Hi Baha,
This
forecast is based on BB, but is an extraneous technique that came out
of the London conference. There's nothing in the book about how to do
this, and it's just a cool side effect of the underlying theory. The
problem is that I got excited about the forecast and wanted to share,
and made the mistake of putting dates on that chart, which then lead
people to believe that if the market didn't turn exactly to the day,
that meant that the forecast was incorrect, or inverted, or that Bertha
doesn't work, etc, etc. This forecast is based on averages, and is
looking at big picture.
To understand how to use it, take a look at this chart:
The
red line is the forecast plotted on top of the Dow, for the last 15
years or so. This is a weekly chart. Keep in mind that this is *not* a
price forecast, it's a directional forecast only. It says whether to
expect the trend to be up or down. The thick white trendlines represent
the last three major drops as called by the forecast. Drop 1 and 3 were
nice declines, and drop 2 turned out to be a flat period rather than a
decline. That happens when the larger trend is up. You'll see the same
sort of thing when intraday markets try to go down while the daily trend
is up - the smaller time frame just turns into chop. Nonetheless, even
with drop 2, you can see that the forecast did a pretty good job of
timing the trend. Not perfect, but not bad either. The bar counts at the
highs and lows tell you how far off the forecast was from the market,
in weeks. If you look at the last drop (the 2008 crash), you can see
that the forecast was 32 weeks late on the top, and 19 weeks late on the
bottom. I'd still say that call was accurate, it's just that you had to
trade it and not take it blindly. When the market goes into a down
trend around the time the forecast says to look for a big drop, that's
when you go short, not before. This would have been once the Dow started
taking out important lows, which was late 2007 before things got really
interesting. In my book, this is a successful call. For those that
don't agree, or expect a long term forecast to be accurate to the day,
I'd suggest getting away from forecasts altogether, as that sort of
accuracy has never been attained by anyone, and never will.
Now
take a look at the aqua lines, which is the current forecasted drop.
What is happening here is that there is tremendous upward pressure from
either a really long term cycle that this forecast doesn't consider, or,
for the more conspiracy-minded traders, from some sort of manipulation.
In either case, you can see that the ebb and flow matches what the
forecast expects, with the difference being that the upward pushes are
much larger than expected, which results in an upward trend. From the
perspective of the very last call (the tax-day top), we can't really say
that it is a mishap yet. We're right on it now (point C), and would be
looking for a drop into the low point of the year from the perspective
of the forecast. I'm interested to see what happens there, because at
that point (point D), the upward pressure that we are experiencing now
will be in alignment with the natural cycles of the market, which you'd
expect to act like throwing gasoline on the fire in terms of
volatility.
Anyway, when making trading
decisions based on this, or any other forecast, you can't just blindly
be buying and selling. You have to judge the trend of the market, and go
with the flow. In the simplest terms, the book-method Bertha approach
identifies the trend, then identifies the lowest-risk opportunities
within that structure to actually take a trade. With this particular
market, Bertha traders have been long since 2009, and would remain long
until market structure told them otherwise. The purpose of this forecast
is to act as an early warning system for changes in trend, but you
can't actually do anything about that until the market tells you. If you
are following this forecast, but don't know how to implement the actual
Bertha techniques, then what you need is some trend-following tools
that you can use to confirm the turns and actually trigger you into a
trade. What you don't want to do is go short on a forecasted top, watch
the market move against you, and hope and pray that it turns around
before you're blown. That's bad. Don't do that. Rather, watch the trend,
pay attention to important support and resistance levels, and in
particular pay attention to which levels are holding and which are
getting taken out. Then, when you see that within the context of a
forecasted top or bottom, that's the point where actual trading occurs.
Hope that helps.
Regards,
Earik
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Posted: 5/8/2013 12:02:32 PM
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