Tutorial #1: Flagged under “MIDAS tutorials”. This is being flagged as a tutorial because as well as market commentary it includes discussion of how to adjust D in the Topfinder/Bottomfinder as a trend develops. See also my discussion in the book.

D. G.Hawkins, March 14, 2011

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For many weeks now, we’ve been watching the TopFinder (TF) on the weekly bars chart that is fit to the mid November 2010 pullback – see last week’s weekly bars chart.  That TF has been projected to run for several more weeks.  Now, I’m going to demonstrate a procedure that I explore fully in our upcoming book, which is the way to adjust a TF as the move progresses.  Since the November pullback, there has been one more pullback, at the end of January.  The question I discuss in the book is, should a new TF be fit to a later pullback?  What I advise is first try to adjust the D, duration, of the first TF to see if it could be reasonably fit to both pullbacks with not much error.  Often that can be done.  And that’s what I’m showing here in the first chart, the weekly bars chart updated to the end of last week.  It turns out that by reducing D from 61 million to 54 million, the TF slightly overshoots the low of the first pullback while slightly undershooting the low of the second.  These overshoots are quite small; the November low is at 1173.6 and the adjusted TF there is at 1176.3, an overshoot of only 0.2%; at the January pullback, the low is 1173.6 and the adjusted TF is 1176.3, an undershoot of only 0.1%.

This adjusted TF ended over a week ago, just as the current price consolidation started.  I think it’s safe to say that this intermediate term uptrend, which started late last summer, is now over.

The expectation in Midas theory is that once a TF ends, a consolidation begins, and we’re now in that.  However, this gives us no prediction as to the direction of the next trend.  Right now, price has consolidated down to S3.  If price goes on to break and close below S3, that would be the signal of the start of a new downtrend.  But if price holds above S3 and goes on to break above the high of mid February, then that would be the start of a new uptrend.

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