BarroMetrics Views: The Impact of Change on NOT
Given the exchange I had with Baz yesterday, I felt an example of what I meant was in order. I said that the NOT’s expectancy return had not changed: they are what they have always been. I took Baz’s comments to mean that NOT probabilities for success had been somehow altered.
The best way to illustrate my meaning is by way of example; let’s look at the EURUSD.
Figure 1 shows the EURUSD 12M chart.
At B we see a greater than 78.6 retracement of XA suggesting a sideways market would form between XA. It also suggested that B would be at least 78.6% of XA and would probably go to the Primary Sell Zone. B went to the 78.6% and sold off raising the probability of a triangle in the process of formation.
I found the swings XA, AB, b1C relatively easy to trade. But let’s look at the area around rectangle on a daily chart (Figure 2). The rectangle marked a period I have found difficult using NOT material. But that did not change the NOT probabilities, NOT has always had difficulties when dealing with complex corrections.
For NOT, the benchmarks are 1.3817 (upside breakout) and 1.3288 (downside breakout): acceptance beyond these points would indicate the end of the complex correction. But until that happened, we could either wait for the breakout (stand aside) or seek to obtain a position ahead of the breakout. But this is easier said that done.
Notice the gap – on that day, it looked like an upside breakout was on the cards. Instead, we saw the market reverse.
The new tools provide finer benchmarks. They are a series of support and resistance zones. Breach of a zone suggests a move to the next e.g. in the EURUSD,
- With last night’s move the EURUSD ought to get to 1.3125 BEFORE we see acceptance above 1.3310.
- Acceptance above 1.3310 suggests a move to 1.3594.Should we see a move above 1.3310, the tools would also provide benchmarks for ‘failures’.
- Notice that the 5-d does have a potential for a Spring Change in Trend IF we see acceptance above its Primary Buy Zone 1.3319 (Figure 3)
The example best illustrates the advantages of the new tools – we have finer benchmarks. NOT will ultimately tend to produce the same signals but will do so later and in some cases, much later. This tardiness does affect the expectancy return under some trading environments.
FIGURE 1 EURUSD 12M
FIGURE 2 EURUSD 18d and 5d
FIGURE 3 EURUSD 18d and 5d