Fig 1. June 14, 2013. EURUSD 5min chart at the day low.

Here we see a +8% bullish RSI divergence (lower lows of price, versus higher highs of RSI), where the signal forms over 5 bars and the first derivative of RSI with respect to time, gives it a Price Deceleration (PD) of 1.6. Extensive back testing supports the notion that PD values >1.0 tend to be strong and acute divergences which foreshadow price reversals provided they are found outside the range and on technical levels. The green dashed line seen above is the support 1 pivot (S1), its a location for a possible price reversal which lines up with the 1.3300 handle as psychological support. The signals time N is 13:15, and N+1 is 13:40; meaning the start and end points, whereby N is an arbitrary variable.

Fig 2. EURUSD 1min chart (14.06.13) at the exact day low up to 13:41 GMT. The 5min would connect to the 13:14 low when the S1 was initially test, you can see there was a strong RSI DIV there which suggests a slow down of the mornings sell off. However, as price ticks below the S1 level there is a never acute bullish RSI DIV with a PD =1.0. The 5min signal and the 1min signal now make this momentum change High Momentum, which just means RSI divergence in two time frames with the inferior signal starting after the superior signal. Did the EURUSD make a bullish retracement off the S1 pivot?

Fig 3. EURUSD 5m chart. The pair retraced just over 50 ticks from the S1 pivot with a high momentum price reversal (HMPR), then found resistance on the daily pivot (blue dashed) where it printed a -9% RSI divergence. In the chart above the last bearish candle (black) is a spinning top at 16:45 GMT, youll notice that the red divergence zone ends 4-5 candles before and there is a further drop of RSI that hasnt been connected with a trend line inside the indictor. This is significant because it implies that the 1min chart will have yet a further momentum drop. The 1min chart is next to magnify this region.

Fig 4. EURUSD 1min chart up to the 16:47. The last candle tests the daily pivot level. The daily point is just the previous days HIGH, LOW, & CLOSE averaged, so the level reflects a mean that can act both as support and resistance depending on how it is approached. Here we see a double top divergence with -5% RSI DIV, the PD value is not calculated because theres clearly more bars then 5, so we know the ratio is less than 1.0. Extensive back testing supports the notion that divergences greater than 5% tend to be leading indicators of price reversals.

Fig 5. EURUSD 1min chart up to 17:32 GMT, you can see the FX pair came off 30-40 ticks. So far you can see that both reversals were defined by a principle called the HMPR (high momentum price reversal) and all the divergences were greater than 5%. Some of the signals were acute; of short duration and therefore had PD values greater than 1.0 which further increases the probability of a price reversal. This supposition, that PD values >1.0 increase the probability of a price reversal is based on the theory that strong technical levels tend to cause strong decelerations prior to price reversals; a logical price action theory.

Fig 6. The Eurodollar came off 30 ticks from the resistance at the intra-day pivot point. The last chart which as saved here at 17:45 has price testing several levels. First off, from the day low, to that high on the pivot, price as dropped back 61.8% to find support on a fib level support which hasnt been annotated. It in testing the intra-day down trend line support, but acting as a trend line retracement; meaning the down trend line was resistance, but it seen here as support. The low seen here had a 1min bullish divergence, and the market rallied to new highs. A signal in the 1min chart, but not the 5min is called, the Low Momentum Price Reversal (LMPR).

Fig 7. June 14th, 2013. Gold 5min chart at 13:10 GMT. Here we see a perfect double bottom divergence at the day low, just on the key up trend line support. The divergence is +6.1 which gives it an edge, however it is also a double divergence, because you can see a +4% RSI DIV just before the left shoulder of the pattern. This +4% DIV suggests as price approached $1,380, the momentum of the sell off had decelerated secondary to buying pressure with the anticipation of trend line holding as support.

Fig 8. Gold held the trend line support and retraced $13.

Fig 9. June 14th, 2013 at 08:10 GMT for Crude WTI 5min chart. Here we see oil test, but not quit touch the purple level. My annotations are set to show classic levels as purple, said another way, this was the past high, that one previous resistance, it was crossed once, then has the potential to act as support from the other side. The divergence is large at +16.5% and I hold the supposition that the larger the divergence when price is outside of the range and testing a key level; the greater the probability of a price reversal. Did WTI bounce?

Fig 10. Crude oil WTI, 5min chart. Oil rallied 180 ticks from that classic level. The signal was formed across 19 bars, so the PD value was very close to 1.0 and quantified here as 0.9.

Fig 11. Oil. 5min again.

Fig 12. June 14th, 2013. SPX hourly chart up to the 14:00 candle. Seeing this candle printed at 15:00:01, then it is price action up to 15:01 essentially. What is important to notice is the cluster of the down trend line resistance which is actually the 4th test which lines up with the previous high from 12.06.13. Here we can also see a massive double top divergence with a strong PD value of 1.5. Further signals in the lower time frames would increase the probability that the high from 12.06.13 is the reversal point.

Fig 13. SPX 5min chart at 15:05 GMT as the previous high is tested and the trend line resistance has been broken slightly. The blue line on RSI shows a wide region where RSI is flat, but price as made a higher high. This is the type 3 divergence, which is actually the weakest of the three signals that regular RSI divergences provide. However, the last 5 bars, shows price up, but RSI down 2.8%. What it this area look in in the 1min chart?

Fig 14. SPX 1min chart. Here we see the day high when price penetrates the previous high. Here we see a classic bearish RSI divergence. Price has made higher highs, but RSI has dropped from 85.2% to 81% for a -4.2% divergence. It is not >5% which is believed to be the significant level which statistically precedes price reversals, however at the test of this key resistance level in an established down trend, there are divergence in three time frames, which suggest a price reversal is about to occur. Lining up a horizontal level, with a trend line and an RSI DIV >5% in that time frame is called the cluster strategy, however RSI DIV in three time frames as the test of a key level is also called Fractal Divergence. Therefore, we now have a sell point known as the Fractal Cluster set up. Did the SPX come off?

Fig 15. SPX 1min chart. YES !!