Tuesday, November 24, 2009

Stock market cycles on Bradley model: how to use and not use this forecasting info

The Bradley model (referred to as the Bradley "siderograph") is a cycles method for forecasting the markets far in advance. One source is Manfred Zimmel - who has other methods he also relies on, but does create and provide forecast charts of the Bradley model at his Amanita Market Forecasting, at http://www.amanita.at/FAQ/FragenzumBradley-Siderograph/Bradley-Siderograph/. The Bradley model is interesting and many traders like it, generally using it for stock markets. But there are things to understand, including the hard fact that the indicated highs and lows are NOT necessarily highs and lows - they are TURN dates. Dates or really time windows in which to look for a swing trade reversal, but not necessarily a reversal that automatically sends the market to a major new high or low. Also, some Bradley dates are more important than others.

Manfred Zimmel produces a free version, as well as proprietary versions in which he incorporates his own "Amanita dates" to seek better reliability. For example, he says that "'In the Amanita prognostications, timing is almost always more important, reliable & precise compared to prices. The standard window for all time projections is +/- 1 week, with the exception of the Amanita pivots (+/- 1-2 days)." If you're not familiar with the Bradley model and want to know more, you should check out his Amanita site. I've also posted information about the Bradley siderograph previously here (use the "Cycles on Bradley model" label to locate, including the 2009 chart). Meantime, here's a quote of one of his explanations to go along with his free version of his Bradley model chart:

It is crucial to understand what the siderograph is about since almost all traders (and even financial astrologers!) misunderstand it. Over the decades it has been observed that the siderograph can NOT (!!!) reliably predict the direction but only turning points in the financial markets (stocks, bonds, bonds, commodities) within a time window of +/- 4 calendar days (in a few cases up to +/- 7 days). Inversions (i.e. a high instead of a low and vice versa) are quite common. Also, it is not a timing tool for short-term trends but rather for intermediate-term to longer-term trends because the turning window is rather wide.


So for example in the chart Manfred Zimmel produced, below, we can think the time window centered on 3/1/2010 (interestingly about a year after the March 2009 lows) will be an important turn date, but not necessarily "the high" for the indicated time (or whether it must be higher or lower than the current stock market levels). Just as the October (22) time wasn't "the high" for the current rally, at least not in all indices and sectors (although it was a high in which they all participated - unlike the current-month November highs enjoyed by only some). So the October time window was important, we'll just have to understand how important in retrospect. The October high was tradable of course. Let's continue to use our other methods but go ahead and consider the Bradley siderograph dates as part of the mix.

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