Oh, and as a side note... Linear risk estimation techniques like I have just showed you being used by traders and hedge funds are probably a direct cause of some fat tail events, LoL...

Also, support/resistance containment probability gets slightly worse the shorter the timeframe. A level that runs at 95% on the S&P daily runs at 88% on the S&P five minute.

The risk of tail events can be estimated with some different techniques. COT Reports help in some markets, but I have my secrets.

Good luck all! I don't think I will visit here again until late next week.

meanVelocity 

*Pats self on back...* Phew, I am fully back in sync with this market. I was only a point off on my short term top estimate, LoL... Srgtroy, can you guess how I came up with that number? Hint: It requires a chart drawing tool.

Look ma, no hands!

Actually... I do not use Fib's. I just use retracement quarters and halves. The numbers match pretty close though.



I do not believe many big traders use fibs anymore. I think they are just thinking about a rally moving half as high as the last, a quarter higher, double... Etc...

What you have to remember is that the butterfly effect of certain price levels depends upon how many are watching them and thinking about taking profits at them.

Retracements are highly popular and so are projections, but tools like pitchforks and fib fans have gone out of favor IMO. Trendlines are as popular as ever so expect order pockets at them.

Tools are not really all that useful by themselves unless you can also find a way to estimate if the small effect of the number of traders using that tool can actually influence the market enough to trigger a move. In low momentum conditions and drifty markets the standard pivots formula is quite strong, but when things are really moving with momentum... The market can plow straight through these levels.

It's great when a market hits a critical resistance people are watching when it's overstretched, but it doesn't really matter that much if it slams it in the inverse elasticity zone with momentum, it will drive straight through.

As we open into next week... The market will have free reign in the area of about 2045 to 2070 on the cash. In that inverse elasticity zone the market can move around freely Monday. To burst outside it, the market needs a emotional catalyst. Eg, news...

That tail candle can only scare so many people.

The Butterfly Effect may have some significance in illiquid markets but I seriously doubt it has any influence on price discovery in liquid markets other then perhaps small/short-term price fluctuations that are almost certainly ignored by larger players.

srgtroy 

The Butterfly Effect may have some significance in illiquid markets but I seriously doubt it has any influence on price discovery in liquid markets other then perhaps small/short-term price fluctuations that are almost certainly ignored by larger players.

LoL, right... The R2 weekly trigger a five point move and reversal in the S&P on Friday prematurely. The market would have easily dropped further toward full gap fill, but sideline buyers were attracted by the stability caused by the initial buyers at that support level.

Also, into late 2013 pivot resistance was causing the market major problems in rising. That is why it didn't properly pop up before the drop into that correction.