PRESENTATION:

At this point in the book, I think it's fitting to digress a minute and discuss the presentation of the upcoming market examples. This book has been self-published, because I wanted to control the material. If it is accepted as a useful and competent work, I'll be very pleased. If it is not, it won't be because an editor who knows nothing about trading cut the heart out of it. While I have maintained control, such control involves risks.

Presumably, you're studying this book because you want to find out more about my trading techniques, or about the specific topics the book deals with. Up to this point, I've mentioned certain products Coast Investment Software (CIS) offers, primarily as footnotes. That is as it should be.

The safe way to handle the upcoming examples would be to keep the presentation generic. The problem with that approach is that it's not the best method to help you learn, nor is it the best method for me to teach. My work is most efficiently and lucidly taught, if I use the tools I have developed, so that you can see what I 'm doing The FibNodes program is such a tool. The Proportional Divider previously mentioned is another such tool. These are both products that CIS offers. You can get around the use of these tools if you choose to, but my job of teaching the material and your job of learning the material is made much easier by their inclusion in this book.

The FibNodes program allows the user to represent in a tabular format, the Retracement - and Expansion points we've been talking about. It also allows for identifying characters to be associated with the Nodes it creates so Lineage can be established. This feature bears repeating for two reasons. First, Lineage is a part of the methodology that some of my students tend to ignore - to their regret. Second, if you choose to use a spreadsheet to implement the concept, you need to build a Lineage feature into it. The FibNodes program has other features designed for high intensity data management during the trading experience and has been designed as a high quality trading tool. The next few pages will explain the FibNodes program printouts only to the extent that is necessary for you to most easily understand the way I have developed and use Fibonacci analysis. A list of the FibNodes program features can be found in Appendix F.

FIBNODES PRINTOUTS:

For your understanding of the concepts taught in this book, we are utilizing FibNodes software, DOS version 4.32, from which all printouts are generated. The program can handle up to 30 Reaction Numbers. Typical printouts will contain three or four Reaction Numbers. In practice, I seldom use more than 12 per file, since 12 fit conveniently on the monitor and are reasonable to keep track of. Upon entering any Reaction Point, you can enter an identifying character (such as '*') after the last digit of the Reaction Number. This character will be carried through to the Fibnodes associated with the particular Reaction Point you select.

We have an idealized example of a Market Swing, starting at 225, achieving a high, then retracing to 540 and thrusting up to 750. User inputs to the FibNodes program are 750, 540T, and 225*. They are shown on the left side of the FibNodes printout. The Focus number 750 is automatically entered for each segment (1 & 2) since Fibnodes within a series are always created from the same Focus Number to each Reaction Number. Box 1 contains the .382 and .618 retracements between the Focus Number and the first Reaction Point. Box 2 contains the .382 and .618 retracements between the Focus Number and the second Reaction Point and so on. Whether the FibNodes file is a support or a resistance file, .382 Nodes will always be shown at the top of the box, while .618 Nodes will be shown at the bottom of the box. This is done for two reasons. First, when you are trading, you want to see the first number which is likely to provide support or resistance in the current market situation. Second, the form of the printout with the top numbers always .382 Nodes and the bottom Nodes .618, allow you to easily and quickly pick out Confluence by comparing top and bottom numbers. If two reactions are close to one another, they will produce Nodes that are numerically close but both Nodes will be on top or both will be on the bottom. Therefore they are not areas of Confluence. I always try to make things as fool proof as possible for my own trading, since stress tends to eat up IQ faster than multi-tasking eats up computer memory.

You can also enter any variety of identifying characters you choose, to indicate the Lineage of a given Reaction Point. 'D' can be used for a daily Reaction Point, 'M' for a major point. Some Reaction Numbers are more significant than others, so the capacity to enter letters for clarification after the Reaction Point, is of substantial analytical value. In our idealized example, Reaction 2 is followed by '*' indicating that it is the primary Reaction Number and T' follows Reaction 1 indicating thrust. These characters are carried through automatically to the associated Fibnodes by the software.

Finally, naming FibNodes files is up to the user but the naming convention I use can help you to figure out what any example is illustrating . Odd numbered FibNodes file names are resistance files and even numbered names are support files. You can get other information as well. In our next example, the Dow file is named DJYR02. DJ is the instrument, YR the Time Frame, 02 indicates support. If DA was in the name, instead of YR, it would indicate a Daily file. A five minute FibNodes resistance file ofthe September S&P would be named SPU051.

DOW EXAMPLE:

In the Dow example, utilizing the high in 1987 at 27363 , I placed an asterisk after the 41 Reaction Point, upon entry into the software, since 41 is the primary reaction low, i.e. the depression low occurring, of course, after the 1929 market crash. The low in 1957 was relatively minor, so the small letter 'm' has been inserted to let me know how strong these Fibnodes are likely to be. The low of 777 in 1982 deserves a capital 'M' since it was a major point, the beginning of this incredible bull market. You can see the sharp ascent after the 1080 low up to 2736. Therefore 1080 gets a 'T' for thrust. Thrust Reaction Numbers are extremely important, for a variety of reasons. The FibNodes printout below details Fibnode support and shows a clear area of Confluence between the Thrust Fibnode at 1712 and the Primary F3 Fibnode at 1707. Those ofyou who were around and trading during the nearly 1000 points in four day crash and 500 point single day decline, know just how gut-wrenching this experience was. We had a negative premium of thousands of points in the S&P cash to futures spread, with no end in sight and suddenly all this was stopped dead in its tracks at 1706.90, by precalculated Fibnode Confluence support!

THIS WAS NOT AN ACCIDENT!

FIBNODE OBJECTIVE PRINTOUTS:

In addition to providing Retracement Numbers (Nodes) at which to enter trades, FibNodes provides you with Logical Profit Objectives which we refer to as Objective Points (OPs). The three targets, or objectives we've been discussing have printouts that look like this:

The numbers on the left side of this printout are the values of the A, B, & C points. The numbers on the right side of the printout are the calculated Objective Points.

Ifyou see any extensions on the end of FibNode file names (.FIB .OP), don't be confused. These extensions help the program and therefore the trader to more quickly and easily locate previously generated files.