In theory, with MARKET PRICE BOXES we can "never be wrong." Above the current box we should be long, below the current box we should be short. WHIPSAWS will happen, but you don't have to say you were wrong in a whipsaw, you just say a whipsaw is part of the system, taking the whipsaw is also being right. You can only be wrong if you don't take a signal.

The problem with the market price box is you never "pick" the top or the bottom. The market price box approach requires that you have a divergent top or a divergent bottom, so the market needs to have already made a turn to give the signal. Using other approaches to call tops and bottoms, like extreme overbought over sold indicators, can be used with a statement that "the signal is wrong if" a certain arbitrary level is breached.

Stock Index Timing .com uses Market  Price Boxes with an "opinion." If my view of the market is positive, I might be long above the current Market Price Box and have a neutral position below. If my view of the market is negative, I might be short the market below the current Market Price Box and have a neutral possition above. 

 

 

See Free Stock Chart indexes for current Market Price Box charts. 

Following are the weekly posted charts discussed in the weekly "Forecast and Follow:" video review.

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Stock Index Timing .com presents

Market Price Box

Subscribers click here for DAILY managed account
review and HOURLY DATA Market Price Box comment
 

     
 

George Slezak is a Registered Investment Advisor 
specializing in speculative investment management.

C 2016, George Slezak
 23371 Olde Meadowbrook Cir.
 Bonita Springs, FL 34134
 
For more information call  239-947-9131 
     
  Click here for more information about George    email george@georgeslezak.com  ---    
   

Market Price Box 

A Market Price Box is a price range on a stock index to use as a guide for being positive on the market above the Market Price Box and negative on the market below the Market Price Box. The Market Price Boxes used by Stock Index Timing are DYNAMIC in that new Market Price Boxes are established following market movements in the hourly index data of more than ten different stock market indexes, generally over a period of two to five days.

Three day S&P Market Price Box setup by a divergence in the hourly charts of the Dow Industrials and the Nasdaq Composite.
In the chart at the left the hourly chart shows on December 5, the Dow Industrials did a high higher than December 3. The Nasdaq Composite  chart shows that on December 3, the Nasdaq Composite did not do a high higher than December 3.

This set up a potential Market Price Box that was triggered on December 8, in the S&P 500 index when the S&P 500 index traded below the low in between the peaks that correspond to the divergent peaks in the Dow Industrial Index and the Nasdaq Composite index.

The Market Price Box theory is an extension of the ideas of index confirmation and divergence in Dow Theory. Dow Theory looks at index patterns in daily charts of the Dow Jones Industrial Average and Dow Jones Transports Average over periods of weeks or months. 

In my Market Price Box approach I look for similar index divergences, but I apply the idea to more than ten indexes and look for confirmations and divergences in hourly data over generally a two to five day period.

Click on chart for full page view.

"Forecast and Follow": Another use of the Market Price Box is to adjust positions established based on some other market discipline. 

For example, based on fundamental and technical indicators, you might view the market as over valued and "forecast"  that you want to have a short position on the market. But, to avoid short positions during market bounces the Market Price Box can be used to "follow" the market and reduce short positions above the Market Price Box, and re increase short positions below. 

Or, your "forecast" view of the market might be bullish, but the market may be completing a downtrend, or subject to corrections. The Market Price Box can be used to "follow" the market and reduce long positions below the current Market Price Box and re increase long positions above the current Market Price Box. 

New Market Price Boxes are created by hourly market index divergences as the market moves giving new Market Price Boxes along the way of the trend, thus acting in a way similar to a trailing stop, only far less arbitrary because it is created by market movement.

 

Market Price Box GUIDELINES

1. The first rule of using Market Price Boxes for changing or adjusting positions is you create the Market Price Box on the market you are trading. If you choose to trade a market based on a market price box of an index different than the triggering index, you need to understand there are additional risks.

2. Trade decisions are made based on the market being above or below the most current Market Price Box in the market we are trading. Once a new Market Price Box is triggered, all past Market Price Boxes are ignored. If we make our trades based on the Market Price Box in the market we are trading, our risk is generally a function of the range of the current Market Price Box.

3. When you are above the previous Market Price Box you look for a new box based on a divergence of market highs. When you are below the previous Market Price Box you look for a new box based on a divergence of lows. A Market Price Box of lows that is above the previous Market Price Box. a contra trend Market Price Box, can be considered when there is an important risk adjustment. A Market Price Box of highs that is below the previous Market Price Box can be considered when there is an important risk adjustment. For example, after a long market move above the previous Market Price Box, a box from divergent lows above the previous box might give new buy sell points that will help retain position profits.

4. When a Market Price Box is triggered in the market you are trading, but not fully confirmed by the diverging indexes, special consideration should be given to the potential of the trade reversing by breaking the other side of the Market Price Box. Remember, "break out failures" are powerful market indicators. 

5. If after a Market Price Box setup is triggered by the index trading through the trigger price, the non confirming index or indexes then confirm, the Market Price Box stands as the current Market Price Box. The confirmation is too late to cancel, the new box stands even though the index or indexes confirmed.

6. Market Price boxes can overlap. Overlapping boxes tend to be a wider price range and therefore expand the position risk and thus might be ignored in favor of the smaller price box. Trading systems should consider overlapping Market Price Boxes in testing.

7. A tweezers box is a two day box arising from a divergence between the last hours of the fist day and the first hours of the second day. A tweezers box should be viewed with caution. The generally small range of the box will be prone to whipsaw because it gives a tight stop reverse. Consider small than normal positions on tweezers box.

 

 
 
Market Price Boxes are established from HOURLY market index DATA. New Market Price Boxes are often set at short term market tops and short term market bottoms. You might use a Market Price Box set near a market top to exit the market during a correction. And then use a new Market Price Box to re enter the market near the bottom of a correction. 
 
   

Example of HOURLY DATA Market Price Boxes

During the last half of 2013, Stock Index Timing .com had the view that the market was over valued and thus was negative on the market. But, the Federal Reserve's policy of Quantitative Easing drove the market to even more over valued. Stock Index Timing .com used the following hourly data Market Price Boxes as a factor in deciding to adjust managed account positions during the period August 2013 to December 2013. In some cases, managed account short positions were increased below the current Market Price Box and reduced above the current Market Price Box.

 

 
   
   

The Market Price Boxes in the chart above were created by looking for two to five day divergences in the hourly price data of about ten different stock market indexes. 

The last Market Price Box in the chart above was the result of a divergence between the Dow Industrials at new high on December 31 and the Russell 2000 high on December 27, shown below. That "potential" Market Price Box was "triggered" when the S&P index traded below the in between low on January 2, prior to the Russell 2000 confirming the Dow high..

 

Example of HOURLY DATA Market Price Boxes

Market Prices Boxes are established by monitoring hourly data for the following market indexes: 

Dow Jones Industrial Average
NASDAQ Composite
Dow Jones Transportation Average
New York Stock Exchange Index
S&P 500 Index
Dow Jones Utility Index
NASDAQ 100 Index
Russell 2000 Index
Wilshire 5000 Index
Global Dow Index
S&P 400 Mid Cap Index
S&P 600 Small Cap Index

Other indexes might also be considered
VIX
VXN
Dax
Hang Seng
Nikkei
FTSE
SSE Composite (Shanghai)

Click here for a page of Yahoo Finance hourly index prices for possible divergence review.

(Note: The Dow Jones Utility average often varies from the general market pattern and gives many divergence signals that are not useful in making trade decisions about the general market.)

Reading the hourly charts.

"Potential divergence setups" are identified by seeing a new two to five day high in one index and other indexes failing to confirm that new high. The "potential divergence setup" is "triggered" by an index trading below the in between low before the other indexes confirm the new highs. 

"Potential divergence setups" are also identified by seeing a new two to five day low in one index and other indexes failing to confirm that new low. The "potential divergence setup" is "triggered" by an index trading above the in between high before the other indexes confirm the new two to five day lows. 

Stock Index Timing makes market timing calls on the S&P500 index. One of the tools use to make those decisions is the current Market Price Box. A two to five day divergence between indexes is applied to the related price range of the S&P 500 index. The S&P 500 index trading below the in between low after a non confirmed high is the primary trigger for establishing a new Market Price Box for the S&P. (Or trading above an in between high after a non confirmed low.)

Establishing new Market Price Box ranges based on current market movements makes the decision price box dynamic. Once a new Market Price Box is triggered, it becomes the sole price range for position adjustment. Past Market Price Boxes are no longer considered as decision ranges.

Each day Stock Index Timing .com posts on the subscriber web page the current Market Price Box and any potential new Market Price Box set up that might get triggered based on stock market index movements. Subscribers to Stock Index Timing .com can view the daily posting on the right column of the weekly commentary page, and a picture of the hourly index charts reviewed to identify the Market Price Box.

For more information about a managed account contact George at 239-947-9131.

   
 

Good luck and good trading!

George Slezak

       
 

 

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Managed account profit and loss are based on actual account returns. Any reference to future Profit or Loss are hypothetical and do not reflect the results of any actual trading. Theoretical profit or loss shown are per unit before commission and fees. YOU SHOULD BE FOREWARNED THAT SYSTEMS WHICH TRIGGER FREQUENT TRADING SIGNALS AS PART OF A DAY TRADING STRATEGY CAN RESULT IN SUBSTANTIAL COMMISSIONS AND FEES.

All aspects of any trade recommendations contained in this report are subject to modification at any time. 

TRADING INVOLVES SIGNIFICANT RISK OF LOSS AND IS NOT SUITABLE FOR EVERYONE AND THE RISK OF LOSS SHOULD BE CONSIDERED CAREFULLY BEFORE MAKING ANY TRADES. A STOP LOSS MAY NOT LIMIT YOUR LOSS TO THE AMOUNT INTENDED.  YOU SHOULD BE FOREWARNED THAT SYSTEMS WHICH TRIGGER FREQUENT TRADING SIGNALS AS PART OF A DAY TRADING STRATEGY CAN RESULT IN SUBSTANTIAL COMMISSIONS AND FEES. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ANY STATEMENT OF FACTS HEREIN CONTAINED ARE DERIVED FROM SOURCES BELIEVED TO BE RELIABLE, BUT ARE NOT GUARANTEED AS TO ACCURACY, NOR DO THEY PURPORT TO BE COMPLETE.

ANY REFERENCE TO PERFORMANCE IS INTENDED TO BE UNDERSTOOD AS STRICTLY THEORETICAL. 

REGULATORY DISCLOSURES REGARDING HYPOTHETICAL RESULTS

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS EXISTS IN FUTURES TRADING.

 

       
 

 

 

The term “qualified client” includes any natural person or company (i) that has at least $1 million of assets under management with the adviser immediately after entering into the advisory contract (the AUM test) or (ii) whom the adviser reasonably believes has a specified net worth, or joint net worth with a spouse, of more than $2 million (the net worth test)

Rule 205-3 under the Advisers Act exempts an investment adviser from the prohibition against charging a client performance fees in certain circumstances, including when the client is a "qualified client." The rule allows an adviser to charge performance fees if the client has at least $750,000 under the management of an investment adviser immediately after entering into the advisory contract ("assets-under-management test") or if the adviser reasonably believes the client has a net worth of more than $1,500,000 at the time the contract is entered into ("net worth test").

pursuant to section 205(e) of the Investment Advisers Act of 1940 and section 418 of the Dodd-Frank Act, IT IS HEREBY ORDERED that, for purposes of rule 205-3(d)(1)(i) under the Investment Advisers Act of 1940 [17 CFR 275.205-3(d)(1)(i)], a qualified client means a natural person who or a company that immediately after entering into the contract has at least $1,000,000 under the management of the investment adviser; and IT IS FURTHER ORDERED that, for purposes of rule 205-3(d)(1)(ii)(A) under the Investment Advisers Act of 1940 [17 CFR 275.205-3(d)(1)(ii)(A)], a qualified client means a natural person who or a company that the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, has a net worth (together, in the case of a natural person, with assets held jointly with a spouse) of more than $2,000,000 at the time the contract is entered into.

http://www.sec.gov/rules/final/2012/ia-3372.pdf