I know you wer expecting pivot lesson 4 today but I'm sorry I've had to delay it until tomorrow night.

I made a mistake. This is what I said in my post earlier today.

"Well, that red line just happens to be daily support in the form of 3 bar equilibrium. I know I haven't gotten to deeply yet into 3 bar in our reference chart series but it's coming this week I promise. "

We'll... I got a flood of questions on 3 bar equlibrium today. Most of you have got me pegged pretty good by now and despite my bluffing you already know that I'm going to answer your questions when you write me.

So, today's answers have left me no time to put together pivot lesson 4 that I had scheduled for today. 3 bar involves a rather in depth and illustrated explanation so it's a wrap for today. I'm exhausted.
I guess it's my fault though, for even putting that little seed in your head.

But If you must send me questions before the time I asked for, I beg of you to at least contain your questions to the particular lesson and not on furture lessons that I have already promised. However, if you cannot I will never refuse to answer your questions.

But please understand that the more complex elements are what I'm doing this series for and I can only answer so many questions in a day that take me 1 hour to explain and respond to before I run out of day. That causes me to fall behind, which only engenders more questions and the wheels of information start spinning to a stop.

So, I've rescheduled pivot lesson 4 for tomorrow night and this means the lesson I had scheduled for Friday will have to be put off until Monday.

But questions about lessons already covered are good because it helps everyone for me to know if I've forgotten something, made an error or left something unclear. That way I can make the necessary corrections for presentation to you in the next lesson.

Thanks, Jerry

Eurodollar 4hr- 4-20 and 4-24-2007

I want you to see something because it relates to the lesson I sent you last night on outside bar reversals. I'm not ready to get into intraday trading L.C.M. with you yet but I want you to see that the same techniques that apply to the longer time frames also apply to intraday. Go down and refresh yourself with Friday's post Eurodollar update 4-20-2007 4hr and copare it to today's 4hr chart.

See how the 4hr today is responding to the outside bar setup and has reversed up off the red line I drew.

Well, that red line just happens to be daily support in the form of 3 bar equilibrium. I know I haven't gotten to deeply yet into 3 bar in our reference chart series but it's coming this week I promise.

I sometimes want you to see how things develop in real time and at times intraday is the only way to do that. Since the action is in line with what we are currently talking about in our lesson (outside bars) I thought you should see it.

The main thing I want you to remember is how it illustrates what I told you about basing your intraday trades off daily or longer support and resistance levels. So, look at Friday's chart that I posted and compare it to the chart I've presented today. Then compare it to the lesson I sent you last night.

Notice how it is very similar to pivot 6 on our reference chart which by coincidence happens to be the focus of our next lesson.

Nothing is absolute, everything is probability.

Jerry
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PIVOT LESSON 3-OUTSIDE BARS

Hello

Pivot lesson 3 - Outside bars has been sent to your mailbox. If you did not recieve it let me know.

Thanks, Jerry
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PIVOT LESSON 2-MOVING FOWARD

Just to let you know, pivot lesson 2 will be delivered to your mailbox. If you have not recieved your lesson by 12:00 midnight e.s.t. please notify me so I can rush it out to you.

This is because, for right now, the blogg is open to all but there is certain information that is reserved for those who own L.C.M.

although I try to give freely as much as possible I unfortunately can't do an injustice to those whom are serious enough to have purchased "THE LAWS OF CHARTS AND MEN," by giving away the house to everyone for free.

I hope that those of you who do not own the book don't feel slighted by this as I feel I often give you much free information that can be found nowhere else. Unfortunately, L.C.M. is not for sale at the moment as my current focus is to udate and improve the services I provide to those who have shown faith in L.C.M. I will provide notifications within the next couple of weeks when I shall again make the book available.

sincerely, Jerry

PIVOT LESSON 1

• THIS IS YOUR KEY FOR INTERPRETING THE NOTATIONS ON THE CHART. I WILL BE REFERRING TO THIS CHRT FOR THE NEXT FEW DAYS.
  
  S= SWING BAR
  
  ARROW= SIGNAL BAR
  
  RED NUMBER= PIVOT NUMBER
  
  YELLOW NUMBER= CORROSPONDS WITH RED NUMBER (Profit target)
  
  
  WHY I STARTED THE COUNT HERE
  WHY I ENDED WITH PIVOT 9
  WHY I DIDN’T INCLUDE THE LOW AFTER PIVOT 6 IN THE COUNT
  

A. WHY I STARTED THE COUNT HERE

I started the count here because I had to start somewhere didn’t I? Just kidding…If you are going to trade with the trend then you first have to be able to identify if the trend is up or down.

In the case of our chart I started here because, as I stated in the chart-reading 101 post, it is where the prior down-trend ended and the current up-trend began. How do we know this is the transition point? Because when we look at pivot number 2 on the chart we see that it is a higher pivot than pivot 1. Translation, the first higher pivot after a series of lower pivots equals change in trend from down to up.

For more clarification see page 26 of L/C.M. under the heading- FIRST HIGHER BOTTOM-FIRST LOWER TOP. This is otherwise known as trend failure. When the down-trend failed to print a lower pivot than pivot 1 that means the downtrend has failed and an up-trend has begun.

B. WHY I ENDED WITH PIVOT 9.

Because, pivot 9 is the most recent bullish pivot in the current up-trend. If we are to trade with the trend we only need to concern ourselves with bull pivots in the current up-trend.

C. WHY I DIDN’T INCLUDE THE LOW AFTER PIVOT 6 IN THE
COUNT

Simple… because I missed that one. So we can add 1 more pivot to the count and make it 10 pivots instead of 9. So, you can make a big deal about me missing that one or you can focus on the fact that it performed as advertised, as in profitable 10 for 10.


Now, I know you have questions but for this week I’m going to ask you to restrict your questions to the lessons at hand. I also want you to hold them until the end of the week and then if you still have those questions I will be more than happy to answer. Or, you can send me your questions but instead of answering it directly I will weave the answer into the lessons as we go forward. Then, again, if it is still not clear to you, let me know on Saturday and I will clarify the answer on a more personal level. The second option may be better because it may insure that I don’t miss something as I progress the lessons. That is how I realized I missed a pivot because one of my observant students notified me of this today. That allowed me to weave that into today’s post so instead of helping one it helps all.

Don’t get me wrong, it’s not as if I’m avoiding your questions it’s just that I’m trying to present the material in a more organized format and I believe this step by step approach will be more beneficial and less confusing to the majority as it will avoid jumping around from point to point, as well as providing an organized frame of reference if I have to go back and clarify a point for you on a more individualized level later.

In the next post we will take a couple of more steps and I’m sure at least some of the questions you have now will be covered.

This has been the setup phase for our future discussions. If you feel this format is unsuitable for you let me know and I'll try to think of a way that we can improve upon it. Remember, nothing is absolute, everything is probability.

NOTE: One of my students has posted a comment on the post prior to this one. I think you should go down and click on the comments button there to see what he has to say as it was not just meant for me but for you also.

Cheers, Jerry

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CHARTREADING 101

uptrend bottoms

In my last post I suggested that you do a little back-testing on your charts to look for pivots. Sometimes when I suggest back-testing it seems as if it evokes images of digging foxholes or something. I think traders have been trained to back-test by using complicated mathematics, or specialized software programs and such.

Well, when back-testing for pivots you need none of that. It is as simple as looking at the tops and bottoms on the chart. As I’ve stated many times before that wherever you have a bottom or a time you will find a pivot. It is not about looking at every single bar on the chart. All you are looking for are the signals. Really, how many tops and bottoms are on a chart…?

Today I have supplied a chart that marks the tops and bottoms for approximately the last 3 months starting from January 12-2007. Since that time until now there have occurred 9 bottoms and 6 tops. I’ve done the work for you but it would have taken you no more that 2 minutes. I mean, think about it. If I had a line 100 of people standing in a row and I said walk down the row and pick out only the people who were shorter than the person standing both, to their immediate left and their immediate right. You could stand back from a distance and point them out real quick wouldn’t you. That’s a big difference from saying go to each person and measure them to see who’s the shortest.

That short person is the pivot person.

On one chart (bottom of post) I have identified each high and low for you with green arrows just so you can see how quick and painless it is for you to do.

On the other (top of post) chart I have only identified the bottoms with green arrows. THIS IS THE IMPORTANT CHART FOR NOW. Reason being is that the market has been in an up-trend since the beginning date. And as I’ve said many times, the trend is your friend so you want to trade in the direction of the trend. This holds true no matter what style or system you are using. You need to hold on to this chart and the one I’m sending you tomorrow because they “WILL BE THE CHART OF REFERENCE FOR THE NEXT WEEK.”

See, I need to clarify some things by getting back to the bare basics of LCM. When you paid for this system I promised you that it would be successful on 8 out of every 10 trades. I also advertise that this is a system to be traded off the daily charts and what that means is this.

TRADE THE PIVOTS
TRADE IN THE DIRECTION OF THE TREND
TAKE PROFIT AT 3 BAR EQUILIBRIUM
PLACE YOUR STOP BEYOND THE PIVOT

That’s it. Everything else I talk about is just additional techniques to help you better understand trading concepts to fit the system in with your various individual trading styles. Most prominently intraday trading… And then I’m trying to show you how to be conservative with the system as opposed to aggressive just so you know the difference and you have a choice. Everything else is just gravy.
So now it’s back to basics. I have to take this approach because I’m finding that some of you who started off with massive success like 9-10 winning trades in a row but lately you have been losing money. This tells me that somewhere along the line the additional information is confusing you instead of helping you.

So, I have to ask myself, if there have been 9 bullish pivots on the daily charts over the last 3 months without a single loser, why are some of my people losing money. The conclusion is that it’s my fault due to information overload.

Also, I too often make assumptions in my commentary. I mean, if I’m talking about a trade and I say it’s a high risk trade, and that I wouldn’t trade it unless I’m willing to take a gamble on a particular trade because it’s against the trend, or for whatever reason I should have been spelling it out like this. “THIS TRADE IS NOT ACCORDING TO THE SPECIFICATIONS OF L.C.M BUT, IF YOU FEEL THE NEED TO SCRATCH THE TRADE ITCH AND TAKE ADDITIONAL RISK, THIS IS HOW YOU SHOULD DO IT.”

I do know one thing for sure. If you can’t look back on the charts and find the trade signals, then you certainly won’t be able to identify trade opportunities going forward.

So, here’s the game plan for this week. We’re going to identify each one of those 9 bull pivots and examine why each one was profitable. We’re going to define with each one exactly where you should have entered, where you should have placed your stop, where you should have taken your profit and why. Then I will ask you to go back-test 3 months prior to January 12-2007 and identify the pivots. Then I will show you how to get practice identifying pivots going forward without practice software and all that stuff.

Then, next week we will get into the specifics of how you could have used intraday techniques to take advantage of these trades while keeping your stops within an intraday range.

Now is the time to get back to, ‘THE LAWS OF CHARTS AND MEN.’

Jerry

All bottoms and tops

Eurodollar update 4-20-2007 4hr

Hopefully everyone got their book updates 1 and 2. Remember that there will be some mistakes as what I'm giving you now is not the polished version that You will receive when the whole thing is done. It's just that I don't want you to keep having to wait because I know you've been waiting a while for it. Fortunately I have a couple of sharp students (Thanks Sue, thanks Mimo) who help me out by pointing out certain errors I make in these manuscript versions.

That brings be to a correction I need to make on the 2ND update I mailed out last night.

Page 2 paragraph 5 reads; "With all this volume this bar could not close below the low of the prior bar, and could not even close below the open of the swing bar.

"However it should read; "With all this volume this bar could not close below the low of the prior bar, and could not even close below the close of the swing bar.

"In order to further illustrate what I mean in that portion concerning volume I hope you will allow me a little analogy.Think of it this way.

If you are standing on some stairs and I push you and you stumble down 1 stair step and stop. Then I push you again twice as hard. On the second push you don't stumble down any more steps, but remain on the 1st step you went down to on the first push. Since I pushed you harder on the second push you should have stumbled down at least another step. The fact that you didn't means that you are showing strength of balance and your momentum has changed from down to up.This is what they mean when they say one needs to be counter intuitive when trading markets.

You can pull up the 4hr Eurodollar chart for today and look at the white candles. Even though their were 3 bars with higher volume the market really didn't do much. Professional traders who move the market can see that the market is showing strength so they did not jump in. By the force of the volume the market should have fallen much harder but did not. Since it did not do what it was supposed to do, fall, that is a show of strength.

On the chart I have provided see how bars 1,2,and 3 all close within the range of the green (up bar). The gold lines. With all that volume yet, only a 26 pip range? 3 bars staying within the range of one single up bar that doesn't even classify as a range bar... Bar 2 had higher volume than bar 1, yet, did not manage to close below the low of bar 1 (harder push no additional step).

Bar 4 finally managed a close below below the green bar and below the low of it's prior bar (3). So, finally we have a bearish breakout from the range of the green bar, but only by a paltry 2 pips. Non of this inspired confidence for a short entry today.

But the market did what the market does. After the breakout the next bar (5) pulled back up to test the range of the breakout before closing down. But, an inside bar. It did not close below the low of bar (4). It also closed on lower volume.

Now bar 5 did what it was supposed to do. It had lower volume so it was not supposed to close lower. So, here is what I expect from here.

I expect the next bar to test the range of the first two red lines (three bar equilibrium) which are the open and low of the bar that represents equilibrium. You can never know for sure if price will just test the open or go through the open and test the low. That is the range of decision for a trader.

If I'm already in a short trade here and looking to take profits I get out when the open is touched of the bar serving as 3 bar equilibrium. If I'm looking to fade the move and go long I will look to enter at the low of the bar serving as 3 bar equilibrium.

( fading a move is market jargon for expecting price to bounce off a certain level. When you do this you are not waiting for a pivot so it's a lot more risky. If the market is falling you place a limit order to buy when price touches a certain level. If the market is rising you place a limit order to sell when price hits a certain level)

It's just my opinion but I find success most often with this technique when I fade off of 3 bar equilibrium for a quick in and out trade.

If price should close below the low I'm looking for it to continue to A (The next 2 bars lower) third red line. If it closes below A I'm looking for it to fall to B (2 more bars lower) fourt red line. That's how you walk and that's how a market walks. left, right. One, two, one, two...left, right... The 2 step waltz.

I don't know if I've mentioned this before but before any single bar can be considers strong or weak it has to remove itself from the confines of the bar that preceded it.

So, while we're talking about three bar equilibrium, on the way to oz (2 bar above or below the swing bar) if price should bounce off the first bar then it's a good sign that the pivot will fail. This is just one more bullet in your pistol to confirm what other things are telling you.

If you're wondering why I'm milking pivots and 3 bar balance for all it's worth all you need to do is look back on your charts.
And, the longer time frame you look at the better the results. The moves are more pure because you get fewer whipsaws and the big volume is at support/resistance on the daily up.

I want you to do something. Look for pivots and 3 bar on the weekly and monthly, and daily. I'm telling you right now that if you were trading just based on pivot, 3 bar, and volume, you would have made big money. You will notice how pure the moves are on the weekly and monthly.

You only think you can't afford to trade off these charts. But what if you based your intraday entry off a pullback to a monthly pivot point. Your stop won't have to be the low of the monthly swing bar. You stop can still be below the low or the 1 or 4hr pivot. but just below that intraday pivot is the monthly pivot or the weekly pivot. That big pivot is playing big brother protector to your little pivot. Do your homework on this I guarantee you will be impressed.

This is the real deal. It's not that you can't afford to trade off the longer term support/resistance, it's that you don't have the patience to do so. From here on out when I make a trade call for you intraday it will be on an intraday bounce off a daily or longer support/resistance.

Oh, I better stop now before I've written another book.

Cheers, Jerry

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CONTINUATION OF BOOK UPDATE

Just to let you know that I've mailed out the continuation to the book update on pivots (part 2). If you didn't get it in your mailbox let me know.

Jerry
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EURODOLLAR FRI 4-20 TRADING LESSON

Let's recap what we talked about today

Okay, bar 3 is not a valid pivot bar because a valid pivot bar, like any other breakout of support/resistance should occur on higher volume. This was not a pivot bar to trade from. What I failed to make clear was that I only mentioned it to show that it was not a valid pivot due to volume. So, at this point there had not been not bullish pivot I really wanted to point out that it was not a valid pivot. I've been gone for a while, maybe I have to get my mental coordination back.

Look to bar 6. This is the actual valid bull pivot bar. This is the first bar that closed higher than the high of bar 1 on higher volume. This occurred eight bars after bar 1. This is a complex pivot. The temptation is to look at bar 5 (seven bars after bar 1) as the pivot measuring (swing) bar but it is not. Up to this point (bar 5) There has not been a valid pivot bar since bar 1. Bar 1 is still the pivot measuring (swing) bar until another bar closes below it.

Bar 5 closed inside the range of bar 1 not lower than bar 1 so it could not be the swing (pivot measuring) bar. Now you know why it's called a complex pivot. Note again, bar 1 is the swing (potential measuring) bar until a close below it. The eight bar after bar 1 (bar 6) is the bullish trade signal bar, the valid pivot bar on higher volume. The time to enter would be the close of bar 6 or a pullback to the high of bar 1. The stop would be below the low of bar 1, and the first target would still be bar 2 (three bar equilibrium).

Then also consider that bar 1 is a range bar. If we add our range bar guidelines to the picture it becomes even more clear. This is what I mean by not trading one thing by itself (in a vacuum). Just by considering what you have learned about range bars would clear up some questions about this pattern since we already know that range bars are support/resistance in their own right. So, even if bar 1 was not a swing bar it would still be the barometer for a breakout. Then, when we add what we already know about volume, that any breakout of support/resistance needs to be supported by higher volume, even if I make an error you will see that it I am in error without me saying anything.

Jerry

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CORRECTION ON LAST CHART

This post is to notify you of a correction to the last chart I posted. Click on chart to see how it should have appeared. On the prior chart bar 1 is noted as the pivot measuring bar but it is underneath the wrong bar. It should be underneath the long white candle instead of the green candle that it is sitting under. I apologize for the confusion. I should have been more careful.

Many times when I am doing real time updates I am rushing to get it out to illustrate a particular point before the market moves and does something else. I want you to have it before a move occurs so that you can get an idea of anticipating certain happenings before they happen.

I also want you to keep in mind that real time commentary can not be as orderly as the lessons in the book, or when I'm simply posting a lesson. During real time I am commenting on things as they happen and they don't happen in a certain order. Thus, I am jumping around without
regard for a particular order of lessons.

Then too I'm trying to give you an outlook for both daily and intraday simultaneously. So, at times it may seem inconsistent because a person whom is trading off the daily will have a different outlook than a person trading intraday. But I need your feedback to tell me what is helpful or not or what seems confusing or inconsistent. In this way I can conform the commentary to the needs of the less experienced as well as the more experienced. If I don't hear from you I have to assume that you are getting out of it what you need to get out of it.

Today a got a response from one of my most dedicated students letting me know that I seem to be somewhat inconsistant and the comments were extremely illuminating for me. I need you to give me your feedback also so that I may make necessary adjustments as needed.

Jerry

4TH POST 4-19-2007

Here is an important point I need to mention about 3 bar equilibrium. Just as you should not count inside bars there is a flip side to that. For everything there is a balance and the balance to not counting inside bars is this. A range bar counts as 2 bars. At this point I hope I don't have to go into what a range bar is (see LCM).

Also I want you to remember that no technique is to be traded alone. Care should be taken to look at any indication within in the totality of market structure. There are six keys to knowing where a market is as far as structure is concerned.

1. Most recent top and bottom
2.Most recent pivot
3. Three bar equilibrium
4. Range bars
5. Fibonacci
6. Volume

1. Most recent top and bottom tells you where the market is in relation to trend.

2.Most recent pivot tells you the likely direction and strength of the current move within the most recent top and bottom.

3. Three bar equilibrium tells you if the most recent pivot will test the most recent top or bottom and the first level you should look to take profits.

4. Range bars present a level of support or resistance that a market must get through on the way to the next top or bottom. It is one bar support/resistance.

5. Fibonacci tells you if a move is a temporary bounce or a real reversal as well as providing logical entry/exit points.

6. Volume tells you if a move contains enough energy to be sustained.

This is something that many of you intraday traders don't want to consider even though I repeat this over and over. An intraday trade must be considered in the context of what's going on with the daily, weekly, and monthly charts, Just as daily charts must be consider the context of the weekly and monthly charts. There is a hierarchy of power and you must always look up to the next level of power.

Monthly trumps weekly. Weekly trumps daily. Daily trumps 4 hr. 4hr trumps 1 hr. 1 hr trumps 30 min, ans so on. Oh yeah, there are also quarterly and annual charts. Quarterly trumps monthly. Annual trumps quarterly.

When something does not work like you think it should, 9 times out of 10 it did work the next leve up and you bumped heads with it. You did not pay attention to the hierarchy. The larger wave trumps the smaller wave. Nothing else even makes sense.

Well, I think I've given you enough fat to chew on for today. I've got to get busy on the new website which is under construction.

Take care, Jerry.
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3nd POST THUR 4-19-2007

Now let's look at what has transpired since the first move and pullback to 61% retracement on the 1 hr. It's 10:00 am est. since the pullback did not close above 61% that was a signal for a second wave decline and we now extend out fibonacci line to this new low which is the bottom of bar 1.
A new bounce up started after the close of this bar. We are looking for a bullish pivot to see if this is just a retracement or a bounce.

We did get a pivot and bar 3 is the pivot bar as it closed above the high of bar one which is the measuring bar, and closed above 61% retracement. But notice that it did so on lower volume so this is a pivot and fibonacci break with little strength as per your volume rules so we would classify this upmove as a bounce rather than a retracement.

Bar 2 is 3 bar equilibrium for this move because the two bars before bar 1 are inside bars so we don't count these and notice how price bounced off bar 2, and did in fact bounce back down kind of hard (see bar 4).

Study this action. Back test 3 bar equilibrium on the daily charts. I think you will then better understand that there are three points to balance as I illustrate in the free version of LCM.

Jerry

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2nd post for 4-19-2007

Lets look at an intraday chart so we can zoom in on the action for today. I have attached a 1 hour chart. Bar 1 is where the market was during my last post 10:20 pm est. That's why I have drawn the fibonacci lines to the low of this bar. This other bars had not printed yet.

Looking at bar B you can see that price subsequently bounced back up to the 61% retracement before heading back down. Once the first move had been missed this was the safest place to enter. See my earlier post this week for clarification.

Okay, if you received the book update last night you now have an idea about 3 bar equilibrium so look at bars A and B. These are inside bars. When you are doing your 3 bar count do not include inside bars. Bar Z would be the 1st bar to include in the count and bar X is the second. The bounce back up to 61% occurred of the bottom of bar X, which is 3 bar equilibrium for this downswing. Three bar is the first place to look to take profits or expect a bounce. A close below three bar is expected to go down 2 more bars. Just remember, don't count inside bars.

Jerry.

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EURODOLLAR THUR 4-19-2007

I didnt have a chance to say this earlier but look at the chart and see thay yesterday we had an up close on lower volume on the daily chart. This is an idication that buying momentum has slowed and I would expect a down day today. I don't have time to go into the details but use your LCM rules if you trade intraday with an eye for a short. When you see this setup you want to short near the high of the prior day's bar. It may be too late for that now so I would only look to go short on a pullback near the high of yesterday. Of course use your pivot rules.

Jerry. Email me! click here

Book insert mailed

I have completed the mail out of the new book insert. If you did not receive your copy in your mailbox please click on the email link below and let me know so I can make arrangements to get it to you.

Thank you for your support.

P.S. The new website is under construction but make a note of the new address which is FOREXTRADINGMAJIC.COM.
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CONCERNING BOOK ADDITION

Just a short post for today. I'm preparing to get the book update out to registered members today. Look for the pdf file in your mailbox tonight. Even though it's not quite complete I know that you have been patiently waiting for it. So, in order to get you going quickly with it I'll be distributing it to you in two parts. By the time you get through digesting the first part you will be ready for the second part. This is the informal version so don't be too hard on me for typo's and such. Your questions and comments on it will go far in helping me to polish it up for you. As always, cheers.

P.S. If I think of something important to say about today's trading action I may add a post so it won't hurt to check in a couple of times today just in case.

Jerry
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3RD POST 4-17-07

Now that the U.S. trade data has been out for a couple of hours let's look at how the action transpired in relation to what I told you for today. Question...was I right or wrong about today's action?

Let's focus on my last post:

From Eurodollar update 4-17-2007

"The up move has dramatically more volume in totality than the down move. This is another reason we want to wait for an intraday short pivot before we enter short."

"Then consider we still are not going to enter short just because price touches 3560. It must touch and pivot. I like 30min and 1hr pivots, but many times 15 min will work."

"In any event, I suspect that the real deal will be disclosed at the U.S. trade data this morning but I want you to get the idea of how I am mentally processing trades as I flow."

1ST POST 4-17-2007
"If you wait for an intra-day short pivot reversal after a pullback to 3554 like I'm going to do you will be playing it conservative as you can use that pivot as your stop which would probably cut your risk to around 15 pips on a 30min to 1hr short pivot, and place your mental stop above that pivot measuring bar. This is just me being a little conservative since I've been off for a while I'm not feeling so cowboy just yet."

"Also, consider that there is important U.S. data coming out at 8:30 am EST and you might want to wait for that instead of staying up all night waiting for a sharp move when the move is waiting for the data. Many times there is an intra-day pivot just before the news comes out to give you an indication on which direction the move is likely to take."

Then we should consider that the trend is up so this is a trade against the trend and as we know most surprises occur in the direction of the trend.

SUMMARY:

I did not enter a trade and I hope you did not either. Why...? No entry signal. There has been no short pivot reversal on the intraday charts as I write this at 11:00 am est thus, no entry signal. A trade signal gives you your bias, your entry signal tells you when to get in. The intraday pivot reversal is your entry signal.

The market did not touch 3560 until after the news was announced so there is the touch. We are still waiting for an intraday pivot reversal which may or may not occur.

Key in on this statement I made; Many times there is an intra-day pivot just before the news comes out to give you an indication on which direction the move is likely to take.

The intraday close on the 4hr and 1hr showed a bullish pivot just before the news broke to indicate the move would be up on the news. See, the big boys know before hand and can't help leaving footprints for those who know how to track.

The point is that it's not an issue of right or wrong it's an issue of flow. It's about what the market is telling you when it's time to tell you. A bias is just that...a bias. A trade signal without an entry signal to back it up it stays a bias. A bias doesn't cost you money. A bias alerts you to be on the lookout for and entry signal not to enter a trade.

So, When you click on the chart I've provided you can see that the close of the 4hr bar at 8:00 am est formed a bullish pivot and reached a high of 3552. No entry signal no how, no way. What this did tell us was that the market had set up to break upward on the 8:30 news. This is how we follow and trade flow. This is how we avoid the ego trap of being right or wrong. If the current changes we change to flow with the current not against it.

The U.S. data was considered a surprise. Surprises occur in the direction of the trend. But looking at the 4hr bullish pivot, it should be no surprise to us...

P.S. There prior posts display the incorrect time of my postings. I am on Eastern Standard Time. The blog was reporting Pacific time. This has been corrected beginning with this post. Also, I encourage you to leave comments or questions as your comments will help others when I respond to them because if you have a question/comment someone else may have the same thing on their mind.

Jerry.

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UPDATE TO 4-17-2007 EURODOLLAR

In the 1st post for today I gave you a daily analysis with a short bias. Now let's look at how we use the intra-day chart to flow with the market and confirm or amend our bias. The first chart I offered you today was the daily chart. Now let's look at the next most significant level which is the 4hr chart. The daily chart is the wave. The 4hr is the wave within the wave.

The first thing we notice on the chart is that price touched the 23% Fib level and is currently bouncing up off this level. This is typical price action. When price is working through Fib levels it will typically go something like this...

A. Touch 23% and bounce up to test prior pivot, then fall back down through 23% and...

B. Touch 38% and bounce up off that to test 23%, then fall back down through 38% and...

C. Touch 50% and bounce up off that to test 38%, then fall back down through 50% and...

D. touch 61% and bounce up off that to test 50%, then fall back down through 61%.

When there is a bounce back up off of a level and price should close above the next level on the intra-day 30min or greater time frame, that is a signal that the
pullback is over and the market is ready to resume the up move.

If you get a close below 61% the odds are high that the market will bounce back up to test 61% or even higher before continuing down to complete a 100% retracement.

This is not a rule but a guideline as far as tendencies. At this moment we are in phase A of this cycle.

Now when we look at this chart the prior bar (red line through it) closed up on low volume. This tells you that selling pressure has subsided for the moment. So you should look for a bullish pivot and for price to go up to at least 3560. I say 3560 because that is 3 bar equilibrium. Yeah I know. For those who have the system the full explanation of that is coming.

So, based on the intraday flow we know to adjust our short entry to 3560. This is good because if we enter and the trade goes against us this lowers our risk by 6 pips. Then consider we still are not going to enter short just because price touches 3560. It must touch and pivot. I like 30min and 1hr pivots, but many times 15 min will work.

But the main thing is this...we are flowing with the market. This is important when considering a counter trend trade.

Now consider the volume trendlines I have drawn on the chart. Notice how the down move has declining volume as opposed to the prior up move that had rising volume. Also consider the magnitude of the two volumes. The up move has dramatically more volume in totality than the down move. This is another reason we want to wait for an intraday short pivot before we enter short.

Remember, the only reason we are considering this short trade is because the market is due for a pullback on the daily and is exhibiting early signs that it wants to do so. In any event, I suspect that the real deal will be disclosed at the U.S. trade data this morning but I want you to get the idea of how I am mentally processing trades as I flow.

And by the way, yes, I do use indicators like moving averages, stochastics, and Macd. But these are icing on the cake and are used to confirm these other things I'm telling you about. I'll get into how I use those as we go along but they are secondary not primary and I only put them in play if the other analysis is not clear. See, operators know that many traders use these averages and easily manipulate price action to make these levels appear real. And differant charting systems will show the same moving average or other indicator, and you can use the same input values and these indicators will look differant for every differant data provider.

You're probably thinking, Jerry if you said yesterday that you don't like the way the Eurodollar is moving, why are you focusing on this pair. It is because, if you can get it with the toughest pair, then the rest will be easy.

If you find this blog helpful you should check back every 4 to 8 hours for continuing update. Take care...

Jerry
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EURODOLLAR 4-17-2007

If you are thinking about a trade in the E/D today this is what I suggest.

Enter short 3554=low of bar A which is a tepid reversal bar because it is a Sunday bar

Stop 6 to10 pips above 3578=High of bar A

Take profit 3485=38% fibonacci retracement

Risk 29 to 35 pips

The reasons I consider this a high risk play is because the measuring bar A is a Sunday bar for the bear pivot reversal. Even though yesterday's down day occurred on higher volume the higher volume occurred in relation to a Shortened trading day. So, Friday would be a more reasonable day to compare volumes and yesterday's volume did not conquer Friday's volume.

Then we should consider that the trend is up so this is a trade against the trend and as we know most surprises occur in the direction of the trend. However, in light of what I said in yesterday's post it is a calculated risk. Then we are in a position for a reasonable stop-loss if we wait for a pullback to 3554 before we enter. Yes you could enter now but your risk goes up to around 50 pips and counter trend. But each according to his/her own risk tolerance.

If you wait for an intra-day short pivot reversal after a pullback to 3554 like I'm going to do you will be playing it conservative as you can use that pivot as your stop which would probably cut your risk to around 15 pips on a 30min to 1hr short pivot, and place your mental stop above that pivot measuring bar. This is just me being a little conservative since I've been off for a while I'm not feeling so cowboy just yet.

Also, consider that there is important U.S. data coming out at 8:30 am EST and you might want ot wait for that instead of staying up all night waiting for a sharp move when the move is waiting for the data. Many times there is an intra-day pivot just before the news comes out to give you an indication on which direction the move is likely to take.

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Eurodollar 4-16

The objective of today's commentary is to give you an idea where we are in the market landscape. Before you know where you're going you first have to know where you are. Once we get a feel for where we are we can get more into specific trading opportunities and situations.

The other currencies usually move in relation to this pair but there seems to have been a seperation from that over the last couple of weeks. Looking at the chart the E/D seems to be moving strangely compared to the other pairs. After doing some checking I found that some very large trading houses (operators) had some very large option positions above 3350 to 3550 so now I understand better having just returned to the market why this pair has been flowing unusually.

On the chart you can see that the market has been working within the range of bar A until several days ago when it finally broke out of this range. What's unusual is how this bar garnered so much respect in relation to the volume it carried. This was an up close day on lower volume and as expected the market started down the next day. However, the high and low of this bar held as support/resistance for 2 weeks. The close below bar A was on a Sunday but Sundays are usually not real unless there is a major news/geopolitical event somewhere in the world causing the move.

You can also see how the trend has been moving up since bar A but the volume has been getting smaller in relation to the volume before bar A. This contraction in volume trend flys in the face of the price action. This is my favorite pair to trade since it usually sets the sentiment for the other pairs but I am reluctant to enter this pair at the moment. However, volume did break out of the volume trendline I've drawn on the chart for you to go along with the price breakout of the trading range so I have not choice but see the breakout as valid but with some trepidation as far as the overall uptrend.

You can see how bar B was the first bar to breakout and close above the range but it was obvious that it was a false breakout because this bar had lower volume than the previous day. Anytime you see a range breakout on lower volume don't trust it.

Bar C is the valid breakout bar as evidenced by the higher volume than the prior day. You can also see that after the breakout the next bar pulled back to test the breakout, which is now support, before continuing up just as I teach in LCM. Since the trend is up you should be looking for an opportunity to enter long if you decide to try an entry but not now. The breakout has continued for 3 consecutive days without reversing to test the breakout. So, it is about that time for a pivot reversal to come back and test support if the uptrend is to signal a continuation. If you enter long now your risk is all the way back down to support. I'm not saying we won't continue up from here I'm saying the risk far exceeds the potential rewards.

If you're game for a high risk play, a short entry back down to support would make more sense right now. Especially in light of the gap up today. This appears to be an exhaustion gap. I say that because gaps usually signal a reversal unless price gaps through a support/resistance level. Reviewing your back charts will bear me out on this assumption. Remember, nothing is absolute but we have to consider tendencies.

It's good to be back.

Jerry

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NEW FORMAT

Hello.
Welcome to the new Tradingmajic blog. I have a lot to say so here goes.

Yes, I know I've been missing in action but I'm hoping that you will forgive me in light of what's been going on with me.

When you last heard from me I was in the process of updating the book to improve the understanding of and therefore the results you receive from trading THE LAWS OF CHARTS AND MEN (LCM). However, I was halfway through the update when I encountered some major issues in my life that I have been struggling through. This is basically what happened.

I have a 19 year old daughter who is/was in college on a basketball scholarship. While home a weekend she went out with a friend. While she and her friend were out at a teen social club they were robbed and brutally beaten by a gang of girls and boys. While trying to escape they made it back to their car. When they made it to the car while still being beaten by at least 10 people. As they made it to the car they were shot at, yes, shot at by theses thugs as evidenced by the multiple bullet holes in the car. By this time they had already been so badly beaten, complete with kicks to the head while they were down and baseball bats.

When the shooting started they were desperately trying to get away while their car was still surrounded by these animals. To make a long story short, while trying to escape they ran over one of the gang members who, we found out later was a 17 year old high school student/dropout.

This tragic situation began a chain of events that spiraled into my worst nightmare. First of all, my daughter and her friend were beaten so bad I did not recognize them when I rushed to the hospital and her friend was battling for survival.

This began a vigil praying for the life of her friend, dealing with the police, the media, etc. After a full investigation the police ruled the girls death a justifiable accident. The only person arrested for the incident was the shooter whom shot up their car. Yes, he was trying to murder them. All of this for some expensive jewelry they were wearing. After a couple of weeks everything seemed to be coming along okay and I thought my family could return to some type of normal life. My daughter and her friend survived and their wounds were no longer life threatening.

This all sounds so crazy I really had no idea what to say to you at that time, but I sent my daughter back to school and resumed the work on the book update at a feverish pace, and here is where an insane situation gets more insane.

As I mentioned, my daughter plays basketball for her university on scholarship. A week after she went back to school her university had a game with a university here in our home town against one of the local colleges here. Just to let you know, I never miss one of her games, if they are within a 4 hour drive or less. But this game I did not go to and I will never forgive myself because I let my daughter down as a father.

See, after everything was over with I was upset with her for wearing expensive jewelry in public and going to a place that I found out had a seedy reputation in the first place. So, in effect, I blamed her. But in reflection I was upset because the situation had caused me to fall behind on my obligations relating to LCM AND SOME OTHER THINGS.

So, this is what I told her. "I'm not coming to your game this time because you have caused me to fall too far behind and now I have to take care of business." Of course she protested but I scolded her once again for the reasons mentioned. Being the idiot I am, I actually didn't go to the game.

I didn't know this at the time but this gang somehow found out where my daughter was going to school and discovered when and where she would be playing that day. I also didn't know that they had sworn revenge for the death of their fellow gang member. Looking back I shown have thought about this possibility but let my anger override my love for my daughter, therefore I wasn't thinking the way I should have been. Especially after being a decorated police officer in life before markets.

Incredibly, after the game, while my daughter was standing on the court talking to her coach, in front of at least a couple of thousand people whom were still in the arena, this gang ran out of the stands and once again attacked my daughter, along with her coaches, teammates, and friends who rushed to her aid. Basically, everyone but me, since I was stupid enough not to be there. If not for the efforts of those around her she would be dead. And where was her father is what everyone wanted to know, since I have been a fixture at her games forever? I then found out that these people had been sending her death threats after she got back to school, but did not tell me because, as she put it, "you care more about your work than you do about me. If you have children I don't have to tell you that her words cut the spirit out of me because I knew she was justified and my selfishness could have cost her her life.

This incident began another chain of events. I 've had to take her out of school and send her out of town, but the whole thing has just thrown our whole lives out of order. I have not been trading nor following the markets during this time so I am in a hurry to get back to full steam.

In closing, I've been gone longer than I anticipated and am just now getting back some normal flow to our lives.

Now, I am restructuring how I will be handling things as far as the web site and the means of our communication. If you went to the web site and it is not up don't worry about it. I'm switching web servers and revamping the web site. The web site is for introducing new members and right now my main concern is current members and how I can help you.

I'm switching because I've grown to where I need a more versatile site where I can set up videos and live chats, etc... So trying to maintain the old site will take away time from getting the new site up and running as I'm not trying to recruit new members just yet.

I'm first going to concentrate on getting the book updated and resuming my daily commentaries. Starting now you can address questions to me here at the blog and I feel this will be the start of more efficient communications. The look and feel of the blog will evolve as we go along but I wanted to get things up and running as soon as possible.

You should check the blog several times each day as some days I will be posting more than others.

You can click on comments for specific trading questions. For more personalized questions you can email me by clicking the email me below. I will resume market commentary on Monday April 16, 2007.

Jerry Email me!.