Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing Bonds

Figure # 2.12 - On June 13, 2003, the September T-Bonds closed at 122-21 (B). This high was above the previous pivot high posted on May 23 (A) and was followed by five consecutive lower closes that ended at 118-18 (C). A two-day bounce confirmed (C) as a low pivot and suggested the beginning of a bearish futures market timing Reaction swing. June 25, started with a higher opening and reached a high of 120-30 (D) early in the session. The 120-30 high was more than 60% of the price swing from (B) to (C), putting the T-Bonds inside the sell window and established June 25 as the Signal bar. However, the rally faded quickly and turned lower where it dropped below the previous day’s low of 119-03 and finally closed at 118-27, well below the previous pivot high. The following day began with a lower opening that triggered the sell signal and confirmed the TR-pattern at a major high.

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Figure # 2.11 – December 2005 Dow Jones

The (D) to (C) swing pattern formed the primary futures market timing Reaction Swing and the last swing of the TR-1 pattern. As soon as the T-Bonds reached into the sell window a sell stop should be entered below the Signal bar that entered the sell window. However, in this case the low of the Signal bar was not known until the close. As soon as the T-Bonds triggered the sell signal a protective stop should be placed above the pivot high at (D). The next day, a sharp sell-off in the T-Bonds triggered the sell and pushed the futures market below the (C) low and closed at the bottom of the daily price range. After the futures market closed below the (C) low for two consecutive days, the protective stop should be lowered down to just above high of the Breakout bar. (The Breakout bar is the price bar that broke the support provided by the (C) pivot low. If a futures market closes below/above the pivot low/high for three consecutive days, it will most likely continue in the direction of the breakout.)

Now that I’m in a short T-Bond position I will use the information from the reverse/forward count to project how far and how long the next downward swing will most likely continue. The reverse count from the (C) low to the (A) high equaled 20 days. I used this information to project forward 20 days from the June 24th pivot high at (D)…the forward count projected a future swing trade date of July 22. As predicted, the T-Bonds continued to trade lower into the July 22 swing trade date. The T-Bonds dropped close to 10 basis points without any significant correction.

The value of this trading technique is in knowing - with a high degree of confidence - how long the futures market will continue in the current direction. One of the most costly mistakes a trader can make is to hold on to a winning position too long or exiting a position too early. With the swing trade date Indicator I can make a reasonable Time projection of when the trend will most likely end or begin a correction, allowing for a timely exit. Later in this book I will illustrate how to use the Action/Reaction method to make price projections in conjunction with the Time projections. It’s just as simple and as effective.

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Figure # 2.12 – September 2003 Treasury Bonds

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.