Two days ago, the U. S. equities market, within a few minutes, experienced an unprecedented collapse and rebound, driven entirely by automated trading programs behaving in ways their owners didn’t intend.  So, since this was not human behavior, and since the goal of technical analysis is to model the behavior of human traders, one would not expect much insight from technical analysis regarding this extreme event.

Yet, look at this chart, the weekly bars chart of the S&P 500.  This is an update of my March 6th post here of the intermediate term S&P 500, q. v.  I have not changed any of the Midas curves on this chart; they have simply evolved with each week’s new price and volume data.  Thursday’s spike low came down right to curve S2 and bounced up. To be exact, Thursday’s low was only 0.3% above the curve, an utterly insignificant difference.  The market behaved in accordance with the Midas curve, with absolutely no human intervention.

One might say that this was just a coincidence.  However, over the 15 years that I’ve been using the Midas method, I’ve seen this happen over and over again, even as the market has evolved from all human to (at times) all machine behavior.  During moments of great panic and disarray, when none of the market participants have any idea what’s going to happen next, the market hits a previously identified Midas curve and turns around and bounces up.

For another example of this, look at the chart of the very long term S&P 500, quarterly bars, in my Feb. 8th post.  In early March of 2009, price was falling relentlessly, with no news or sentiment of any kind that would indicate that a significant bottom was at hand.  Yet, on March 6th, price exactly hit the primary S1 curve launched from the very beginning of the monstrous, two decades long bull market in 1983, and then price bounced up, launching the incredible bull market we’ve had since then.  I doubt that anyone in the markets was watching that S1 curve on March 6th of 2009; I know I wasn’t, and shame on me for I should’ve been.  And yet, it worked.

When Paul Levine developed the Midas method, he based it on assumptions of the human behavior of traders.  But I’ve come to the conclusion that there’s something very much deeper behind it.  In our forthcoming book, I discuss this further, illustrating how it works even in timeframes of a century, far longer than the lives of any market participants. I don’t know what that “something deeper” is, but I do know that it works.

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