AGREEMENT ON THE BOND CONTINUATION:

Now that you're familiar with FibNodes printouts, let's consider an example of Agreement that nailed a major weekly low in U.S. bonds. We'll look at the same chart of the U.S. bond market we looked at earlier, but we'll label it in order to determine where likely support will come in, after the double top at the 122 level.

The area of Agreement between the COP (10528) of the A, B, C and the '*' support Node of the up move 1 to F, shown on Chart 11-17, held firmly. Subsequently this area led to a rally in the bonds, from 10528 to a high of 117 a few months later, which was an approximate .618 retracement of the preceding down move! See Chart 11-18.

HIDDEN D-LEVELS :

In trading, when everyone knows something, it does no one any good. When you know something and everyone else finds out about it later, is does you a lot of good! If everyone believes the stock market or soybeans are going up, they are already long and that knowledge is factored into the market. If you know the outcome of a report or otherwise have inside information that is truly significant, then you can position yourself ahead oftime and benefit from those that follow. Such is the case with hidden D-Levels.

Consider Chart 11-19 below. Based on what you have learned so far, label the Focus, Reaction Numbers, and Fibnodes, before turning the page.

Let's go over this Market Swing one label at a time. The Focus Number is the high of the move. Reaction 1 is the first low preceding the Focus Number. Three bars to the left of Reaction 1 is a slightly lower low, which could have been included in the labeling as 2m (for minor). I have omitted this reaction for clarity, since the Nodes it produces would have almost the same numerical value as those produced by the reaction labeled as Reaction 1.

The second reaction is the top of the gap or the bottom of the bar after the gap. This is a hidden Reaction Number and it produces Fibnodes other traders will not be aware of. Fibnode Confluence areas may also be produced which are transparent, even to traders with knowledge of advanced Fibonacci techniques.

Reaction 3 carries no particular Lineage designation. For clarity, I chose it alone, rather than including the Reaction 3 bars to the left of it. Reaction 4 is particularly important since it is ofF a thrust bar. Like 2G, it produces hidden Fibnodes. 4T is more powerful than 2G, since Thrust Reactions are more significant than Gap Reactions. Reaction 5 has the small letter 'f' assigned to it to designate 'first.' This particular reaction is important for its ability to get you in the move There will be more on this in the advanced comments section coming up shortly. Reaction 6 is the Primary Reaction Number designated '*'.

ADVANCED COMMENTS:

If I'm trading an active market like the S&P, I'll usually insert reaction lows, even if they are close to one another, and label the lower one (in an up move) with the letter 'm' to indicate 'minor.' In the course of trading I will enter trades consistent with context of course, on the higher Fibnodes created, thereby insuring a fill. I observe the 'm' Fibnodes to determine the strength of the market, i.e. if I am filled and the 'm' Node is not broken, it indicates more strength than if the 'm' Node is hit or slightly exceeded. Without adequate software, or if you were only using dividers, including these minor Nodes would be inadvisable. The time it takes to calculate them and the clutter this presents, particularly on an intraday basis, would be counterproductive. Lines produced by graphics software splayed across the screen would be equally counterproductive.

Remember earlier when I discussed the difficulty you would face when you bought or sold in the right areas? There is great demand for a fill when you are buying at or near the low point of a dip (DiNapoli, "The X'd Trade".) Using Nodes from a slightly higher Reaction Number, like 1 or 3 on Chart 11-19A can be invaluable since you need to get a fill to make any money! These Reaction Numbers produce Fibnodes that will enable you to be filled ahead of other traders. Mark the Fibnodes on the chart with your dividers if you don't implicitly understand this. See the more detailed labeling of Chart 11-19 on Chart 11-

This same reasoning is the basis for my use of the 7fNodes rather than 8* Nodes, upon entering orders. The world may be trying to buy at the .382 of 8*. Who knows about, or considers the .382 of 7f? If you try to be too conservative and buy at the .382 of 8* instead of just above the .382 of 7f, you 're more likely to getfilled only when the Node is destined to break!

Finally, if I can get a Confluence area off of a thrust bar that is not an identifiable reaction low, I am an excited trader. I have strong information the world lacks. I'm looking to make some serious money!

USING FIBONACCI ANALYSIS TO DEFINE MARKET MOVEMENT

I've alluded to this technique when I discussed Leading and Lagging Indicators in CHAPTER 2. One of my comments referred to utilizing Leading and Lagging Indicators to their best advantage. Using Fibonacci as an indicator to define Movement might be a bit off the mark. It really depends on your experience level with the market in general and Fibonacci concepts in particular. That being said, the basic idea behind this technique is to look at the extent of the retracements, to determine the anticipated Movement of the Market.

Deep retracements presumably lead to a change in Movement from up to down, for example, while shallow retracements would be consistent with a continuation of existing market Movement.

While I have used and taught this method since the mid 80s, I suggest using it only as a confirming indicator, rather than as a primary Directional Signal or Trend indicator. One has to be thoroughly schooled in the application of higher Time Frame D-Levels to keep this particular technique accurate.