Carolyn Boroden's S&P and NASDAQ Price Action Levels Reports

***Actual reports are done on S&P Futures, and Nasdaq Futures tracking stock.
Spyder traders can use the S&P work as proxy for entry in SPYDER shares.***

The analysis used in the end-of-day and intraday reports are based on Time and Price
Techniques using the ratios derived from the Fibonacci number series. In these reports, we
are identifying the previous important highs and lows in a particular market and then applying
the ratios to both the time (X Axis) and price axes (Y Axis) of the market.

The purpose of the reports is to identify relatively low-risk, high-probability trading setups. In
each report, we will clearly identify and define current trading opportunities as well as point out
the potential risks along the way.

What is unique about this type of analysis is that besides the excellent trading opportunities
identified by price cluster zones, we can also project the dates of market highs and lows with a
high degree of accuracy.

The ratios most often used in the analysis are: .382, .500, .618, .786, 1.00, 1.272 and 1.618.

Occasionally, .236, 2.618 and 4.236 will also be used. These are key numbers in the
Fibonacci number series as they are used to calculate price retracements, extensions and
projections.

The end-of-day and intraday reports usually include:

Support and Resistance Levels (including Price Clusters): The more important areas will be
marked with double ** or triple *** asterisks. A Price Cluster is defined as the confluence of
three or more price levels (i.e.: retracements, extensions, projections) within a relatively tight
price zone. The more levels within a particular cluster, the more significant the cluster. These
price clusters identify important areas of support and resistance where the market will typically
reverse approximately 70% of the time (as long as it was set up in the direction of the
main trend). The initial risk on these cluster trades is just above or below the extreme level of
the cluster zone. Stops on cluster trades should be moved to breakeven as soon as possible.
Price clusters will be marked in bold and with a triple asterisk ***. Once a key support or
resistance level is surpassed by a decent margin, the levels are no longer considered
valid!! ***Also note that the odds for a level or zone to hold on the second or third retest
is much lower. If a key cluster zone is being retested, in these cases I suggest using an
alternate trigger if you are going to consider a trade against it.

Time Cycles: Upcoming cycle dates for each market will be listed. These are dates in which
there is a high probability (70%) of at least a short-term change in the trend. Cycle dates are
not always exact, so please allow plus or minus one day from the cycle date for the change to
take place. These dates should be watched closely as they draw closer. Stops on current
positions should be tightened around cycle dates. When a market does not stall at the timing
parameters, it usually indicates an acceleration of the current trend. If the market is going
sideways into these cycle dates, then either ignore the cycles or go with the breakout. Look for
timing histograms below individual charts. These histograms represent the standout time
cycles that are due in a particular market.

Market Commentary: The market commentary section will discuss current conditions in the
markets, along with potential setups and specific trade recommendations when appropriate.

-- A note on Synchronicity (i.e.: the coordination of Time and Price): When time and price
parameters come together using these techniques, the odds for a profitable trade (comparing
waves of similar degrees) goes up to approximately 80%.
Key:

R - Price retracement

E - Price extension

PO - Price objective

SL - Swing low

SH - Swing high

*** - Price cluster in BOLD

** - Important price or cycle

Glossary:

Fibonacci Number Series: A Number Series in which the properties were discovered by the
Italian mathematician Leonardo Fibonacci. The ratios derived from this series are consistently
found in nature, architecture and the financial markets.

Price Retracements: Opposite movements to the current trend. Calculated by measuring the
distance from key highs to lows or lows to highs. The Fibonacci ratios most often used to
calculate retracements are: .382, .500, .618, and .786.

Extensions: Price extensions are essentially retracements that extend beyond 100%. They
are calculated from swing highs to lows and lows to highs. The Fibonacci ratios most often
used to calculate extensions are: 1.272 and 1.618. Sometimes, 2.618 and 4.236 are used.

Projections: Price projections/objectives are always calculated from three different price
points in order to compare swings of the same degree and in the same direction. The ratios
most often used for these projections are .618, 1.00 and 1.618. Here we would measure a
swing high to a low (or a low to a high) and then project the ratios from the third point.

Price Cluster: A coincidence of three or more price relationships (i.e.: retracements,

extensions, projections) that come together in a relatively tight range based on the Fibonacci
Ratios (ratios typically used are .382, .500, .618, .786, 1.00, 1.272 and 1.618). These cluster
zones identify key support and resistance decisions.

Time Cluster: A coincidence of at least three key time relationships coming together within a
relatively short time period. These clusters illustrate time windows with the potential of a trend
reversal.

Time and Price Squaring: Time and price parameters coming together at the same time,
thus indicating a high probability of a change in trend.

For more information on and definitions of these price relationships, please refer to my trading
lesson "How I Use Fibonacci Levels To Identify Key Support And Resistance Levels" on
TradingMarkets.com.
 Now that you know what is included in the reports...

How do you profit from them?

The best way to use the information in the reports is to trade against the key price cluster
zones. These cluster zones will be marked in bold and have a triple asterisk *** next to them.
Let me add that my goal (not guarantee) in these reports is to provide you with at least one
winning trade setup per session when possible. Anything beyond this is a BONUS!

There are two ways I like to trade against price clusters and they are described in detail below.
For other suggestions, please visit the TradingMarkets.com website or consider using your
own favorite trade entry technique.

First, if the price cluster is against the direction of the main trend, you can simply buy or sell (in
the direction of the larger trend) against the cluster zone with your stop placed just above or
below the extreme level of the price cluster.

For Example: On this 15-minute chart, we were looking at a cluster of four price relationships
that came in between 2371-2380. Since the larger trend in this market was considered to be
down at that time, you could sell as close to this zone as possible. In this case, the high was
made just one tick short of the bottom level of the cluster zone, which was followed by a
relatively quick decline to 2310. Your initial stop could have been placed just above the
extreme of the zone. In this case I would have suggested a stop at 2395. If you are a
perfectionist like me, you may miss some of these trades if the EXACT zone is not hit. I
suggest to you and I try not to be so perfect!
The second method for trading against a price cluster is waiting for a confirmation signal or
indication that the cluster is indeed holding. This alternate entry should be used especially
when you are looking at a cluster that is setting up counter to the main trend.

For example, after the high was made around the same cluster discussed above, you could go
down to a lower time frame for a more timely entry. In this example we went down to a 5-
minute chart on the Nasdaq futures contract. Then we would look for at least a prior low to be
violated before entering the sell side. In this case we were looking at the prior low made at
2356. Your initial risk with this type of entry is still defined as just marginally above the
extreme of the price cluster zone. In this case since the top of the cluster came in at 2380, we
would suggest using a stop at 2395.

Here's another way to look for confirmation and an entry against a cluster. Referring to the
same price cluster zone, you could wait for a break of a prior swing low (2336) instead of just
a prior low. I like to wait for the next rally to sell after the initial breakdown. I typically want to
see at least a .50-.618 retracement before entering. Then at that point, my risk can be defined
just behind the prior swing high. In this case the violation of the 2336 low was the sell trigger.
The rally that developed after that break was approximately a 50% retracement. If you were a
seller on this "pullback" your risk could have been defined just above the prior swing high at
2367.
Note that these are ways of how I personally trade against a price cluster zone. Feel free to
implement your own "trade entry" techniques when you utilize the time and price methodology,
especially if it increases your confidence level. There will also be times that we will enter
against a single Fibonacci price relationship. This is demonstrated in the case below
concerning the "Squaring of Price and Time." In this example, prices retrace .618% of the prior
down move. While at the same time we were hitting .618% in time of that same prior swing.
We had eight days in the downtrend and five days in the uptrend. If you then divide five by
eight (5/8), you would get .625 which is close to .618. Due to the proximity to .618, it should be
monitored closely. We had reason by way of timing to execute a trade against a single price
relationship. To be on the safe side, we did wait for "confirmation" of the violation of the prior
swing low. For more information, please refer to my "S&P Time and Price Square" report on
the TradingMarkets.com website
There will be other times that a single retracement by itself, not qualified by time, could be
important. In the 60-minute crude oil chart below, we were looking at a single .618
retracement of a prior swing. Though we had nothing to back up the importance of this single
retracement, waiting for confirmation of a change against this level would have set you up in a
great trade, with your risk very well defined.
Once again, a simple way to trade against a level or zone would be to wait for a prior swing
high or low to be taken out. In this case, taking out the 27.50 high would have sufficed (see
60-minute chart below). You could have also gone down to a shorter time frame such as a 5-
minute chart and possibly entered sooner. Your risk at that point was initially defined just
below the low made around the retracement (23.90). Note that the low was made 2 ticks
below the actual retracement, which is another case illustrating why not to be a perfectionist!
 How about those time cycles?

At the bottom of some of my reports you will see a "time histogram." These standout bars
represent the "clustering" of time cycles similar to the way we look for clusters of price in our
analysis. These cycles are projected by taking the range in time between key highs and lows,
multiplying these ranges by the appropriate ratios and then projecting forward in time from the
ending point of the cycle we are measuring. When we see a cluster of time cycles as
illustrated by one of these histograms, we know to look for a potential change in trend in the
market we are analyzing. In the example below, the S&P 500 futures contract was trading
lower into the 12/21-12/22 time period. The cycles were suggesting a potential change in trend
at that time, since we were trading lower into it, we were looking for a lower low. We saw this
low made on 12/21 which was followed by a tradable upside reversal. This particular time
report from the Dynamic Trader program is calculated using calendar-day projections.

.
Sometimes, in order to see exactly what cycles are taking place in the markets, I will use
trading days instead of calendar days. In this case, I will illustrate a confluence of cycles with
"time lines" as in the daily Nasdaq composite index below. In this particular example, we saw
a coincidence of six Fibonacci time cycles come in between 4/28-5/2. As the market was
trading higher into that time window, we were looking for a potential high and thus a downside
reversal. In this case, we saw a high made on 5/1 followed by a healthy downside reversal. As
a general note on time "windows". When we are looking at a group of cycles, you always want
to give it plus or minus one day from the projected date. Remember that the price analysis will
also be working with time to help identify whether or not you will see a more important turn.
Being off by one day should not negate the value of what these cycles are trying to tell us.
When setting up trades against timing parameters, we want to coordinate our price
relationships and/or wait for confirmation of a change in trend. These trades can be triggered
the same way we trigger trades against price relationships. To clarify, if we are within a
relatively tight time window for a potential change in trend, we can take the violation of a prior
swing low or high to suggest that the cycles are actually kicking in for a reversal.

Additional Guidelines

S&P or Nasdaq Price Action Level Reports

As my trading service continues to evolve, my initial tutorial does not address all the questions
that are continually asked of me. Hopefully, these additional guidelines will address these
questions so I am left to what I do best during the day which is to set up key time-and-price
decisions in these markets!

If you are not just using my work in addition to your own favorite methodology, I believe the
best way to profit from my service is to focus on the price cluster zone setups. A price cluster is
defined as the minimum or 3 or more Fibonacci price relationships that come together within a
relatively tight price range. Very often, we are seeing coincidences of more than 3 levels and
up to 7 or 8!! The more price relationships within a zone, the higher the odds that you will see a
trade develop off a particular zone.
***Note that the single and double price zones are lower-probability price zones for turns or
reversals, though they can be used to fine-tune exits or can be considered for a trade only if a
lower-time-frame trigger indicates a reversal against it. I typically stay away from these as far
as trade entries are concerned, unless they are major retracements on a daily or weekly chart.
Otherwise, there are plenty of cluster zones that develop in these markets each and every day.

My definition of an ideal trade setup is: buying or selling on a pullback against a price cluster
zone within the direction of the degree of trend that you are trading. A general definition of
trend tells us that if a market is making higher highs and lows, it is in a bullish trend. If it is
making lower lows and highs, it is in a bearish trend. It's even better when all degrees of trend
agree (for example: daily, 60-minute and 5-minute trends are all bullish or bearish), though
there are plenty of great trade setups when this is NOT the case. For example: We have had
plenty of trades where the larger trend has been considered bearish, but the 60-minute and 5-
minute charts have begun to show a bullish pattern (higher highs and higher lows). In these
cases, we do set up low-risk entries in the direction of the lower-time-frame charts, even if the
larger-degree trend does not agree. Let's say however, that the daily charts are bearish, the
60-minute charts are also showing lower lows and lower highs, and the 5-minute charts are
also making lower lows and lower highs. If you attempt to buy against support in this case, you
will probably never make it in the trading business. Why attempt to swim upstream?

General Rules

Once a support or resistance zone is violated by a decent margin, it is no longer valid. We look
to the next zone or trade instead.

Once a support or resistance zone is violated, it does not become new resistance or support on
the way back. Sometimes this appears to work, but it is not something that I count on. Instead, I
run new levels of support and resistance as the new highs and lows are made.

Ideally we want to see a cluster "hit" exactly within the specified zone, though life is not perfect
and this does not always happen. Depending on where the cluster was projected from, I will
allow for a "miss" a little, either side of the cluster. This margin is different for each market. I will
give you some general guidelines: (Remember this is an ART not a SCIENCE).

S&P 500 Futures: 100-150 points above or below

Nasdaq Futures: 5-15 points above or below

With the above guidelines in mind, if I don't see the ideal "hit" and hold of a zone, I will typically
wait for a trigger to confirm whether or not we should still consider an entry.

It is generally best to take a trade against a price cluster (especially if you are buying directly
against the zone) on the first test of it. On the second and third tests of a zone, the odds for it
holding are lower. This does not mean that the cluster is no longer valid, but it does mean you
may want to consider using a trigger if it does hold on another retest of it, since the odds are
not as good as on the first test. A definition of what constitutes a retest is too difficult to explain
here. I may attempt to describe it in a future seminar, but again this is the "art part" of this
system. When in doubt, wait for a trigger to get into a trade against the zone that is being
retested.

Triggers: When to use them and when you don't need to

If a cluster is in the direction of the main trend you are trading, you can elect a trade directly
against the cluster and then risk just below it, using the stop guidelines. The best conditions for
those entries are when the market is relatively calm and orderly. If it looks like you are stepping
in front of a freight train, or market conditions are wild it is preferable to wait for a trigger.
Please go back to the main tutorial for a definition and examples of "triggers."
Price Objectives for a Trade

In general, if the market is trending up, the pullbacks terminate at a retracement back to a prior
swing low to high and then if the trend remains intact, it rallies to at least a price extension of
the prior high to low. The 1.272 price extension is always my initial upside objective, though this
can easily be surpassed. Reverse this for a downtrending market. This is a simplification of
what I do, but it will help you understand what I am doing.

Reversal Trades Personally I prefer NOT to take a reversal trade on a failure of a cluster zone.
I would rather set up the next trade on the way back up, as I like to keep the edge.

Stops

Stops can be placed either above or below a cluster zone; above or below a prior swing low or
high on a shorter-term chart; or above or below the next listed support or resistance zone.
There are other variations on this. After you place an initial stop, you will want to trail it as the
market moves in your favor. You can also use your own "trigger" to exit a trade. Bottom line,
pick a method and remain consistent!

General Guidelines for initial stop placement against clusters:

S&P Futures: 200-250 point stops below the extreme of the cluster zone
Nasdaq Futures: 20-25 points above or below the extreme of the cluster zone
Money Management

If you trade multiple contracts, consider getting out of ˝ your position as the trade starts to move
in your favor, then use a trailing stop on the balance of your position and see what the market
gives you.

Patterns
You will hear me talk about two-step corrections or Gartley patterns, 5 wave patterns, double
tops or bottoms, etc. Sometimes a double top or bottom is a great entry technique against a
cluster zone! I am not going to define these patterns here. You may request an example of one
of these patterns if you like.

Symmetry
Symmetry to me is essentially equality. I constantly monitor the markets for equality in either
the price and/or time of the prior corrective moves. If a cluster of retracements overlap one or
more of the 100% projections of the prior corrective moves, I will focus on those zones for a
trade entry. These contribute to the best trade setups. Think about it this way: The name of the
game is to enter the market in the direction of the trend with an edge. Many corrective moves
tend to be similar in both price and time!

Beyond this, I am sure more questions will be asked and, as time goes on, I will attempt to
address them here, rather than during the trading session!

Happy Trading

Carolyn