Market Update for Purists

Jon Alternative Media, Science

Net Lines
It’s that dreaded day after Independence Day. The weather is gorgeous and I don’t really feel like trading either. The thought of just phoning it in had occurred to me, but as the new month just rolled over I thought I may as well take another peek at our monthly charts. Which uncovered quite some interesting perspectives that I’m eager to share.
But no worries – we’re keeping it light and easy today. Consider this a purist’s approach to market analysis as we’re going to ignore everything but Net-Lines.
So what are Net-Lines? Before we get into the thick of it let’s quickly cover the concept of Net-Lines, which is purely price based and as such I don’t consider them ‘indicators’ in the traditional sense. There are in fact two types of Net-Lines, one for the buy and one for the sell side. The rules are pretty trivial:
Net-Line Buy Level (NLBL): Wait for three consecutive lower lows, then take the high of the first candle as your NLBL. The push above that high is your signal to go long.
Net-Line Sell Level (NLSL): Wait for three consecutive higher highs, then take the low of the first candle as your NLSL. A breach below that low is your signal to go short.
That’s pretty simple, isn’t it? No exotic mathematical formulas or price derivatives which may require a PhD in quantum physics to fully grasp. The whole idea here is to identify price inflection points as well as trending behavior. If you’ve been visiting the lair for a while then you know I have been using Net-Lines in the context of our market analysis for many years now.
So let’s get to the goods. Usually we focus on short term and daily charts but today we’ll be exclusively looking at monthly panels. The first one is the E-Mini and it’s the one that actually inspired me to write this post. If you look at the price action over the past five years then what do you see? A lot of red lines below it, correct. Those are monthly Net-Line Sell Levels and we’ve been trading above them almost the entire time. That is bullish of course.

This post was published at Acting-Man on July 5, 2016.