Countdown

Buy Countdown begins when a buy Setup has completed (once the minimum requirement of nine consecutive closes less than the close four days earlier is fulfilled). Beginning on the ninth Setup bar, a process is applied that compares the close of that price bar vs. the low two bars earlier: If the close is less than or equal to the low two price bars earlier, then a Countdown is recorded.

Just as a buy Setup series’ bars are numbered, so too are bars in a Countdown, except in a different color. Once 13 valid Countdown bars have occurred (note: Countdown bars do not have to be consecutive), the downside price momentum is likely to be exhausted. Additionally, to ensure the price action is sufficiently low relative to the prior price action, the following qualifier is used: The low of buy Countdown bar 13 must be less than or equal to the close of Countdown bar 8.

There are two events that cancel a buy Countdown prior to completion:

The first occurs if, subsequent to the completion of a buy Setup, a price bar’s low and the prior price bar’s close are both above the highest price of the entire buy Setup series. In these instances, the buy Setup is cancelled and you must begin to look for a new Setup series. The second cancellation occurs when a contradictory sell Setup appears before the completion of the Countdown.

Because of additional selling from a new group entering the market, a downtrend will unexpectedly intensify from time to time. If the selling becomes sufficiently intense for an extended period of time to produce a new buy Setup that extends past the minimum nine to at least 18 consecutive closes less than the close four bars earlier — prior to the completion of the Countdown or prior to a subsequent close greater than or equal to the close four price bars earlier — the Countdown process will “Recycle”.

Sell Countdown inverts the rules for a buy Countdown: It begins once the minimum sell Setup requirement of nine consecutive closes greater than the close four bars earlier is fulfilled for a sell setup. Beginning on bar 9 of the Setup, a series of closes (which do not have to be consecutive) greater than or equal to the high two price bars earlier must occur. The rules for cancelling a sell Countdown are inverted as well.

On the daily time frame, completed Countdown “13s” coincide with a market’s top or bottom approximately four or five times a year. On shorter timeframe charts, the number of Countdown 13s will increase commensurately.