Intraday S&P Forecasting
For those of you who have been following our Showcase pages, you know that we have been working on a number of methods to generate long term forecasts. Those who have contacted us also know that we have been quite secretive about these methods, especially in the beginning! Our methods were based on extracting cycles from the market and projecting them forward into the future to predict future price action. Our Cycle Forecaster works in a very similar way to this, and accurately projects the composite market cycle 7-10 bars into the future. The problem we were experiencing was that the underlying cycles were shifting in and out of phase, which made it necessary to retrain our forecasting engines every few bars to maintain their accuracy. This is why the Cycle Forecaster has trouble going above 10 bars into the future. By the time that point arrives, the cycles have already shifted and have moved to different locations.
After countless hours of research, we made a critical breakthrough in early 1999 that allowed us to predict precisely when the cycles would shift their phases. More importantly, this discovery allowed us to pinpoint exactly where the cycles would move to once they shifted! The result is that we are no longer hampered by a 10 bar forecasting limit, and can generate accurate cycle forecasts far into the future.
We have completed a program that has the ability to generate a forecast for the intraday S&P 500 market one day in advance. We have been following these forecasts now for over 6 months, and continue to be amazed by their accuracy. Below are some examples from the December 99 contract. Remember that we knew what the forecast looked like before the opening bell...
Price basically followed this forecast the entire day. Here's another example:
Although not as exact as the last, it was pretty obvious where to look to place trades during this day by using this one tool alone. Although we have only shown two charts at this point, it should be clear that this new forecasting technology has the ability to generate very accurate cycle forecasts. Here's another chart:
Again, this was an extremely accurate forecast for this day. However, the important thing about this example is that this forecast is actually the inverse of our original. No forecasting technology is perfect, and this applies to ours as well. Although the times of the turns remain extremely accurate, the direction of the turns is not fixed in stone. Markets are chaotic systems, and chaotic systems always have more than one solution. This means that sometimes the markets will follow the original forecast (blue on our charts), and sometimes they will follow the upside down inverted forecasts (red). As a trader, it is our task to decide which forecast is the correct one for the time.
The advantage of being able to study a forecast the night before the market opens is that general strategy can be formulated for the next day. For example, in the chart above, one trading idea would be to look to take a trade around the 10:20 turning point. According to the forecast, that point should be the high/low of the day, and the market should keep moving away from it until the close. We didn't have to know whether the market would follow the inverted or normal forecast, only that it would be a one-sided day. As it turned out the market followed the inverted forecast and dropped 30 points for the day.
There has been a lot of prodding and coaxing on the part of the few traders we have shown this technology to, and we have decided to release it on a limited scale. Since we are reluctant to let the formula out of our control, we have decided to provide these forecasts to traders on a subscription basis only. Each night, we will send out an ASCII file containing the following trading day's forecast. The price of this subscription is $300/month, and it is limited to no more than 30 traders at this time.
We realize this might sound a little expensive to some of you, but it comes out to around $15 per trading day which is less than most commissions. We will be posting old forecasts to pages which can be accessed with the links below. This will allow interested parties to view the forecasts day by day free of charge. We also offer a 2 week free trial, so you can take the forecasts for a test drive to see how you like them in real time before paying anything.
This is perhaps the greatest trading indicator we have ever devised, and we are very proud to be offering it to selected traders at this time.
Jan 2002 Note: These forecasts are no longer available as a subscription. However, you can get them through our new Wave59 RT day trading software. Please click here to visit our new site!
Trading Tutorial #1
Trading Tutorial #2