Many traders don’t understand the importance of “time” when they are trading and focus more on “price.” It has been drilled into our heads that price is king. Don’t fight the trend and that is all they know. It does work, but combining time and price works much better.
By combining “time and price,” a trader has the advantage of knowing “when” to start looking for a reversal and to then use price to figure out “where” the reversal may take place. Fibonacci levels and support/resistance pivots are a very common way to determine price, or where a turn may take place. It is something I use religiously, especially when they fall on support/resistance zones.
Here is the problem using just price alone. If the SPX (S&P 500 index) falls to a Fibonacci level or pivot support, but the “time” for the reversal isn’t scheduled for another four days, the odds of that support level holding are not high at all. Sentiment cycles repeat! Understanding how long each cycle will last allows you to predict the time period to expect a reversal, and then you combine price to figure out where it will reverse.
January 15-19th – Scheduled Reversal Time Period
On December 22nd, we identified the January 15th-19th as the “low period” for the expected drop. Knowing the lows weren’t in, based on the sentiment cycle, the rally that started on January 6th should have been used to short.
There was resistance between 2055-2072 and the SPX reversed at 2064. Knowing the low was not scheduled for another 10+ days, I used price to determine where to get short, instead of jumping long.
Once we enter the January 15th-19th “Scheduled Reversal Time Period,” I will use price to determine where to get long for the expected rally. Knowing when to take a position is just as important as where.
Here is a FREE guide to help you understand how to measure the sentiment cycles.
