Jun

27

Today will make eight new consecutive lows for S&P Sep. future contract. The last time was in May of this year with a happy outcome. The other rare occasions of eight new lows were mixed. Since none of this is very significant statistically and by reason of its rarity, a different approach, discussed by Nison in Japanese Candlesticks, about record sessions might provide an idea to consider. He says eight to ten record sessions is important and is called "bones of Sakata's body." Sakata was the city in Japan where rice futures were traded in the 1600s. He says buy after eight record session lows. So far today it would have been a good buy, but time will tell.

Another interesting technique is the use of three-line break charts. These are similar to point and figure, but rather than use fixed box sizes, the three-line reversal must exceed the low or high of the prior three bars for a reversal. This way the reversal adapts to the market rather than a fixed system and might capture the changing cycles. Vic and Laurel tested point-and-figure and found some value. Perhaps the three-line break approach could be tested as well. A suggestion might be to trade it non-traditionally, in new ways that might be more profitable as suggested by Vic and Laurel's work, using point and figure in buying the pullback rather than the breakout as is traditionally suggested.
New Lows:

1543.8 6/18/07
1540.7 6/19/07
1525.5 6/20/07
1518.0 6/21/07
1513.5 6/22/07
1505.5 6/25/07
1497.5 6/26/07
1494.8 6/27/07

Larry Williams remarks:

Not really eight new lows — the gap-up on 6/15 and inside bar (to the prior day's true range) and then 6/19, also inside the gap day, did not really create new lows. 


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