Lecsó or Lechon Manok – that’s the question here

What is an Echo?

It is a failed rally / sell-off.

Why does this happen?

In trading, you never have any use for a why. You just need to notice when it happens and act accordingly.

How does it happen?

There are two factors, duration and location.

As for duration, the great majority of these runs is 2-3 hours in length. The zone to fail is typically a 21-pip range where the third candle should print a high/low and retrace more than 1/3rd of the current hour’s action. The zone itself is most often from inside the 30-sample HL2 hourly BB by two pips to outside by 19.

The failure high/low is often final but allows for a fake out for up to 10 pips. This displacement I call the moratorium zone. I don’t have any examples where the market managed to walk into the zone by more than 7 pips before reversing for good.

You would likely find that the first hour spent at least a little time on the other side of the hourly 8 EMO.

Confirmation

An ECHO is still pending upon the 3rd hour’s failure. The 4th hour closing towards the 8 EMO is the first confirmation. The second confirmation is not taking out the high/low made by the 3rd candle in hour 5. At this point, confidence is in. Further confirmation would be starting to print closes on the other side of the 8 EMO.

The one disqualifier (muter) I have is if the 30 sample BB width is less than a fluctuation size or 32 pips. In this case, I gray out the Echo print.

The Black or BB echo is a version where the 8 EMO is out of reach. This move also starts from inside the BB, the failure zone is the same as well, but it requires a print outside the BB right before the Echo count starts in exchange for no 8 EMO.

I also implemented an early “heads up” marker with the same system of Yellow for pending and Green or Red for some directional confirmation, but one hour earlier. The rugged edge circles I’m talking about. Some of these never turn into an ECHO.

I did invent the Push and Echo coupling for the Weekly chart. Over there a Push is defined by a move outside the 14-sample Window Envelope with a week-on-week progress being at least 50% more and the time limit for an echo is 2 Weeks (2 more candles), but can happen in 1.

As you can see, the hourly Echo definition is different, it can happen almost anywhere and does not represent more than a turn. It is not necessarily a major swing you are looking at, but a failed auction nevertheless. A trade that would be on until a Black or White Echo prints in the opposite direction.

There are very simple mechanics at play.

Here the market is trying to fail…

…but it does not get confirmed in the first following hour.

Now an Echo is out of the question, but a BB Echo is a possibility 2-3 hours from now or it would have to reconnect with the 8 EMO first and start a new count.

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Album #24 up to listen

…potential BB Echo, will know in 3 more hours for sure. The current candle would have to close down 1/3, the next candle would have to be red and the candle afterward would not be allowed to take the high by the settlement.

The first one is that one filter of the Echo is counterproductive, and thus should be eliminated.

The Low of the 2nd hour of selling does not have to be lower than the first hour’s.

The Echo print is yellow at first, meaning pending – the next two candle prints can confirm it or eliminate it completely if the second hourly candle is to print a lower low stripping away the fractal status.

Counter to what everybody holds as a belief, that the market can do whatever it wants at any given moment, I am firmly in the camp that it can rarely do whatever it wants.

My proof is the volatility compression, which has different degrees.

In the image below I made an Orange shaded field. This was an R minus 1 compression, the strongest there is. Meaning that they were shorting starting 20 pips out from the recent low not letting the market to reach the dashed line (I call it E). Who are they? Something that does not sleep. Programs. CTAs, bots algos, pick.

When you have 40 hours of R minus 1 compression, the Shot Over the Bow level is E. You can bet that with this strength of compression, the market cannot gap in the opposite direction.

The last thing is paying attention to an hourly candle that exceeds 1 fluctuation maximum (here meaning 45 pips).

This size of free movement requires that the buy programs to be turned off.

The last image shows 3 range candles. Their body becomes crucial. 3 consecutive closes outside are a confirmation of the new direction. The yellow arrows are where they turned the volatility compressor routines back on – this time on the opposite side.

…confirmed in. The moratorium line pushed 10 pips down.

Curve fitting (here) is the abuse of filters. In general it is cherry picking data to prove a point.

This typically shows up when somebody wants to show better results on a re-run and would likely end up cutting a time period or even a full month out.

Curve fitting of course can become an issue with firward testing as well.

I had the ECHO prints have a perfect scoreboard for the last few months, but the last one was a dud. You can never be certain that you have all the necessary filters already in place.

You have to evaluate what was different on this occassion. Then comes the need experience when picking the right way of excluding this prompt.

For instance, the width of the Bollinger Bands could often help, but not here.

The two choices are: eliminate the fractal where the candle 2-hours prior spiked outside the upper BB or eliminate when the candle 2-hours prior had a range of 50+ pips. I went with the latter as the second case would happen way less often.

The dynamic zone to fail a direction is from 21 pips wide, it starts from inside the hourly 30 sample HL2 BB by 2 pips and extends 19 on the outside.

There are serious restrictions for the time window when this would be possible at all.

If my filter is correct, the market has already failed the downside. The fractal with the Echo print below has an additional moratorium zone of 10 pips marked with the green line, but no guarantees of how much more downside movement you shall get.

//// ECHO on the upside
if (((Close[i+1]>iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_UPPER,i+1)-80*Point 
&& Close[i+1]<iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_UPPER,i+1)+190*Point)
|| (High[i+1]>iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_UPPER,i+1)-20*Point 
&& High[i+1]<iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_UPPER,i+1)+190*Point))
&& Open[i]>Close[i]
&& ((Low[i+1]>iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+1)
&& Low[i+2]>iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+2))
|| (
 Low[i+1]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+1)
&& Low[i+2]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+2)
&& Low[i+2]>iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_LOWER,i+2)))
&& High[i+1]>High[i] && High[i+1]>High[i+2] 
//&& High[i+2]>High[i+3]
&& Low[i+3]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+3)
//|| Low[i+4]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+4))
&& Close[i+1]<(High[i+1]-((High[i+1]-Low[i+1])/3)))
{
    ObjectCreate("HOTE"+i,OBJ_TEXT, 0, Time[i+1],High[i+1]+150*Point);
    ObjectSetText("HOTE"+i,"ECHO", 26, "Impact", clrYellow);     
    if (i>1) {ObjectSetText("HOTE"+i,"ECHO", 26, "Impact", clrWhite);     
    level = High[i+1]+100*Point;  }
}

There was a 75%+ pullback and then a move back above the 25% line before a drop and a close at near the halfway mark. The drop we saw could have been a wave 2 down of a Wave 5 up.

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Album #23 is here.

The first question to ask is where are they compressing volatility?

The answer currently is about 32 pips up from the last swing low. There are another 3 examples above.

The second question is what is my proof for price having turned around?

The answer is none, as there has not been a White or Black Echo print yet.

//// ECHO on the downside
if (Low[i+1]<iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_LOWER,i+1)+20*Point 
&& Low[i+1]>iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_LOWER,i+1)-370*Point
&& (Open[i]<Close[i] || (i>0 && Low[i-1]>Low[i+1]))
&& High[i+1]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+1)
//&& High[i+2]<iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+2)
&& Low[i+1]<Low[i] 
&& Low[i+1]<(Low[i+2]+20*Point)
&& Low[i+2]<Low[i+3]
&& High[i+3]>iMA(symbol,0,8,0,MODE_EMA,PRICE_OPEN,i+3)
&& Close[i+1]>(Low[i+1]+((High[i+1]-Low[i+1])/3))
&& ExtATRBuffer[i+1]>50
)
{
    ObjectCreate("HOTE"+i,OBJ_TEXT, 0, Time[i+1],Low[i+1]-80*Point);
    ObjectSetText("HOTE"+i,"ECHO", 26, "Impact", clrWhite);     
    if (ExtATRBuffer2[i+1]<50 && (iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_UPPER,i+1)-iBands(symbol,0,30,2,0,PRICE_MEDIAN,MODE_LOWER,i+1))<320*Point) 
    ObjectSetText("HOTE"+i,"ECHO (MFI_R)", 26, "Impact", clrGray);  
  

The Gray Echo was a downgrade due to the BB width not reaching at least 32 pips (squeeze-release).

With that said, there is a 3rd hour of selling currently. If this candle closes back up 1/3, the confirmation could be either the following hour closing green or the second candle staying off the low. That would be a white Echo print, and the moratorium line would be re-plotted 10 pips below the new swing low.

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Achilles Dent: Never, Never Land with the voice of Chester Bennington.

…

We had a severe reaction, but is this move up up yet?

I personally would give the benefit of the doubt of the move down being wave 4 of Wave 3. This would mean two more waves up coming, a wave 5 of Wave 3 and a Wave 5.

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Album #22 is out now.

…in the meantime everyone’s selling bonds, mostly US bonds.

We are toying around the Overbought Neckline at 1.1050.

If the swing high was made, come next week the price should make it 53+ pips higher before more selling. Use this leverage to hedge.

Currently, nothing is talking about an immediate downside, in fact, there’s an Echo print.

Principles then.

Step #1 Align holdings with the last settled Echo

Take on excess
– beyond S30
– add 3/4 ways
– add outside BB30 1H

Lighten excess into/past the level reached with 3 whole candles outside the BB

Alles Klar, Kommissar?

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Achilles Dent: Rock Me Prometheus

exhibit a: stall & pullback in front of an important level that is to be taken out with force

exhibit b: the two volatility lines want to converge and they mean it this time

c: you are inside the block where the weekly echo could come from, but there is more room to retrace (purple square)

After watching this video I am convinced we need to regulate AI 🤦‍♂️🤣pic.twitter.com/RWydjISBvv

— Clown World ™ 🤡 (@ClownWorld_) August 28, 2024

The market got overtly excited by its own prospects by staying outside the BB for 6 hours+, and is currently returning to the E-9 not seen in 11 days as a Wave 4.

There’s an untested trendline

The last weekly rung, 86 pips up is totally doable.

There is a triple magenta line, but that is showing some slow down (the first magenta is the measuring leg), but what normally happens is that the 2nd peak would become the flagpole of the last bow back.

We are looking at a peak in the range of 1.1233-1.1249. Could the last move up master the swing high in image 1 (1.1275)?

The launch pad should be the SOB.

I know it does not feel like it, but the market is in a hurry here. The rally could be over in 5 hours. It does have 115 pips of potential based on history relative to the low made today (that’s like 1.1262 currently – 13 pips shy).

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Album #21 is out now.