Trading to Win - Bryce Gilmore

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Course

One Doy of o Time By BryceGilmore lcl2004

A completeguideto S&P500FuturesTradingIntra-day

All RightsReserued: BryceGilmore& Associates PtyLtd. Australia. Queensland.

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Trading to WIN Course - One day at a time

[c] Bryce Gilmore2004

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The Author: I havebeena successful traderin oneform or anotherfor mostof my adult life.I haveworkedindependently for myselffor the past32 years. In 1981whileI was in Londona traderfriendof minetook me into his broker'sofficefor lunch.This is whereI sawfor the first time a completely differenttradingworld,the futuresmarkets! WhenI returnedto AustraliaI openeda commodity futurestradingaccount, bought2 contracts of ComexSilverandproceeded to try my handat trading paper.MyfirsttrademademeUS$11,500 in twoweeksandI washooked. It wasn'talwayseasygoingbut overthe next few yearsI was completely absorbed withthe mechanics of the futuresmarketsandbeganto developmy ownsofturare to explorethe methodologies of ElliottandGann.

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BryceGilmore By 1989I had gaineda reputationas an authorityon Time and PriceAnalysis and becamewell knownto serioustechnicalanalystsfrom aroundthe world. It has beena pastimeof mineto teachpeopleto trade from my earlydaysin this business. In recentyearswith the adventof electronic tradingand cheap commissionrates the growth in day trading volume has openednew doors andthat is whatthis courseis about- takingadvantage of the opportunity. I believewith the helpof this TTW courseand also my Dynamicnme & Price Analysisbook (2002), anyonewho is willing to put in the hard work will definitelybe ableto makean excellentlivingas a professional futurestrader. Formoreinformation on my profileyou shouldvisit my web site: http: / /www. bryce-gilmore.com/

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Contents: Subject

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Introduction

Tradingto WINTools Section1: Practical

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CloseStops

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Market Mechanics- howfuturesmarketsoperate Suppoft - Resistance& TREND Three Bar Swing chafts - buyingandsellingbias Old Highsand Lows- areasof support/resistance The 50o/oBalancePoint Rule The 1:1 OverbalancingRule The 2 day correctionrule

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Shoft Term Trend Indicators

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Bars Bars- OutsideReversal ReversalBarc - Reversal Doji Hammers. Gravestone - Numerous examplesof Intra-day Patterns Revercal Patterns 3 drivesto a top. Reversal - Old - Breakouts ContinuationPatterns - Rectangles Support= NewResistance.

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GeneralPatternTools- Linesin the Sand- Higher HighsHigherLows- Lowerhighslowerlows- Trendlines Triangles.

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DailyRange. Days,TheAverage Gaps,GapReversal

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OpenInterest in futures markets.

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NewsEvents/ Repofts/ EconomicIndicators.

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Fail SafeTRADEENTRYtechniquesand exit rules.

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There are others but I will introduce these later in the course as they require extra knowledge to implement correctly.

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Daily RangePatterns

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Section1: Summary

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- tradingtools PriceGeometry Section2: Dynamic you needto understand to WIN. Ratios SacredGeometryandthe Cardinal

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Ratiosin MarketCorrections Geometric BearMarketTrends BullMarket Trends

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Alternate Waves& RetracementLevels The ReverseCross Inside, Outside& DoubleCrossLevels

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Approach My X-ABCDPriceGeometry

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Pastexamples reversals of X-ABCD Levels& Targets OddBallRetracement Bread& ButterTradingSet-ups MarketLogic

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Section3: Dayto DayandWeekto Week Daily Check List MOB(Makeor Break)Levels 1: 1 Overbalancing levels 61.8 50 38.2levels 3 day Swing AverageDailyRange DailyTrendIndicators MarketReports Weekly Check List Timing GannLevels ElliottLevels MarketMood

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Contract Rollover - 1"t Month Thingsto considerin the rolloverperiod.

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Section 4: Summaries The PsychologicalAspectsof Tradingto Win in the S&P500 A day by day accountof my experiences 2003. fromthe endof July2003to midSeptember My thoughts on how to beat the market

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A look at the S&Pmarket prior to publication

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Esignal- APPENDIX

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Information on my internet Tradingto Win Group: This group is a selectclub of traders,and is steadily growing.Detailsfor entryare on the bulletinboardof my website. http: / / bryce-qilmore.com / bulletin.htm Testimonialsfor studentsand professionaltraders: Theseareon mywebsite:

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http://www.bryce-g iImore. Iletin.htm com/bu Steve Rifl
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http://bryce-gil more.com/bulleti n.htm

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INFORMATION ON MY XABCD INTRA.DAY SOFTWARE pricegeometry Foranalysing eitherintra-dayor daily,

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qe.htmI http://www.bryce-g iImore.comDGBCDpa

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Tradingto WIN Cowse- One day at a time


Introduction: Oneof the failuresof mosttradingbooksI havereadin the pastis thatthey leaveout the "humanelement"associated with the day-to-day of behaviour mostof ourmarkets. Marketsare livingthingsand reactto currenteventsas well as technical eventsratherthanto just movealongwith no consideration for the outside you world,as mosttechnical bookswouldlike to believe. Technical Analysis tradingrequires an alonewill nota tradermake.Successful understanding of the players,as well as the technicaland the fundamental aspects of anymarket,anda continuing handson day-to-day approach. My way is all about technicalpreparation, studyingthe fundamentals, listeningto the currentnewsand evaluating the unfoldingchaft patterns beinggeneratedbetweenthe actionsof the buyersand the sellersin the marketsI follow. To trade profitably in real time only requiresyou to identify low risk entry oppoftunity in my opinion. This is the bottom line between successand failure. Simpletradingoppoftunities in the S&Pare often presented dailywith the releaseof US economicindicatorrepofts,FEDEMLRESERVE decisions on interestrate policy,ConsumerSentimentlevelsor specificpriceearnings repoftsof the majorcompanies highup in the S&P500complex. On top of this the intra-daymarketmovementis constantlyinfluenced by pressure points tradersusinggeometric analysis to buyandsellat perceived thatarerelativeto GannandElliottWavetheory. In times of indecision the S&Pmarketwill go throughaccumulation and phases.Thesephasestraceout or form patternson your chart distribution pattern that implyfuturedirectional tendencies. Eachandeveryconsolidation that a chartof the marketpricemovement formswill haveceftainreliable professional implications, implications that traderswill act upon. All it takes is some good or bad news to be releasedand this will set off a new seriesof impulse buying or selling that movesthe market to new DAILY highs or new lows. Thesesituations are our primary sourceof trading oppoftunities. Nevertheless the S&Pmarketwill nevermovegreatdistances in a straightline psychological up or down unlessthe fundamental attitudesurrounding or currenteventsis quiteunusual. TTW Course

lntroduction



Againyou haveto understand trendsare alwaysinterruptedwith periods where the exuberancein the marketflow slows down and WC : have corrections to bringthe buyersandthe sellersbackintobalance. Eachand every market correctionor suddenrevensalof trend due to an exhaustion behreen the buyers or the sellers is in itself generatingyet another new trading oppoftunity. Learning to identify these oppoftunities is the basis of my TTW Counse.Once you can learn to identify the low risk oppoftunity levelsalong the way where you can make trading entries you will be tradingto WIN. I amalsoalwaystryingto evaluate tradersversus the positionof the technical the impactof suddenunexpected newsthatcanenterthe market. I haveceasedto believethat one needsto be anythingmorethan a day traderto makegoodconsistentprofitsin the market.Wellat leastI have concluded wayto trade. thatwith 24 hourtradingthisis the leaststressful Therecouldbe occasions in differentmarketsthanI currentlytradethatoffer you tradeswhere enterandholdfor longerperiodsof time.I don'tdisbelieve thisbutevenwhenyoudo theystillconfrontyouwithsomesurprises. is OnethingI cantell you beforeyou beginto studytechnical methodologies, thatyou haveto havean appreciation that affect for the fundamental aspects the ebbandflowof the marketsthesedays. News surueillance is so fast now days that when somethingodd or unexpected happensthe marketplayersoften reactin a way that was not predictable viathe normaltechnical beforehand approaches. It reallygetsyou to understand why you needto havea fingeron the pulse eachdayif youwishto be successful. If you just want to breezein and out of the marketwithoutdoingany preliminary researchor watchingfor importantupcomingreportsyou are placingyourselfin a positionof luck.Luckhasnothingto do with tradingto WIN. Successful tradingis all abouttradeselection at the pointof leastrisk,getting out fast if it doesnot work immediately or lettingyour profitsrun whilethe marketshowsno signof reversing direction.

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Daytradingis all abouttradingpredominately in the directionof the shofterterm trend. This trend could be influencedby patternsand geometry occurring in differenttimeframes.It couldbe dueto l-minutebars,S-minute bars,3O-minute bars,60-minute barsor dailychaftpatterns.

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Makingdecisions to entera positionrequiresa currentopinionof wherethe marketis at, right now. Not yesterday or whereit will be at tomorrowbut now.Moneyis won or loston the spotor in the next20 minutesmostof the time. The noviceneverseemsto understand of tradingand as a theseprincipals resulttheyall endup losingmoneyinitiallyuntiltheygetthe message. Themarketis not likeanythingelsein life,it goesbackwards andforwardsall trend. thetimewithoutanyrespectto youropinionof the longer-term To be profitableyou haveto learnhowto dealwith the marketon a day-todaybasis. Notonlythat, you haveto learnhowto dealwith the marketon a weekto week,monthto monthandyearto yearbasis. In the largerpicturemarketsmovein seculartrendsandryclicaltrends,these trendsareobviousafterthe fact.A seculartrendcanlastfor manyyearsbut the cyclicaltrends,be they bull or beartrendsvary in length;The ryclical trendscan be motivatedby all sortsof economicdata and governmental influences. Cyclical trendscanbe brokendownintowhatI wouldcallseasonal weather,interestrate trends;thesecan be influenced for all sortsof reasons, policies,wars, threats of wars, companyearnings,employmenttrends, consumerconfidence,bank lendingpolicies,naturaldisastersand even terrorismacts. In a seasonaltrend the market will move through phasesthat are predominately influenced by the actionsof largetraders.Yousee,everyday the traderscometo workwith an opinionof whattheyexpectthe marketto that givethembuy do.Theyhavesophisticated systemsthey havedeveloped or sell signalsand they act on them.This is wherethe technicalindicators giveyoua guideto theirmediumtermactivity. Oncea seasonaltrend developsand the mediumterm positionof large tradersis knownthe marketmovement by the actionsthat is thengoverned haveshorter-termconsiderations. Theseare differenttypesof systemsthat shofter-termtradershavedevelopedor learntto take advantage of the dayto-daymarketmovement.It is whenyou get downto the nitty-grittyof the day-to-day thatyoucanappreciate the biggerpicture. To becomea successful the overallpictureand traderyou haveto appreciate thensubdivide trendsandthentrendsof the unfoldingpatternsintoseasonal be theytechnical a lesserdegree.Theneachdaytradethe currentinfluences or fundamental. During the day-to-dayactivity the market will move from oversoldto manytimesovera day. overbought andbackagain,sometimes TTW Cowse

Introduction



Traderswill buy and sell basedon technicalindicators and the priceranges theyunderstand to represent suppoftor resistance. The future directionof pricewill be dictatedby the balanceor imbalance betweenthe whimsof the traders.Pricedirectionof any marketonlycomes downto onething,i.e.,whois in the majority,the buyersor the sellers. To become a successful traderyouwill haveto monitorthe buyersandsellers eachday. If you know the pointswherethey will buy or sell or reverse positionyou havethe EDGEto beatthemat their own game.Thisapproach allowsyou to movewith the ebbandflow of the marketratherthanrestrict youractionsto somesystemthatcant adjustquicklyenough. Outlinefor this counsemanual: In 2002I saidtherewouldbe no needfor me to write anymore,but that published hasn'texactlyturnedout to bethe truth.Althoughall my previously workcontainsall the information I think is necessary to makea success of trading,I wasleftwitha slightlyunfulfilled feeling. I decidedto re-writethe TTW bookas a moreinformativecourseand then whencombined with my DYNAMIC TIME& PRICE ANALYSFbookstudents wouldhavea complete instruction standalone course. This manualwill take you throughin stagesusingthe methodologies in tradingprinciple the wayI do it. Muchof the materialmaynot be newto you but it is the waythat I combine it togetherthat makesit so poweful. Thismanualwill instructyou howto preparefor the tradingdayandthento staya stepaheadof whatis goingon asthe marketunfolds. My hopeis that this finalcoursewill act as a reference for interested traders for yearsandyearsahead. At leastI will knowthat everyonewho hasthis bookwill at leasthaveevery chanceof becoming a professional trader. The approachI am going to take is to lead you through the basics and then expandon them as we go on. The firct thing you need to learn is how to control risk. After that you can learn to be selective with your trading entries. Once you have mastered these simple things you should study the time and price material, the Gann material and the other criteria I have published in DT&PAso you will know the outer workings of the market place. TTW Cowse

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Tradinsto WIN Course- One dav at a time


It is very important for you to understandwhat can motivate other traders if you wish to be successful,as the market has technicians working on all different levels, i.e., they make decisionsbasedon data over different time frames. If you understandthe basic premiseof WAVESOF SIMII.ARDEGREE you will be able to monitor what is predictablein the intra-day' the daily and the weekly price movementof any market. Study this material a little each day until you have receivedthe messageI am sendingyou. It is in your own interest to do so.

YOU EMBARKON THIS ONETHING I NEEDTO TELLYOU BEFORE TOUR: levelsin All the technical thingsI will teachyouthat helpyouto pickreversal to the marketareindications of whatmighthappen,theyare not guaranteed work. At best,the bestsignals,maywork75o/o of the time.Theyarealwayssuspect provide much untilthey Notso on the intra-daybut in the larger confirmation. picture. andgive Butthe truthis thatwhentheydon'tworktheyarenon-confirmation youthe go aheadto keeptradingwiththe direction of the currentmove. As longas you alwaysbearthis in mindyou will not havea problemtrading with StopandReverse Orders,I am an expeftat it. If yourfirst Lifein the fast laneis aboutusingknowledge to makedecisions. your will. choicedoesnotworkthenit is mostlikely second I ama believer in thisphilosophy.

WILL: SOMETHINGSWIIL NEVERAPPEAROBVIOUSBUTOTHERS I reckonthat whenthe technicallevelsare moreobviousto the crowdthey havea greaterpotentialto work. You mustremember this becauseit will be the differencebetweenbeinga loseror a winner.

TTW Course

lntroduction



FALSEBREAKS: Falsebreaksare alwaysa problembut you haveto rememberin life that whenmarketsreacha levelwherethe technical worldknowsspellssupport players andresistance who thereare out there dont knowand maketrades thatwilltestthem. - no longerthan5 If technicallevelsare testedandthey breaktemporarily minutes thenanyreboundis the direction to trade. Thepatternsaftera falsebreakwill confirmthe reversal in anycase. Thisis impoftantfor youto learnas nothingin life is perfectin the electronic worldandyou mustlearnto adapt. 38.2- 50 - 61.8 levels: Theseare the levelsthat everyonerespects. Youwill knowif they are solid because the marketwill not breakthemby morethan 2 ticks.If it doesand reverses alwaysbarein mindthat on the nexttest they will mostlikelyget takenout. you are in the morereliablethey The higherthe degreeof wavemovement are. If theybreakyoucantargetthe nextlevelasyourbestoption.

THETWO.DAYCORRECTION RULE: Oneof my strongestrulesin tradingis that marketsin any prolonged trend shouldnot makeany correctionthat enduresfor morethan 2 daysif the trendis to goingto resume. Alwaysbearthis rulein mindwhenyouarein corrective movesasthe second dayalwaysprovides tradingoppoftunity. 3.DAYBALANCE POINTS: Thethree-daybalancepointis the mid pointof the last3 daystradingrange. Whenthe marketis aboveit, it is potentiallybullish.Whenbelowit, it is potentially bearish. Thisis onlya rulein the shofter-term of course.

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3.DAY SWING HIGHS & LOWS:

The3-dayswinghighor Iowevenif it is froman intra-daychartis the fastest wayto calculate the on goingtrend. If you get a false breakof the 3-dayswinghigh or low and the market pattern. youwill knowfromthe unfolding reverses Normally if the 3-dayswinghighor lowis takenout it is a signof a reversal, i.e.,if the marketis retreating on the currentmove.

THESEARESOMESIMPLERULESTO STARTWITH: If you followmy rulesandtradewith tight stoplossesyou canwin - if you chooseto usewidestopsyouwill lose.

NEVERFORGETTHIS: Never leavean open positionon if it is in a loss positionat the end of the day.... ALSO Believe what you see and not what you think,

The only thing easier than making money is losing it. You must trade by rules and disciplineto be successful.

TTW Course

Introduction



Section lt chapter r:

CloseStops: The first thing a trader needsto learnto becomeprofitableis to control losses. If thiswasthe onlythingI couldteachyouit wouldat leastgiveyoua profitable. 50/50chanceof becoming Givingthe marketroomto makeup its mindis not partof my vocabulary. As proven far as I am concerned my reasonfor takinganytrademustbe right immediately or I shouldn'tbe in thatposition! Marketsmovein thrustsbetweenimpliedsuppoftand resistance, if we enter positions at the criticalpointthe marketwilleitheragreewith usor it won't. Professional traderswhetherthey are systemtraders,programtradersor floor tradershavetechnicallevelsin mindto buy or sell off. The market ceateslevelsas it movesalongwhichwill eitherfacilitatetradeor rejectit. Themarketflowis all I am interested in asa trader. WhenI seethe levelsI am prepared to buy or selloff I will givethe trade severalchancesdependingon the degreeof price movementI think is possible at thetime. It is betterto take L or 2 smalllossesand be sureyou are the rightway aroundthanto sit andwatcha position turnsouron you. To staftwiththe marketcanonlydo 3 things:1. Goup. 2. Godown. 3. Gosideways. If youare buyinga breakoutpatternthe marketmustmakea cleanbreakfor yournewpositionto be profitable. If the previous wassay1100on resistance the E-mini,the breakoutpointwouldbe a tradeat 1100^4,as thisshouldbe enoughto catchthe initialstopsof the peoplearoundthe wrongway.Asthey get caughtout there will be moreordersnestedup aboveby the people givingthe marketa little moreroom.Theseordersshouldfeed the initial thrust into new territoryalmostimmediately the breakouthappens.If the breakoutfailsit is because tradershavesellordersin abundance nestedjust abovethe breakoutpoint.In whichcasethe breakoutwill becomea false breakandwill fail. Youwill knowthe breakoutis failingbecause the market doesnot movein your favouralmostimmediately. So if that happensyou shouldscratchthe positionassoonas it tradesbackbelow1100. Thesamesituationapplieswhensellinga supportlevelon a breakout. CloseStops

Section1: Chapter- I

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Tradingto WIN Cornse- One day at a time


Thereis no second-guessing a breakouttradeas it will be provenrightor wrongwithina matterof minutes- sometimes seconds! youto takethe If youget a REVERSAL BARon a falsebreakoutit is signalling reversepositionfor a quickscalpbackthe otherway.If you do takea reverse position youapplya closestopof no morethan1^4 pointson thataswell. Tradingto WIN is aboutgettinginto a positionthat will workwith the least possible riskto yourcapital.Oncethe positionis workingyou canthenthink abouttrademanagement. So let'sjust get thistacticfirmlyin yourmindbeforewe go anywhere else.I amtryingto createa foundation of goodtradingprinciples beforeI teachyou the finerpointsof tradeselection. If youarebuyingor sellinga breakoutpatternthe positionmustmovein your favourimmediately or within a minuteto confirmyour decisionwas the correctone.Othertradersmustbe in agreement with you or the tradewill not workanyway.If it doesn'tthenVouabandonthe positionandstartfrom you fresh.Thereis no pointsittingaroundwhenthe marketis not confirming are rightaboutwhatyou are doing.Hopewill not makeyou a profit!If you wantto be a traderyou mustacceptthat you are eithergoingto be rightor wrong straightaway - not in 30 minutestime. Forgetabout tomorrow because tomorrowis anotherballgame. Whensellinginto strength(marketis goingup in a correction) in a 3 day established the levelsthat you selectmustbe exacton ratioor a downtrend doubletop. Theselevelsmust not be exceededby more than 1 tick (2 maximum) too meananything.Thiswayyoucansella doubletop or ? 50o/o, evena 61.80lo retracement and placea stop1 or 1^4 just aboveyourentry point.The 1^4 is probablybetterbecause the sellscanonly be doneon the BIDand not the OFFER whichwill alwaysbe a 1 tick spreadat minimumin place. the first Thecloseryou cankeepthe stopthe betteroff youwill be in the longrun. The samethingappliesin reversewhenyou are buyinga RETMCEMENT in an uptrendingmarket. If you everhaveany doubtsin futurewhy you are not winningthen come backandreadthesewordsoverandoveruntilyouget it. You can only be a consistent winnerif you controllosses.You mustnever holda losingpositionunderanycircumstances. Youmustlearnto taketrades at the criticalpointsand acceptthey will be eitherright or wrongalmost immediately. A winneris a grinner- a loseris all but pasthistory.If you are in between thenI havehopefor youin the future. CloseStops

Sectionl: Chapter- I


[c] BryceGiknore2004

FORTOPS& BOTTOMS: ENTRYTECHNTQUES WhenSelling- If youdon't seethe CrowsSCRATCH Stoolossor SAR.

5 MinuteBAR,S

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.-.......-..........-..ft [ -- l point 6r'ids

Stoplossor SAR When Buying - If you don't saa tha DovasSCRATCH the CROWS or bOVES movayour STOP to When the t'eversolshov,rs breokevenimmadiqtaly.Onca thot is donethe cntry is riding for no risk. It will either turn into o WININIERor you ora out ond stort ogoin'

The SARis a stop and reverseorder that you can use becauseif the resistance or the supportyou soldor boughtoff breaK the marketwill at leastrun enoughfor you to retrieveyour originaloppottunitycosts.Most timesyou may not wishto takethe SARbut it is alwaysworthconsidering is an eachwaybet. whenyouthinkthe opportunity Nowthe realissueis in locatingthe levelto placeyoursellor buyordersand onceyou havethat workedout you will be kickinggoalswith the bestof them. trader. Onceyou refineyourentrypointsyou are goingto be a professional I am goingto tell Beforeyou can do that you will needto learneverything youin thisbook. DonttakewhatI saylightlyas if youdo youwill not befollowingwhatI have to teachyou and you will becomea statistic- a statisticis my wordfor a to bits. wouldbetraderwhoblowshistradingaccount Entering tradesat the pointof decisionis the onlywayyou cancontrolrisk, i.e.,unlessyou are in a runningmoveandjust jump on boardandplacea tightstopaboveor belowthe last5 minutebar. Nevergivethe marketmorethan2 pointsto proveyou rightor wrong,if you endup withthe arseout of yourpants. do youwill eventually

CloseStops

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Section l: Chapter- I

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[c] BryceGilrnore2004

ENTRYTECHNIQUESFOR BREAKOUTTRADES:

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BR,EAKOUT LEVELS

This is an exampleof a top patternthat was recentlydisplaying a sign of exhaustion andoffereda chanceto be shortingit. Therewas someto and fro in the middleof the priorrangethat causeda coupleof headaches but the end resultwas what counted.Noticehow the strongerbreakswereat the levelswhichhadpriordoublebottoms. The moreevidence that you canfind that the supportlevelif brokenwill hit youneedto gather. othertrader'sstopsis the evidence In any caseas we work alongyou will see how the logicalsuppoftsand resistancelevelsthe market has to break through,to confirm further impulses, haveto beobviousto otherprofessional traders. Wewantto bewiththemandleavethe"geese"withtheirowndilemmas. Onceyou can understand how to read the patternand the logicallevels yourcareeris beginning traderswilleasilyrecognise to forma foundation. Thiswill beyourfirststepin becoming a professional trader. But believeme nevergive the marketanymoreroomthan two points(B ticks),on the E-minithat is only $100.If you breakmy rulesand cop a beatingyouwill endup in so muchpainyouwill be betteroff to stoptrading untilyour mindreturnsto normal.Lossesare paft of this business but they haveto be controlled if youwantto stayahead.

CloseStops

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Tradingto WIN Course- Oneday at a time


ENTRYTECHNIQUES IN UPTRENDING MARKETS: I like to sell predominately resultsseemto comequicker,but you because haveto be a buyerhalfof the timeandyou needto understand the habiGof the marketto get setwithoutriskingto much. Breakouts in up trendingmarketscando oneof threethings. 1 . They break out cleanly becausethere is a force of buyers overwhelming the sellers. 2. Theybreakout andcomebackto testthe breakouthalfthe time. 3 . They breakout and get hit on the headby sellerssittingup there waitingto takethemon. Soyou have3 possibilities to consider whenyou aretakinga buysignaland youstillhaveto followthe mainrule- controlrisk. In a strongmarketthe breakout willcomeandneverlookback.In a mediocre marketthe breakoutwill come,exceedthe markethighit is breakingout of by a few pointsand then comebackto the breakoutleveland then regain strength.If the retestof the breakoutcomesbackmorethan 2 ticksinside the breakout levelit couldbetellingyoutwothings. 1. I am nota buybuta sellasthiswasa falsebreak. 2. I am notsureaboutthisandit is timeto remainon the sidelines. Youhaveto dealwith eachof thesesituations asthe markethandsyou more information. Trendindicators canhelpwithyourreadof the marketmood.

BUYING in or uptrendwith the 3 doy trand This wos q SELL here eorrectivehi

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Aswe movealongthe logicbehindallof thiswillbeexplained satisfactorily. Close Stops

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Sectionl: Chapter-I

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THINGSYOU NEEDTO LEARNTO BEA PROFESSIONAL TRADER:

1 . Closestops. 2 . Enteronlyat the pointof leastrisk. 3 . Studywhatthe marketpatternis tellingyou. 4. Learnthe habitsof the traderswhoknowwhattheyaredoing. 5 . Preparebeforeyou sit downto trade. Youhaveto understand that it doesnot matterwhatyouthinkthe marketwill do, it will not go anywhereunlessthereis an imbalance betweenthe buyers andthe sellers.Onesideneedsto bewinningfor the marketto trend. Theotherthingis that you canenterthe marketat anytimeyou get a signal thatis valid.Thesesignals appear5 or 10timesa day. Novicesneverget to learnthat the marketis easybecausethey rush in withoutstudyingthe marketflow.Manyjust listento brokersandtheydo not haveon linedatato seewhatthe marketis doing. Youhaveto havethe facilities of the professional traderto callyourselfone. Mostof allyouhaveto act likeone. The biggestcommonfault of losersis that theytakea positionandwill not getout of it whenthe writingis on the wallthattheywerewrong. Youwill alwaysknowwhenyou wererightandyou will alwaysknowthat if you took a tradeand it didn'tdo what you thoughtit wouldyou are now wrong.If it looK like it is not workingSCMTCHthe tradeand wait for a betteropportunity. To do anythingelseis stupidity. Askyourself!WouldI stayin a highstakespokergameand bet on the next carddrawnif I was holdinga 7 and an 8 - NOyou wouldjust throwthem away.Yet if you hada pairof Acesin the holeyou wouldbet the livingshit out ofthe pot. Thefirst thingyou needto learnto be a professional traderis to removeall the stupidityfromyourgameplan.Youmusthavea goodreasonto takeany trade. Youcannotaffordto be lanl or for that matterthinkfor oneminuteyou know whatthe marketwill do. Youmaythinkyou do but youwill still haveto wait to findout if youwereright. Oneotherpieceof advice- avoidforecasters as all theywill do is causeyou to holdlossesin the hopethe marketwill comebackandsaveyou. Themarketwill neversaveyou- you haveto saveyourself. CloseStops

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Sectionl: Chapter-1



SeCtiOn 1l chapter2:

MarketMechanics: The primary most importantasset for the professional trader is his understanding of marketmechanics. It cantake monthsfor the averagenovicetraderto understand the street sensethat prevailsin the markets.Mostnewcomers neverget to appreciate gone the experience because theyare long beforetheyrealisethattradingis common sense,nothingmore. There are so many "mad professors"out there that attempt to invent foolprooftradingsystemsit is unbelievable. Theycuruefit pastdatato work out the oddsof buyingand sellingwhen someproprietary algorithmthey havedreamtup repeatsthe "set up" that producedprofitabletradesin the past. Commodity tradingsystemsand horseracingbettingsystemsfail because of volatility,the marketis neverrunningin a consistent way monthin month out.Sureit maydo it for 3 or 4 monthsandtheneverything looK likeit is a licenceto print money. When you put these systemsto the test the "Eldorado" anticipated usuallyturnsintofoolsgold. Systemoperator's work on the pretencethat the marketwill "trend"around the minimumof 30o/o of the time.If it doestheycanculvethe datato their algorithms to projecta winningscenario. Thetruth is you can"cuwefit" any price series to a winning scenarioby manipulatingthe draw-down parameters. Systemdevelopers sell their scenarioto the publicinsteadof tradingit themselves. Thepubliclovethis stuffmainlybecause we havetradingmagazines devoted peoplejumpout of the bushes to promoting the easywayto riches Geezes; to get hold of this stuff. Boy! I couldtell you storiesI haveheardabout peopletradingsystems. Mostof themarefunnybut sadstories. I haveseensomesophisticated systemslastfor 15yearsor morewith several lean years in between,but in the end they all fall prey to the market mechanics. Or the peopleusingthemcan'tmaintainthe discipline requiredto just before tradethe systemandstoptradingit. Reason is continuous losses, the systemgetson a run. It takes a very specialskill to trade a systemand be successful, I'm not sayingtherearen'tsystems thatwork,onlythattheyarerare. Market Mechanics

Sectionl: Chapter- 2

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systemwith the How do I know?Well I actuallytradeda sophisticated years. but in the discipline It waswonderfulsometimes requiredfor nearly4 endwhenI wasn'ttradingit, and my ex-paftner was,it blewup likea land mineduringthe 1987crash. ThereasonI wasmoresuccessful wasbecause I usedto trademy systemon the system,i.e.,I useda scalingsystemon the system.My partnercouldn't standit, that'swhywe fell out.Onceaftera hugeprofitrun overa monthor twothe systemwasin profit$70,000a unit,I had2 andmy paftnerhad2. At lunchoneday I told him I wasclosingout, he saidyou cant do that,what will the otherswe managethe systemfor thinkof us?I said,"OKI will tell them', he saidno, he hada betterideahe wouldbuyout LVzof my units,I agreedandhe paidme the money.Hecontinued on with 372unitsfromthat th point,I hadonly a unit, nowhowstupidwashe to enterthe systemat that level? Anywaythat wasn'tthe end of it because the systemkept makingmoneyfor in another2 weeks,aboutanother$20,000a unit.At that stagethe positions I kepttellinghimto quit 6 differentcommodities wereextremely overbought. andhe keptlaughingat me for missingout. It reallyput a hugestrainon the relationship. Thenthe tideturnedandthe systemstaftedlosing,it's priortrackrecordwas neverto losemorethan50o/o / $25,000of its originalstakingplanof $50,000. Eventually over a short periodof 2 monthsit lost $55,000a unit before fromwinninghis turningthe corner.So he lost3% times$55K= $192.5K $210K Net resultafterlosses+$17.5K,I hadwon $155Kandgivenback In the 5 monthsor so my shareof commissions $27.5K,my net +$127.5K. backfromthe brokerswe weretradingthe systemfor wasalsoabout$35K. The realproblems the systemwith a newunitjust beganwhenI re-entered after it turnedthe cornerand then bailedagainwhen I got $20Kahead, whichtook onlyabouta month.I did that severaltimesoverthe nextyear whileI wasworkingon my WaveTradersofhruare andthenquitthe systemto trademy owndiscretionary WhenI quit so did 80o/o of the brokers approach. clients. Thenthe systemhit a brickwallin the crashof 1987andlost$65Ka unitin 2 days.SoI knowall aboutsystems, believeme. Thecraziest arethe systemsI haveseenin my 20 oddyearsin this business "Planetary theydon't Movement" systems.Nowtheseguysare unbelievable, evenhavea cluehowto tradeyet they manageto selltheir"pie in the slqy" systems to the gulliblepublic.Theymakeheapswithouteverriskinga penny in the market.Someof the buy sellsignalscan be 4 yearsapaft.NowI ask you howdoesthat systemknowif that marketwill be evenopenin 4 years time?

MarketMechanics




MARKET TRENDS Markets 30o/o of the time,overtime. usuallytrendapproximately Nowthat doesnot meanthey will trend regularly,only that the meanis around30o/o. Theycouldtrendfor 50o/o of the time overa givenperiodand go then choppyfor twicethe time.

it doesnot care The marketdoes not give you any guarantees, whatyouropinionis; it listensto the flowof moneythat is all.

MARKET MECHANICS so that he A professional trader needsto understandmarketmechanics knowshowto expectthe marketto flow. All marketsgo throughperiodsof inactivityfollowedby periodsof mediumor extremeactivityandthenmostlikelybackto inactivity. Knowing the reasonsfor the activity is paramount to your successas a trader. In short-termperiodsof 2 to 4 daysa marketwill gravitatearounda balance pointwhenit is in a stateof inactivityor mediumactivity.In extremeperiods of activitya marketwill movein one directionor the otherwith very minor corrections duringthe sametime frame or eltendedtime frames.In a protractedtrend the marketwill nevercorrectfor morethan a day or two beforeadvancing again,if it doescorrectfor morethan2 daysyou knowyou pointof the trendat thattime. havereached the balance to Usually the 2 or 3 daythrustperiodsof activityarefollowedby corrections prior level.Thisis usuallyin the the movement, backto whatI calla balanced ballparkof 50o/o(38-620/o) of the advanceor decline,havingdonethat they will attemptto test the priorhighor lowof the thrustandmoveon to a new level. Whenmarketsfail on a test of a breakoutthey normalcomebackto the balancepoint again.If they don't and then break out they provetheir strengthandaresafeto tradein the newthrust.If they comebackbelowthe balancepointtheyaresaidto be in a weakpositionanda changein trendis likely. I.e.,theywill startthrustingfor newlevelsin the oppositedirection.Eachday theybreakthe priordaysextremepointtheyaretrending. Youcantakethis analogyandapplyit to all time periodsif you wantto, but for the purposesof trading we only have to capturethe short-term movements to makemoney. Market Mechanics

Section1: Chapter- 2


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RESIDENT MARKET STOPORDERS All marketshavestandingorderssittingin the wings;they maybe to buyor to sell at dependingupon whichway the marketis breakingout of the previous 2-3-5-10 daytradingrange. Thesestopsbelongto peopleeitherprotecting a positionor initiatinga new position. Themarketseemsto haveknowledge of wherethesestopsareandwill often just move enoughto takethemout andcausea smallbushfire untilthe stop ordersare exhausted, then the marketwill movebackto test the breakout pointof the day levelor evenbreakbackthroughit andreturnto the balance prior or the day. for In timesof extremevolatilitywhena markethasrun hardin onedirection severalor moredaysthe marketwill exhaustall the newbuyersor sellersto the pointthat therewill be no oneleft to suppoftthe newpricelevel.When this happens the reactionis just as severeas the newthrust,in the opposite point. direction, movesthe pricebackto the nearestbalance

TRENDS DEVELOP BECAUSE Trendsdevelopbecause thereare morebuyersthan sellersor moresellers pointis price thanbuyers.And will movein that directionuntilan exhaustion reached. Usuallythe balancepointwill be exceeded untilthe marketwill not facilitate will depend trade,thenthe trendwill reverse. The dimension of the reversal people losing moneyas how levels staft on many and arecaughtat the new the marketreverses.The moreof them the fasterand strongerwill be the reversaland of coursethe balancepoint will be over-runin the opposite direction causing the samethingto happenagainin reverse.

MARKET FACILITATION Is a fanry expression betweenbuyers to describe the balanceor imbalance price andsellers? Themarket facilitates tradeas buyersandsellersarewilling to meeteachother. Someonlinesystemseven havea marketfacilitationindexto guideyou mechanically. The theoryis that as the tick volumemovesup or downyou or can tell if the marketis facilitating trade,i.e., is the volumeincreasing the market decreasing on the currentpricemove.As the volumedeteriorates priceis assumed notto befacilitating trade. Normally at anymarkethighor lowthe tickvolumewill reduceto nothing.

Market Mechanics




BALANCE POINT Whatis the balancepointI amtalkingabout? Wellthe balancepoint is the pricethat will facilitatetrade,i.e., the price wherebuyersandsellersareevenlymatched.

OPENINTEREST OpenInteresttells you the changesin activityof the main playersin the market.On any givenday therewill be moreactivityfrom daytradersthan longerterm holdersbut changesin openinterestare reportable andleavea clueto the stronghandsandtheirobjectives.

THEOPENING PRICE Oftenreferredto asthe bestkeptsecretby professional traders. Theopeningpricesetsthe"tone"for the day. a) 50o/o of the timethe openingpricewill bethe highor lowfor the day. b) Theopeningpricebecomes the dailycomfoftzonefor traders. the c) Traderswill buy and sell off the price movementsurrounding price. opening I will illustrate in anothersection. the tradespossible usingthisinformation AVEMGE DAILY RANGE Mostmarketsin an averagestateof activitydevelopa tendenryto tradein an averagerange. I.E.,Thedailyhigh/lowrangeof mostdayswill be the same around50o/o of the time. TheS&P500 futuresfor instance arearound18 points,or $900a contracton the E-Minicontract. Thetwo pointsto consider arethese:a) Is the currentdailyrangeinsidethe averagerange? b) Is the currentdailyrangeoutsidethe averagerange? A professional tradershouldbe awareof the averagedaily rangefor any commoditycontracthe trades,this way you will not be puttingtradeson whenyou are outsidethe envelopeunlessyou are sure of what you are doing. Theaveragedailyrangealsoindicates to you whenthe marketis buildingup energyfor a sharpmove.Themoredaysa markettradesin a tightrangewith smalldailyrangesit is saidto becoiling. Market Mechanics



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Basically it meansit is compressing like a spring.Whenit doesthis, stop ordersaccumulate on eitherside of the future breakoutpoints,oncethe ordersgo markettheywill causea sharprunfor a time.

DAILYLEVELS: OpeningPrice- High- Low& Close

Beforeyou contemplate traderyou will alsoneedto becoming a professional learnsomebasicfactsaboutthe marketplace. The OPENINGPRICE: The openingpriceis a leveldeterminedby the amountof ordersin the systemthatwillfacilitatefair-trading. Officialmarketmakersdeterminea level prior to the openingrotationof stockswheretheywill bid andoffer individual stocK.Theiractionsstartthe by ballrollingfor the day.Fromthereon the pricefluctuations aredetermined the supplyanddemandpressures of the day.

Themarket trades at the pnicethat focilitotes tnodes Thereis onlyonereasonpricegoesup or down: The priceof a stockgoesup becauseyou havemorewillingbuyersthan sellersandthe buyershaveto BIDUPthe priceto actuallyownit. you havelesswillingbuyersthan The priceof a stockgoesdownbecause sellersandthe sellershaveto reducetheirOFFERS theirpositions. to liquidate The marketplaceis a self-regulating auctionwherethe demandsof the buyersor sellersdetermine trade. the levelsthatwillfacilitate MarketMechanics

19




The DAILYHIGH: refuseto payhigherpricesThehighfor the day is the pricewhereBUYERS the firstsignof the highfor the daywill be lowvolumeasthe highis reached. of OFFERS therewill be an abundance As far as marketdepthis concerned andveryfew BIDSto keepthe marketrising.Asthe buyersareall consumed to find the next leveldownwhere the sellershaveto reducetheir OFFERS BUYERS canbefound. thereis no marketdepthof newBUYERS Thefast movesdownoccurbecause standing whenthe sellerswantto liquidate. i.Q.,it couldbe a Thehighfor the daycouldoccurfor anynumberof reasons, gather in abundance or it couldbe somenews technicallevelwheresellers releasewherethe buyersjust headfor the hillsor decideto liquidatetheir longpositions andbecomeurgentsellers. As traderswe need to be alert and watch for the SIGNSto identifythe reasons for the reversal. The DAILYLOW: is the Basically of the dailyhigh- the onlydifference this is just the opposite SELLERS dry up. The SELLERS couldhaveliquidatedall they want to for the day and are positions on the SHORT waitingfor higherpricesor theymayhaveprofitable just profit. at a sideand wantto covertheirpositions Whatoneneedsto be alertto on anygiventradingdayis the marketMOOD. Thereis boundto be someoutsideinfluenceeitherin the newsor some fundamental economicreportthat tradersare watchingout for that will influence theiractions. The DAILYCLOSE: The daily closingpriceis the placewherethe officialmarketmakersare prepared to meeteachotheron the BIDandOFFER. Forthe S&P500we have500 stockstradingall day and the CASHINDH( (SPX)of theirvalueis beingupdatedsecondby second.Thefuturesmarket of the CASHINDEXdirection.Buyersand tradeson the trader'sexpectations reasons. sellers comeandgo alldayfor manynumerous

MarketMechanics

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SUMMARY Nowif you can understand whatI havetold you in this chapteryou are half waythereto becoming a successful trader. youstillhaveto knowhowto execute I sayonlyhalfwaybecause tradeswith theminimum of riskwhentheoppoftunity arises. RISKmanagement is the singlemostimpoftantpaft of beinga successful trader.I haveseengoodtradersmakemoneyweekin weekout for long periods,andthenall of a suddentakea biasedviewof whatthe marketwill do andholda positionagainstall oddsexpecting it to comeback.I haveeven beenguiltymy self,my saviourhasonlybeenthatI havea ruleneverto hold a positionat the closeif the tradeis in a losingposition,no matterwhatthe cost,I haveto "eat" it becauseif I don'tI will not sleepat night.Eventhe nextday if it wouldhavecomebackI can livewith it because the oddsare you 50/50andI knowthe worstusuallyhappens hoping. I willtalk when staft moreon thislater.

I take the view that if you entera trade,for whateverreason,it will staft goingin your favourvery quickly- otherwiseyou are wrongtakingthe tradeandshouldget out quickly. All marketsdevelophabits and if you are astute enoughto understand thesehabitsyou will knowif yourtradeis workingor not. If your trade is workingstay with it until it showssignsof slowing. You must learn to never hold a losingpositionif you want to becomea successful trader.Youwill hearme repeatingthis over andoverthroughout this manual. Notes:

Market Mechanics




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Section 1l chapter 3:

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Suppolt- Resistance& TREND:

It reallydependson how manyordersare nestedat these levelsas to whethertheyactuallyturn out to become Ievels. SUPPORT or RESISTANCE

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I havealreadystatedthat the onlyreasonthe marketgoesup or downis the participation resultof the buyer/seller factor. andwhois the overwhelming

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Aswe movealongI will teachyouall the waysthat professional tradershave for selectingcertainpricelevelswherethey think the marketwill run into resistance or find suppoft.Someof the SIGNSthat the marketgivesare so easyto predictin advanceit becomes fromtimeto timejust to embarrassing knowof them.

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Support,resistanceand Trend are the 3 most importantissuesfor the professional trader. SUPPORT: Thisis the perceived levelwherebuyerswill returnto the marketandsellers willstopsellingandbeginto cover. RESISTANCE: Thisis the perceived levelwherebuyerswill stopbuyingandtakeprofitsand Sellers willstepup theirsellingactivity. SIGNS: Whenthe marketpricereaches levelsof perceived it will supportor resistance demonstrate signsas the buyingor sellingdriesup due to the increasein activitybythe sidethat anticipates the levelin advance. Professional Tradersgenerallyhaveseveralmethodsfor anticipating suppoft or resistance levelsin advanceandwill nestordersin the marketbeforethe price market reachestheselevels.

Thesimpleoneswe staftwithare:1. Double Tops 2. DoubleBottoms 3. 50o/o retracements 4. 1:1Alternate waveexpansion levels 5. 1:l Alternate wavecorrection levels 6. In uptrendingmarketsprevious resistance suppoft becomes 7. In downtrendingmarketsprevious supportbecomes resistance

Support- Resistance& Trend

Sectionl: Chapter-3

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Tradineto WIN Course- One day at a time


for you to Thesemarketpricelevelsaloneare enoughmarketknowledge makea successful careeras professional traderif you wereto tradewith a policy. closestoplossriskmanagement I oftenwonderto myselfas I watchthe marketeek its way betweenthese points"whois buyingandsellingin between". I cancome Theonlyconclusion to is that it is the trend followers,systemtraders,marketmakersor the gamblingpublic.Because any professional traderworthhis"salt"wouldwait untilthe criticallevelswerereached beforeplacingtheirtrades. The only way to guaranteesuccessin this businessis to only act when everythingappearsto be in your favour.You shouldneverchasea trade you missedthe train. I havewatchedsometraders,evendoneit because myself,losemoneytime andtimeagainbecause theydid not actat the right priceandchasedthe tradeinto a territorywheretheycouldnot applyproper riskmanagement.

TREND:

Youhaveall heardthe saying,"Thetrendis yourfriend"! Wellit is yourfriendbecause overtime a trendwill expandfuftherallowing youopportunities or oversold. to go with it or againstit whenit is overbought SinceI knowthereareso manytradersouttherewhohaveno moretechnical I knowledge of tradingotherthan to buy or sellagainstoscillatorreadings, we knowthat whenthe 3-daytrendis UPandthe intra-daytrendis oversold will likelyget buying.Theoppositegoeswhenthe 3-daytrendis DOWNand the marketis overbought intra-day, we will mostlikelyget selling.I cantake tradesat the logicalpriceslevelsthat will attractbuyingor selling.Someof thesetradesmay only last for a very short time but they can be very profitable. chaft You mustalwaysmonitorthe trendon a S-minutechart,a 3O-minute will give and a dailychartlookingfor situations wherethe trend indicators profits. systemoperators signalsto eitherenteror take It is very importantto understand thesethingsbeforeI teachyou the finer pointsof tradeselection; you mustfirstunderstand the basics. If you understand the basicsyou will developa streetsensefor how the marketconfusespeopleand leavesthem caughtin a trap for professional tradersto scalpthem. After all the facts are, 90o/ocometo the partyto losetheir money,it is a provenstatistic.We are hereto get it and the only way to do that is with discipline andknowledge. Support- Resistance& Trend

Section1: Chapter-3



Section 1l chapter 4:

Three Bar Swing Chafts: Thereare all sortsof TRENDINDICATORS but the quickestindicatorto act is upon the 3 BARPRICE SWINGCHART. goingup in trendarebreaking If markets thatwerepreviously backbelowthe previous3 bar low they are suspectfor a possiblechangeof trend in that degree. Thesameappliesin reverse to marketsgoingdown.

THE3-DAYSWING: Thethree-dayswingchaftis the bestMEDIUM-TERM indicatorof TREND as corrections in strongtrendsshouldnot persistfor morethantwo dqyr.They mightin the earlydaysof a newtrendbut whenyou get into a 3'owaveof ELLIOTT degreethe trendshouldbe wellestablished andstickto my rules.If you theydon'tthen shouldbe immediately alertthatthe currentmarkettrend is exhausted.

3 bay Swing

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WHERE HASTHEMARKET BEEN IN THEPAST3 DAYS? GOING This exampleshowsthe low on an OutsideReversal day breakingup for 5 days triesto selloff for 3 daysbreaksbackup for 4 dayscorrectsintothe 3'ddayandbreaksoutto the upside.It wasa confirmed BUYat thattime. 3 Bar Swine Charts

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We haveseveralwaysto determine the relevantdirectionas a guideto the We needto knowif the marketposition currentmarketstrengthor weakness. is ABOVE the BAI-ANCE POINTof the 3-dayMNGE. or BELOW TERMtrend. The 3 day Swingchartis an indicatorof the currentMEDIUM Theswingis eitherUPor DOWNbasedon the recentPRICE activity. 3-DAYSWINGCHARTS: Theseare constructed usingthe highsand lows of the past4 days.For instanceif the currentpricetodaymovesbelowthe lowsof the past3 days the swingis down- if the pricetodaymovesabovethe highsof the past3 daysthe swingis up. Eachsignalis a relevantappraisal of the mediumterm REVERSAL of the directionof the market. If the marketmakesan OUTSIDE past2 daysrangethe trendhaschanged. The 3-dayswingchartis the simplestway you can keepyour mindfocused on the generalmarketdirection. Onceyou knowthe generaldirectionof the marketyou canmoveontousing toolsthatwilltellyouthe strengthor weakness of the currentswing. I havetriedto drumthissimpleapproach intoeverystudentof minefor years - they (the and foundthat to somethe simplethingsare easilydiscarded. idiots)simplyforget to look at the obviousSIGNSand attemptto make Youneed decisions basedon otherthingstheythinkare moresophisticated. to look up the word "sophisticate" in the dictionary- it means- MAKE - makeworldly-wise! - a' la sophistication ARTIFICIAL, depriveof simplicity yourlife! makeit harderandcomplicate Keepit simpleandit is easy- that is my message. THE 3-DAYSWINGIS EITHERUP OR DOWN It will holdformwiththe trendso it cannotbe ignored.If the commitment of tradersis not in the direction of the trendit willtell youto beware.

The 3 HourSwingChart: If you wantto filterthe 3-dayswingchaftyou canmovedownin timeto the hourly3 bar swing- it's hardlyworthgoingdownto lessertime frames,for this you canjust use a SLOWSTOCHASTIC to determineif the short-term movesareshowingoverbought signals. or oversold 3 Bar Swine Charts




Usingthe hourlyINTRA-DAY dataoverthe sameperiodfrom the July24n, 2002 low shownon the chaft on page24 you can see how muchmore information to yourtradinganalysisand decisionmaking becomesavailable process.

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Youwill noticethat whenyou narrowdownthe time frameit allowsyou to gaina fasterappreciation to the current of the trendchanges or adjustments trendastheyoccur. Themarketis alwaysgivingsignsfor the futurepossibilities. 1. It couldbe makinghigherhighsandhigherlowsthat indicateit wants to keepgoingup. 2. It couldbe makinglowerhighsand lowerlowsthat indicatethat it wantsto keepgoingdown. 3 . It couldbe makingfalsebreaKof supportandreversing andindicating renewedstrengthin the currenttrend. 4. It couldbe makingfalsebreaKof previous levelsandfailing resistance to go on indicating inherent weakness.

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Youhaveto continually readthe marketmoodfromthe patternof the trading to stayin syncwiththe currentmarketmood.

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To assistyourselfyou shouldcontinually watchthe newsenteringthe market andevaluate the effectit is havingon the players.

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The newsis the foremostindication of wherethe marketmaybe headedin the short-term, makeno mistakeaboutthat.

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1: chapter5:

Old Highs & Lows: the habitsof It is veryimportantfor yourtradingcareerthatyou understand professional tradersin regardsto oldhighsandlows. Traderswill treat old high pointsas resistance until they are brokenand afterwards theywill treatthemassupport. Conversely they will seeold lowsas supportuntilthey are brokenandthen theywilltreatthemas resistance. Between the mix you will find oppoftunities to bothbuy and sellthe market witha limitedrisk. to Hereis just a simpleexampleof the process I havemanymoreexamples comeaswe proceed. of trading Neveftheless thisis oneof the basicprinciples thatyouneedto understand beforewe go anyfurther. Qcharts CSU

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The occurrences of this phenomena are morelikelyon the intra-daychafts varyingdownfrom 60 minuteto 5 minutethantheyareon a dailychaftbut theydo occuron the dailychaftandmustalwaysbeviewedas possibilities. The dailychaft is morelikelyto containslightfalsebreaksat majordouble bottomsor doubletops. Highs & Lows



[c] Bryce Gilmore 2004

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Section 1: chapter6:

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The 50o/oBalancePoint Rule: 50o/o of any marketrangeis an importantlevelto monitorwhenconsidering the currentmarketpositionandtrend.

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The50o/o levelof the past2 and3-daytradingrangeis the oneI placemost focuson.

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Tradershavebeentaughtforeverthat the 50o/olevelis the BAI-ANCE POINT or EQUILIBRIUM POINTof the marketactivityat anypaticulartime.

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Mystandard rulesare:-

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ThC2 and3-DAYRANGE:

1. Whenthe currentlytradedpriceis abovethe 2/3 dayBAI-ANCE POINT it is in a STRONG POSffiON. 2. Whenthe currentlytraded price is BELOWthe 2/3 day BAIANCE POINTthe marketis potentially in a WEAKPOSffiON. In most strong UP trending market moves the price retracements (corrections) shouldnot comebackbelowthe 50o/olevelof the prior3-day range.If they do thenthe degreeof wavein progresshasmovedto a higher degreewavemovement.If the marketdoesnot correctmorethan 38.2o/o of the 3-dayrangeit is in a far strongerpositionof trend.

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Hereis an exampleof the marketoverthe pastfew daysas I beganwriting thischapter. On the 3'd day of the current move up the marketwas encountering resistance It hadto tradehigher at the 61.8levelof a largerrangecorrection. to havethe 3-dayswingchaftrollto bullish. ESBS|{-10

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Onecouldarguethat the 620/oretracement wasthe overhead resistance and the rally had the potentialto fail. Well that was alreadya possibilitybut beforeit wasgoingto becomea realitythe marketwouldhaveto breakback belowthe 50o/o levelof the past3 days. 0charts f,SU g4E.0a

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The 50% Balance Point Rule

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no Alwaysremember that the 50% levelis the signof strengthor weakness matterwhatdegreeof timeframeyouarelookingat. Whatfollowedwasan insidedaywhichretraced38.2of the 3 dayrangeand foundsupport. Nowtherewasa holidayfor Memorial Dayon the Mondayfollowingthis last going chartandthe nexttradingdaywas to beTuesday27ffiMay. Echarts f,SU 954. BB

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Themarketopenedandtriedto testthe previous lowwhichwasthe sessions logicalsupportand then rallied- the rally neverlookedbackall day until positionsquaring tookplacegoingintothe close.

WE CANLEARNA LOTfrom the 50o/oBALANCE POINTRULE: You can evenformulatea tradingplanaroundit as the 50o/olevelof any rangeis the mostwatchedtechnical levelprofessional tradersarefocusedon. Theywillbuyandselloff it allthetime. Asyou progress withthis manualyouwill seethe numberof examples I have givenwherethe marketeitherstoppeddeadin its trackson a 50 or it broke throughand then the 50 level becomesthe supportin an uptrendor resistance in a downtrend. The 50% BalancePoint Rule

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[c] Bryce Gihnore2004

If you are lookingfor a suppoftto holdat a 50 level it is goingto be a strongertechnicallevelif something elsesuchas a lxl linesup with it, the goes in a downtrend. Youwill see what I meanas we same for resistance movealong. The thingto rememberalwaysis that if the markettakesout the 50 easily thenthe nextsolidpointof suppoftor resistance shouldbethe 61.8 Thetrendwill alwaysbecomeclearto youwhenthe 50 eitherholdsor breaks you will knowthat every and then you can tradewith confidence because professional other traderhasseenthe samethingandwill acton it. The majorityof professional tradersare onlylookingat the 50 andthenthe 61.8or the 38.2. Theseare not goingto explainthe marketgeometry all the time but oncethey are not workingtraderswill revertbackto old topsand to bottomsand other lessimportanttoolssuchas trend linesor indicators establish an opinion. My pointto you is that the 50 givesyou a clearinsightinto the trend in progress it is as impoftantas a hammer andyou mustlearnto useit because is to a carpenter asfar aswe areconcerned.

Todayafter re-editingthis chapterthis is what the marketdid and it is a perfectexample of allthe thingsI amtryingto teachyou. 0charts f,SU 1848. A0

ESO3Z-30

1s44.46 1848.ES

The morket openedon its high for fhe day modeo movedown and fhen went bock to the opening highond failed, The 50 ond the l:1 were support and w er e penetrated on two aftempts before the

1836.86 10.32.69 ilgzfr.w LEZ4.Bg LAZA.AA 1616.BB 1A1u.BB

r/q,

1488.AB gg/24/26fd3 B9/LI

69:34

The 50% BalancePoint Rule

ISZ7.g6

1:g,?J.75

31

16Z4.Z5

1B,z.4.?5 gg/24



Section

[c] BryceGihnore2004

1: chapter7:

The 1:1 OverbalancingRule: the mostimpoftanttradingruleI have The 1:1 overbalancing ruleis possibly wherethe marketwill go in the shortterm.I whenit comesto determining chaftfor intra-dayswingsbut it canalsobe a useit primarily on the S-minute greattoolin largertimeframes.

I I I I

t

The 1st rule is: -

I

marketimpulsemovements wavesof simihrdegreein progressive Corrective preceding greater waveof similardegreeif corrective thanthe shouldnot be the trendis goingto remainintactwithinthatdegree.

t

So let's start with the smallerwave degreeexamplefirst; this type of progression is morelikelyon a dailyS-minutechartwhena newtrendgets could be around3-4 pointson an E-Mini into progress.The corrections move. continuation

T I

t

Trsnd is intqct while cort'ections do noi becomcgreoler thon before

Oncea move of some substancebeginsit alwaysstafts from a market that hasbeenin forcefor a series reversal of somelargerdegreemovement of waves.If it didn't then the marketwould have been going sideways withoutanydirectional tendencies. thisruleis thatthe market whenyouareapplying Thefirstthingto remember with someconviction, in the intended direction mustlook like it is heading i.e., if the marketis goingdownit mustlook impulsiveand then the next andgivesyou the comesbackto a 1:1 with the lst hits resistance correction confirmation that it cannotrallyany higher.This is a signto re-enterthe alsoappliesto a marketmoveheadingup. existingtrenddown.Thereverse Rule The l:l Overbalancing

?)

' Sectionl: Chapter- 7

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WAVESof LOWER& HIGHERDEGREE: <.-NEWTRENDDOWN BE6IN5 HER.E (- lst CorrectionAB

<- Higher &gren l:t equafsl-? lron3 <- tst iargel 1:1ot [fl this is the larger of ab or cd

Marketwavesunfold1* aswavesof smallerdegreeandthentheyextrapolate intowavesof higherdegreeasthe smallerdegreewavescombine to formthe wavesof higherdegree. The 1:1 rule can be usedfor determining supportor resistance levelsin all degreesof marketwaves.Youmustdetermineif the markethasmovedfrom a lowerdegreeintoa higherdegreeto usethistoolcorrectly.

The l:1 Overbalancing Rule

Sectionl: Chapter- 7'


[c] Bryce Giknore2004

COMPLE(MNGE DEGREES:

In this examplewhenthe marketreversedtrend at (pointB) the correct1:1 calculation for the overbalancing rule becomes XA from B. Oncethis degree hasbeenexceeded ZYfrom B. the next1:1 becomes I only ever look backwards TWO DEGREE LEVEISwhen I am calculating markettargetson any giventradingday. If you staft trying to work out to manytargeb you will just confusethe issue.Unlessthe currentmarketis withinrangeof makingit to a 1:1I am not interested in it.

PROJECTING AN IMPULSEWAVETARGETPRICEUSING THE1:1 RULE:

The 1:l Overbalancing Rule

Section1: Chapter- 7'

I I I I

The benefit of the 1:1 projection tool is that it can give you a profit targettoaimfor. If the marketreaches the 1:1targetandcontinues on then it is tellingyouthatthe currenttrendin progress is strong.

t

I don'tconsiderreversingpositionwhenthe marketarrivesat a 1:1 impulse projection unlessthe targetpricecoincides withsomething elseimportant.

I I I I I I

Forinstance whena marketis advancing froma lowpricein a retracement of previous a rangeof largerdegreea 1:1 pCIectionmayterminateon a 38.2, 50 or 61.8of the rangeit is retracing. Thiscouldbe a goodreasonto reverse positionat the targetprice.



In contrastif the newthrustdoesnot reachthe 1:1targetandreverses trend it is tellingyouthe trendis weak. beforehand

;

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Situationslike these are especiallyimpoftantto you becausethe other technicians in the marketwill seethemandbe prepared to attackthe market at thetime. Youwill haveto remember as I movealongthat manyof the technical toolsI am teachingyouarewellknownto the top traders- whenI saytop tradersI meanthe guyswho trade 1000'sof contractsa week.The publichaveno chance at allwhenit is saidanddone. The longeryou watchthe unfoldingmarketeachday you will realisethat most of the things I am teachingyou becomeself fulfillingdue to the professional tradersparticipation. To becomea successful trader is not just a matterof knowingtechnical analysis it is a matterof knowingwhateveryone elseis up to. Understanding the potentialstrengthof technicalsupportor resistancelevelson any pafticular daycomesdownto howthe tradersarereactingat thoselevels. The 1:l Overbalancing Rule




FAILURE: 1:1 CORRECTION the littlethingsthat canprovideSIGNSof whatis likelyto come It is amazing asthe dayprogresses.

has Thisis a situationthat couldoccuron a regularbasis.The 1:1 correction you believing the marketwill take out the currentdayshighbut something the mindsof the playersand the marketcan'tdo it. A breakback changes throughthe 1:1lowis a SELLSIGN. FAILURE: 1: I PROJECTION


t I I I I

I Everylittle thing that happenson the day is impoftantto obseruein this in the next MOVE an UNDERBAI-ANCING Youcouldcallthisexample business. progression. Thebreakout of the highfailsandthe marketreturnsto the prior andthenbreaksfor a SELL. support.Thisonlyholdstemporally Rule The l:1 Overbalancing

Sectionl: Chapter-7'

I

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WHATCONSTITUTES A LEGffiMATE1:1 CALCUI-ATION: in an existingtrendin wavesof similar 1 . The 1:1 mustbe a correction degree. in an existingtrendin wavesof similar 2 . The 1:1 mustbe an expansion degree. In the examplebelowyou will seethat I dont considerexample[2] as a legitimate Thereasonis the marketwasgoingup priorto the 1:1 calculation. BC correctionand the 1:1 being calculatedis supposedto represent off is resistance for a correction levelwhenthe ABwaveit is beingmeasured expansionary. Thetwo dont mixin my book.

The rcosonexctrple [2] is not o legitimotc 1:l colculotion is becouseif is NOT in contsxt of the current trend " 1:1 B is higher thon X ond BC is grcatcr thm AB

ES63U-18

,1-- "teffi::"i;"Nofii="" This is o legitiinote

[3] is CORRECT

Thisview of minemay not makesenseto someof you and I knowthat it In my opinionD couldterminate certainlyhasa few of my students confused. A 1:1 is onlyoneof relationships. on anyratioof ABin contextof the XABCD possibilities. the If you stilldon'tunderstand the logicjust take my wordfor it anddon'tuse 1:1calculations as shownin example [2] as it onlyaddsanothercomplication whatdoesn'twork to youranalysis andour bestpolicyis to alwayseliminate for us.

I

Now I will showyou somethingsin the lesserdegreewave activitythat above. in the legup that is projected as [3] in the example occurred

I I I

At the time this happened in the marketsomeof my studentswerea little in the samedegreeandwhatactually confused which waves remained as to constituted a validpriceprojection usingthe 1:1 rules.

The 1:l Overbalancing Rule

37

' Sectionl: Chapter- 7



a prior All you haveto remember overbalances is that as soonas a correction correctionthe wavedegreemovesup a level.You can start anotherlesser the higherdegreewave degree1:1waveseriesbutyou needto alsocalculate 1:l'saswell. +13''6

These are the optinnsfrom the -5 correctionand hold good -_-_-----t unlessthe marketcorrecfs morethan 5 pointsIo exceed the swingwe qre mecsuring

frum,

I

rr

Neul Frojections After this high the Ll correcfionhas a mo
+13^6 *e

I

r

|

Now the -5 overbalqnc€sfhc prior -4 corraction rahatora lhe next 1:1 options? | lllry | | | |

in the in progress Thisis whatthrewthe spannerin the worK. Thecorrection -5 -5^4 (twoticksmore). chartaboveinvalidated the by declining Thecorrectwayto handlethissituationis this: +15^4

l-csser1:1

L A R 6 E Rb E 6 R ,E E WAVETO A,lEASURE -5^4 Just os longoe the new corraetion exccsdadthe prior correclionstha DEGREElbl THE WAVEShasto ba roised for gcometricreasons.

Just go with the FLOWone step at a time and don't confusethe issue anymorethanyou haveto. Stickto the rules- someare easierto seethan othersbuttheseexamples arethe wayI do it. The l:1 Overbalancing Rule

38


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Section 1: chapter8:

The 2 Day CorrectionRule: Oneof the mostimpoftantmentaltrendfiltersI canteachyou is the TWO DAYCORRECTION RULE. In a trendingmarketcorrections to the maintrendseldomlastfor longerthan 2 days.Theycanalsobe onedayonlycorrections if theyare reactions to an explosive dailymove. is that untila reversal Sothe thingto remember to the maintrendcontinues for over3 daysthe originaltrendmustbe considered asstillintact. Evenif the 3-day swing chaft rolls from long to shoft or short to long the 2-day correction rule over-ridesit. If we lookat the corrections in the S&Prun up fromthe March31slowto the June17hhighyou canseewhatI am talkingabout.Thistrendremained up for 54tradingdayswith onlyone3-daycorrection in the earlystages.

S&P586 High 1414.fiB Loru ?8S.58 Hge, €26.39

w p- ' ] J z i

.:_-2

{- CORR,ECTIONS OF LE55THAhI

3 b*vs B3BZ13

ffi4325

Thebullishtrendhadclearlyhaltedwhenwe hadmorethan3 daysdown. Sincethenuntilnowthe markethasbeenbackwards andforwardsin a large tradingrange. Maybeit is consolidating for a freshbreakto new highgroundor elseit is grindingitselfout for a fall.I'm not sureyet but it recovered in 2 daysfroma for it. hugeoutsidereversal Augustwhichsayssomething dayon the 22no

The2 Day CorrectionRule

39




Section 1: chaptere:

Short Term Trend Indicatorsl tr*ervat fTd--l

-r lffiffiF-l

f alssi.onsl

Eave all the right SIGNALSfOTA SELT old Resistance

00

Thc Slow Stochostic od Thc Dirsctionol /lAovancnt Indcx lirchsdic(14(1),3)

ti .4..

tl

00.00

A,,vc'\:verbought

||,,__t

#V

0@

\ ADX above both DI's

0 11 '12 t3 -:[l Frllav

14

15

10 11 12 06-m i,bffkv

13

14

'rs

olhulk'*

tradesthat Therearetwo indicators I alwaysmonitorasa filterto compliment going swing. to be counterto the trendof the 3-day are you If you are contemplating a tradeagainstthe short-termtrend,because takingplace,you shouldverifythe haveidentifieda geometricexhaustion potentialusingthesetwo indicators. havebeenworking if the indicators A shorttradehasmorechanceof success in Overboughtterritory. havebeenworking if the indicators A longtradehasmorechanceof success in Oversoldterritory. sellthat set itselfup Todaythe besttradeof the day was a counter-trend pefectly. A line of logicalsupportwas formed at the 975 level. The in S1C7.It wasa foregone rulewas in playas demonstrated Overbalancing would be nestedunderthe 975 conclusion that the daytradersstopsto sell had level.The potentialdownwas goingto be goodas the old resistance you canseefromthe the newsupportandthatwasdownat 966.As become to. illustration that is wherethe marketdeclined signals,I take for tradingcounter-trend Youshouldalwayshavegoodreasons mustbe right. themallthetimebuttheconditions Short Term Trend


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t I I I


Whenyou take a lookat this particulartradecloseup it wasreallya gift setup that shouldneverhavebeenoverlooked. ,e [---------

-l r*avalE--l

r as*i.*

I

-3^2-

l[,r/ Ih+fl,-o

''l ftffH *",nn:g:r,'L' 4

ll .r*

One fhing fo renrenrbcr ad fhd is irespcctive ol ie Gc.onelty at 979'4t}e P/4TTER]'|wos indicoting WEAKNIESS- thc CROWS were sqrolking orri lo{d befor.c the BREIK ol 975

The PATTERNS the marketmakescouldbe comparedto instrumentsin an airplanein thattheywamyouof the dangeror oppoftunity that liesahead. Youshouldstudysomeof the SIGNSI havenotedon this chaftthat led meto SELLthe breakof 975whenthe oscillators werein agreement.

Whenall the signalscometogetherTAKETHETMDE: ,o @-ll

I*a'el6-*-l

r-Arsm.

(Et)r& 1t:15:m o.m 0.m 0.m 0.m {1_4 &l

I I I I


I rur a 5lorr, Slochostic on o 5 rninule clrcl* os a rule - if helps

ShortTerm Trend

4l

Sectionl:Chapter-9

Trading to WIN Course- One day at a time


The 1* rallyof the dayto B terminatedon the 50o/olevelup 8 pointsfromthe sellersin the markettoday. low indicating that therewereplentyof technical point After the 6 correctionthat followedthe marketgainedstrengthand levelthat wasalsoon the 1:1 up ralliedbackup towardsthe current61.80lo (8x8). levelthe the 1:1 (Bx8)andthe 61.8retracement As the marketapproached into OVERBOUGHT Stochasticon my S-minutechart was headingwell on the mentalpositionof the daytraders. territoryaddingextrainformation IT WASA PERFECT SELLhereI thoughtat the time- I canplacea limitorder order2 ticksabovethe 1:1 to sell2 ticksbelowthe 61.8andplacea stoploss points. at the timeI figured. It wasverystraightforward for a riskof L^2 The reasonI use a little room on a limit order is to makesureyou get YoucanonlySELLthe BIDso if the hightickfinisheson an OFFER executed. youwill neverget executed if youcut it to fine. PRICE

TheBigPfT TRADEDCONTRACT

Price 963.53 Date 06ru3,m Time l1:50:00

I I I I I I I T T I I

t

Close 972.50 Csr% -0.2 # Bars16

I Incidentally the PITtradedcontractmadean exact1:1 (8x8)on the 61.8to traders my point.Theremusthavebeenplentyof professional demonstrate readyto acton thissignalwhenit camein. It wasas clearasthe trafficlights on everysecondstreetcorner.

In any case my messge here is to keep your eye on your Stochastic as you get near stronggeometricpointsthat havea for an intra-dayreversalin trend, it pays reasonable expectation dividends. Youwon'tbethe onlyonewatchingthem100'sof traderswill be. ShortTerm Trend

42


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SeCtiOn 1: chapter1o:

ReversalBars: Oneof the mostimpoftantthingsa daytraderneedsto payattentionto is the priceactivity,i.e.,the high/lowrangeandthe directionof the price S-minute activity. Eachnewchaftbaris tellinga storydepending uponwhatwentbefore. The bestway I find to visuallyfollowthe currentmarketactivityis by using JAPANESE CANDLESTICK chafts.The UPBARShavehollowbodiesand the downbarshavedarkor colouredbodies.Moston-linedata providers allow youto setyourowncolours.I useWHITEbarsfor the UPbarsandREDbars for the DOWNbars.

t

The examples in this bookwill showthe DOWNbarsas BLACK. The bodyof the bar denotesthe openand the closeand the narrowlinesindicatethe extremes between the highandthe low.

I I

TWO BLACK CROWS - 5 Minute Chaft REVERSALPATTERN:

t t I I I

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Thisis the mostimpoftantbarformationto be on the lookoutfor. In the case of an up trendingmovethe marketwill makea newhighandthe barwill be whiteafterthe newhighthe bodyof the barwillturn black.

If youwerewatchingthis bar unfoldyouwouldfirst seeit as all whiteas the newhighwasbeingmade.Bythe timethe marketmovedon to the nextbar it hadturnedto a blackbodydenotinga possible reversal in the priceactivity. The bar followingthe reversalcouldnot regaintrend and was also black bodied.Thisdenotesa reversalandtimeto actto protectyourposition. Two blackcrowsaftera newhigharethe first indication reversal short-term thata of trendis in progress. ReversalBars

Section1: Chapter-10



BARPATTERN: THEOUTSIDEREVERSAL Thisis the strongestsignalfor a temporaryreversalon a s-minutechartor with this bar majorreversalif it occurson a dayonlychart- the difference baris both andthe simplereversalbaris thatthe pricerangein the reversal preceding of the bar is lower bar andthe CLOSE higherand lowerthanthe thanthe lowof the priorbar. Outside Reversol Bar

Oncethe low of the priorbarto the highis brokenit is timeto act,don'tsit Bar on yourhandsto wait andto see,you alreadyknowan OutsideReversal is forming. are10/1on. If it doesthenthe oddsof a fuftherdecline WHITE BARSV,SBLACKBARS: Visuallythe mix betweenthe numberof Whitebarsversusthe numberof Blackbarskeeptellingyouthe stateof the trend.

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t I in a bulltrend, Two 5 minuteblackbarsin a row usuallysignala correction two white barsin a row generallytell you the correctionis over.You can reverse the process in a beartrend. ReversalBars


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GRAVESTONE DOJI: Thisbarcouldoccuron its ownor it couldconfirma reversalpattern.In this pattern. example Dojifolloweda standard reversal the Gravestone the high At first the marketlookedlikeit wasreversing andthen it attacked of the sellers again,exceeded it andthenfailed.Thisshowedthe conviction at the timeandthe factthattherewereno buyersaroundto takethe market higher.

6ravestoneDoji I

II +

61,8%Retrocement

Tl

l+l

{\nil i+

iil*r

fromthe Evenif youdid not seeit whenit happened the 6I.80/oretracement "set firstdeclineprovided for a goodchaftreader. up"situation a Oncethe markethas demonstrated a reversalof the short-termtrendyou normallyalwaysget a secondopportunity,either at a 50o/oor a 61.8% retracement. Youcansellintothe strengthwith limitedrisk.

I I

DOJI BARS: Thereareseveraltypesof DOIIPATTERNS of themall butthe maincharacter is that theyOPENandCLOSE the barat the samelevel.Theoryis that they areindicating indecision between the buyersandthe sellers.

t I I I I

Gruueslronc

ReversalBars

Doji

Hanging*ion




HAMMERS:

Hammers are similarin a way to the Gravestone or the HangingManDojithe onlydifference is theyhavea headlikea hammer. Neveftheless theycanbethe firstsignof exhaustion to the currentthrust. It is nicewhenyou seea HAMMER on a falsebreakof a MOB,i.e.,whenthe marketpricepenetrates a MOBlevelby a coupleof TICKSandthenreverses leavinga HAMMER BARor a barwith a longreversalleg.Evena HAMMER on any new low or high in the intra-dayS-minutechart is a SIGNthat the hammer impulse haspotentially stalled. Wheneveryou reachthe vicinityof a pre-calculated MOB(Makeor Break Level)you are lookingfor SIGNSof resistance or supportfor a reversalto occur.

iangle Morkel forces fail to close the gop

Honncr rJ 15 ninuies iltnl /r HOilitGF

l4ofrrcrthc OPEN

boublaTop

HommerBars You are not goingto see everysmallreversalconformto standardreversal bar theorybut you will see at least50o/oof reversals terminatedon BARS similarto the onesI havementioned here. TheseBARpatternsare an indicatorof the currentto the minutetrader interest- neverforget no matterwhat your overallopinionof the market directionis it is onlythe traderswhotakeit fromonelevelto another. Significant intra-day SIGNS for the professional daytraderare:1. 2. 3. 4. 5.

46

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Double Tops DoubleBottoms OutsideReversal Bars Gravestone ManDoji's or Hanging Hammers

ReversalBars



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Tradineto WIN Course- One dav at a time

Section

1: chapter11:

ReversalPatterns: Identiffingthe potential to yoursuccess asa trader. of patternsis paramount Topsor bottomscan form numerous typesof patternsthat leadto a daily reversal of trend. II.ITRA-bAY REVERSALPATTER.NIs

5 minute bors t\Aorkeitnokesa boseevsr on or longer.

:_hr

t I I I I I I


'i+fil

wiih reiesl

fricc Pon9€in eonsolidntiotrsmoll

Theseare commonand normallyoccurwhenthe top or bottomis not on a priceretracement recognisable levelto a priorlargerdegreerange. in the In the caseof a bottomit first looK like a continuation RECTANGLE makingbut the bottomsof the rectangle do not comebackto the originallow and in fact what happensis a bullishrectangleforms.This infersthat the marketis consolidating or forminga basefromwhichit canmakean advance backup. This top formationcouldnot get backto the first highto form a rectangle that andthe two blackcrowsbeforethe breakof suppoftindicated the breakout couldsucceed. Connotaven reoch lsi high!

I I I I

EXHAUSTIONTOF

ReversalPatterns




INTM-DAYTOPOR BOTTOM Followedby a 50 or 61.8 RETMCEMENT: The weaknessin the marketat a new high is evidentby the precise retracement, therein force. asthe sellershavecongregated

l'lev.rHI6H ->

RetrEeement 5O or 61.8

Breok ->> 5 minute bars

II{TR,A-bAYREVERSAL

INTM-DAYDOUBLE TOPORBOTTOM Followed by a BREAK OUT: Doubletopsanddoublebottomswill havemorepotentialfor profitif theyare a reversal backin the direction of the dailytrend.

R€VERSNL BACKIN THEbIRECTION OFTHE 3 DAY 5WI}'J6TRENID

ReversalPatterns


I I I I I I I I




TOPPING PATTERNS:

TOPFtI'LG F,ATTERFls

The commonthemeof a toppingpatternis that it will makethe top then retracebackto a recognisable lineof support.It will thenattemptto get back into trendandfail.The failurepointis the placeto sellbecause by the time traders the marketfailsnegativeopinionwill be in the mindsof professional andthe movewillbefuelledbytheirpafticipation.

5 minutes

Singlc Dcys Troding

In caseswherethe markettriesto breakto a newhighandcan'tcontinueon, lowbeforethe newhigh. the lineof supportbecomes the lastcorrection In all casesyou cannotbe sureif the marketwill makea re-testof a break out so you musttakethe tradeon the 1$ break. If by chanceyou get a retestandthe trendlookslikeit haschanged to downyoucanhammerit at the i.e.,was terminated, time. Of coursethiswill dependon wherethe breakout point. the newlowbeforethe re-testa knownsupport ReversalPatterns




TOPPINGPATTERNS:

lrghs <<<<<{<<<< Should trot bE more thon 1:1 ..1t, ,nfl I ft .lJul V

usethe1:lruleto sioyv,ith l*ofthl il:i:::::e Thenoviceusuallyhasa problemwiththissituation. Whenthe marketbreaks downonlyto returnbackas thoughit is goingto be a re-testbut it comes backabovethe baseline.So longas the advance backdoesnot overbalance a priorcorrection sincethe highwasmadethenthe trendis stilldown.

I I I I I I I I I

t Naw High -> Lowar HI6H

Braok back through retrocemcnt highs! <- Sell Foilure

higher low ->

THIS ONECANBEA EE,AL TESTER:

Everynow and againstrangethingshappenthat do not conformto your expectations. Asa traderyou haveto acceptdayslikethiswhentheyhappen. Thisdaythe marketsoldoff earlyaftermakinga newhighthen it formeda doubletop 3 ticK abovea 61.8,the nextlegdownto the higherlowdid not extendas onewouldhaveexpectedanda rallybackbeganwhichbrokeout of the doubletops. Onewouldhavethoughtwe wereheadingfor a newhigh at thetime! The signalto SELLcomeswhenthe marketbreaksbackthroughthe double topsasthis is the SIGNof a breakoutFAILURE. ReversalPatterns


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TOPPING PATTERNS: rA4poRTi{NT LEVEL------.

.. 1.... .

OverloppingWovas 2

NevisuFport FJ TLURE ERENK

l:t into HI6H 3 Drivas to o Hf6H <<-Sirong Upv.rordsmoveprior:

Mostprofessional tradersare awareof this phenomenon, as it is a signof short-termexhaustion in trend.Youcan obseruethis patternin the INTMDAYpriceactionbetterthananywhere elseso it becomes a SIGNfor you to watchout for when the marketrefusesto gain HARDLY any manymore incheseachtimeit breaksoutto newlevels. 3-Drivesinto an exhaustionphase reversalshould have OVERLAPPING WAVESin my opinionto showthe exhaustion process. Onceyouget the washoutthe marketcouldrecoverfullyon the dayor it may continue intoa two-daydecline. 956.BB 953. AB 95A.9S

3 DRIVESto cn EXHAUSTfON Corractions over-bolancing

94?. AB 944.6A 941.BE s38. 86

OVERLAPS

s35.A0

!|3z.sa 9ZS.A0

<- Thrustfollor,ued by Stognation

sz6.Ba

Thispatternis morelikelyto occurat newhighsin a bullishtrendbut it can still occur in an upwardcorrectionto a prior decline.The HffiAUSTION process becomes obviousafterthe correction to the 2ndhigh.

;

l1

ReversalPattems

5l

Section1: Chapter- l l

Trading thesepatterns:

I I

As you learnto readthe patterns- takingtradesat the rightplacebecomes easy.

t



of the buyers Themarketpriceis alwaysworkingto the strengthor weakness or sellerspreparedto committo the currenttrend - nothingmore and breaksBUY. nothingless.WhensuppoftbreaksSELL;whenresistance

If the market is going up you buy it; if it is going down you sell it. That is all you have to remember once you can recognisethe patterns. Impressin your mindthat the chartpatternsare tellingyou a storyof the and goingon betweenthe buyersandsellersandtheirstrengths relationship to a hit by the otherside each weaknesses. Whenone sideis vulnerable by oneside.It sidewill knowit and basically what happensis a capitulation mightonlybefor 5 or 10 pointsbut if you havea 10 lot tradeon thatcanadd upto a goodpayday. Onceyoulearnto readthe patternsyoucancallyourselfa trader. patternis the first thing you need to learnto becomea Understanding to your successful tradereverythingelse I am teachingyou is secondary continuing I couldtradeoff patternalonewithoutknowinganything success. else.Thepatternis the marketsfootprint.

THINGSTO REMEMBER: SOMEIMPORTANT Whenthe marketgoesup in a hurryit cancomebackdownin a hurryand viceversa. Whenthe marketis movingin tight rangesthen expectthe tight rangesto continue stanceor standaside. andtakeon a scalping

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Alwaysconsider the marketvolatilitybeforeyou starthangingintoa position andgoingfor the HOMERUNhit.

t

Themarketis notdissimilar ballmostof the time.Therisesand to a bouncing reallyspooksonesideor the fallsare accentuated whenthe NEWSFACTOR other.

t

ReversalPatterns

Section1: Chapter-ll

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Tradingto WIN Course* One day at a time

Section


1: chapter12:

ContinuationPatterns: Identiffingthe SIGNS that infera continuation of trendis enoughon its own to makeyoumoney. Themarketpatternwill unfoldin sucha waythat it infersthe currenttrendis stillintact. Whenyourecognize the signsyoucanenterthe marketwitha closestoploss eachtimeit movesintonewterritory.

.ffi BreakobovcoH high

Suppofton the 38.2retracement is a signthat the trendis strongandwhile the 38.2remains LOWSit is to makeHIGHER intactandthe marketcontinues indicating the direction is intact. In this examplethe waveup afterthe 38.2correctedat a 50 minordegree retracement by to the movedown.Thefollowingpushbackdownterminated makinga HIGHER LOW. The 1* SIGNafterthe 38.2 retracement camewhenthe of the continuation marketbrokeabovethe minor50 retrace.Thedepthof the retraceafterthe Forthe 50 retracenow becomes the benchmark for any fufthercorrections. trendto remainintact,in the samedegree,anysubsequent corrections to the upsidemovement shouldnot exceedthe lengthof this 1* correction. Afterthis 1-1 alternatewavecorrection, whichwasalsoa 38.2retracefrom the doublebottomthe marketwentsideways for 75 minutes.

ContinuationPatterns




t

1{r 5^4 : HIaHER IOTI/

ab=

13.58 cd=

6.?5

cdlab=

6.580

[C] Bryce6ilmore

Trend remainsinfaci becorsetha next correction doesnot bxcaadtha value of tha lst corraciion. .

ab=

5.50 cil=

5.5S

cdlab=

1.BBE

The unfoldingpatternproduced a tripletop - this occursthroughthe actions of the daytraderssellingthe priorhighs.Youcantell that theireffoftswere notgettinganyfollowthroughbythe shallowdepth. Afterthe 3'dtop the marketreceivedsupportat the levelof the reversalafter the 2notop. Confirmation of the continuation camewhenthe marketbroke outthroughthe topsof the rectangle that hadbeenformed. The ultimateend to this rallywill be determined by geometryin the larger picture. greaterthan5^4 pointsit is timeto lookfor selling Whenwe get a correction oppoftunities. The first warningwill be a correction that is greaterthanthe point latest4^4 correction. ContinuationPatterns

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t

Continuation Potterns

lPlrice

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SectionI: Clnpter - 12

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t t I I t I I



RESTAN6LE

5^4 l/l/hifst the correetions do rrrl excad ths 5^4 banchmarkthc trand is intact IPlrice

ab=

5.58 cd=

4.58

cd/ab= 4.818

Confirmation of a reversalto this uptrendwill be the marketpricecrossing backoverall the breakoutlevelswe havemadeon the way up as well as exceeding the original38.2correction of 13^4 in the largerdegree.

Ourguidelines are clear- if we followthemthe marketwill leavethe SIGNS to guideus.

So let's recapwhat we should have learnt so far in this chapter: 1. CORRECfiONS shouldnot get largerin an ongoingtrend of similar degree. 2. 38.2o/oretracements are an indicationthat the market is in a continuing trend. 3. RECIANGLES area signof a fufthercontinuation. pattern. to be in a continuation 4. Buythe BREAI€if the trendappears 5. Buyany retestsof the BREAK OUTSwith closestopsin a continuation pattern. PATTERN is intactas longasthe marketdoesnot 6. TheCONINUATION prior levels. BreaK should be clean in a BREAKOUT overlap pattern. continuation pricetargets. to establish 7. Wecanusegeometry





Continuotion Potterns [C]BryceGilmore

Breoksrlfrorning High-rt 1:1

ondmrlier high

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t Hereis an exampleof a continuation patternthat developed after a sharp correction beganon the releaseof a 10:00amreport.The reportwasn'tthat badit just camein as unchanged whentherewasan expected improvement. Afterthe fireworKsubsided the 1* rallywasretraced61.8andthe 61.8was madeon a 5 minuteHammeror Dojibar.A breakoutup thensucceeded into the zonewherethe markethadpreviously brokendownfrom.Thefollowing correction wasidenticalin lengthto the 61.8correction registering a 1:1 with it. The nextrallyhighpenetrated the openingrangebeforemakinga 1:1 (in blue)balanced correction of largerdegree.Thenextadvance whenmeasured off its correctionlow to 1:1 (in purple) came out as a double top. Theoretically this was a Sell point in my bookbut it did not work and the marketbrokeup andthroughthe morninghighsignalling a CONTINUATION anda BUY. Themoralto this is if youworkthe guidelines I am showingyouthenyouwill knowif the technicalpositionis continuing to be strongor weak.Theworse casescenario you on the day was hadto buy the breakoutof the morning high whenit came.But therewere severalothertradesbeforethat which stoodout usingmy methods.

t

BEAR TREND CONTINUATION PATTERNS: The sameprinciplesapplyto bear movesthe only differenceis that the declines willbeswifter. As the declinecontinuesthe correctionsshould not exceedthe prior - a doublebottomfollowedby a correction corrections greaterthan a prior correction is a signof at leasta temporary reversal in trend.Oncethe market beginsto overlapprior correctionhighsthe trend has changedor it is pattern. returning to a congestion


56

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','/"/" Tradingto WIN Course- One day at a time

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LARGERECTANGLES: Fromtime to time you will noticethat the marketgetscaughtin a BOXlike patternmakinga seriesof topsandbottomsthatareequal.Thisis knownas a rectangle andin charting termsimplies a continuation. Continuation meansthat whicheverdirectionthe marketenteredthe rectangle in the first placeit will exitit in the samedirection. Qcharts 8SU

rraz.Ea--

Rectongles- IldtPLy CONTfNUATION

109s.aB

1884.80 u81.BB 1B?8.BB

ESB'H-E

DoublcBo*'hon Foiluu Continuation down->

1875' BE lE?Z.g6

1869.80

r----___lltlxx+ E4/25 B,4/ZE

84/28

g4/28

g4/26

A /ZE

Oncethe rectanglebreaksfor the first time you can expecta retestof the break. The retestleg shouldnot retraceanymorethan38.2olo the length,of in this example,D to the failuresupportlevelandthen the continuation shouldbe ceftain. On the nextbreakof the failuresupportlevelthe breakshouldbe cleanand keepgoing. - it is Oncethe breakoutoccursin the first placeit is implyinga continuation just a matterof time. Onceyou canidentifytechnlcalbuyingor sellingoff specificlevetsthe whole approach to makingyour nexttradebecomes easy.You alreadyknowthat whentheselevelsfail the traderson the wrongside haveto take evasive action,andhelppushthe marketin yourpreferred direction. Thisis the samefor all consolidation patterns.





CONTINUATIONBARS: Thestrongest singlesignalfor a continuation of trendis the outsidereversal barin the directionof the priortrend. Thesesignals willapplyto alltimeframes. S&P5BB date AZEBZZ hi 966.88

trlrl

ilr

[gcleTrader

CONTINUATICIFISI6NALS lu date Hain

?F7.58 EZlB18

BUA?I?

BZE8ES

AZB833

BZB513

BE1BB3

BZIBZ.T

In both these examplesthe market had either overheadresistanceor underlying suppoftbasisthe previousnearbyhighsor lowsin the movesto date. The outsidebarswere a sign of powerand suggested that the breakouts wouldsucceed. youSIGNS. Themarketis alwayssending Thefirst exampleon the UPshowsthe marketreversing earlyon the 3'dday downfrom a doubletop. It actuallyturnedthe 3 day swinginitiallybut this signalwas negatedby the highercloseat the end of the day as the 3 day swingremained up. The secondexampleon the DOWNalsopenetrated the 3 day high but this signalwasnegatedas a swingchangebecause the marketclosedoutsidethe 3 day rangeandstillon the DOWN.Thisoutsidebar heldabovethe nearby breakout zoneon the daywhichwasnot surprising asthe breakoutlowwasa major50 of the wavesup to the August22ndhigh966.The next day the marketbrokethroughthe 50 andon it wentdown.




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Section


1: chapter13:

GeneralPatternTools: LINES IN THE SAND: The E-Minicanfrom time to time drawlinesin the sandovera 2 or 3-day period.Linesin the sandcan alsoform over manydays. Firstthe line is drawnas a resistance levelthen,sooneror laterthe marketbreaksthroughit andthen keepsreturningto that level,the levelhas now becomesuppoft. Whathappens at first is that traderskeepsellingoff the levelandaftenruards they keepbuyingoff it. The linein the sandbecomes the balancepointand anybreakeithersideof it signals a buyor a sell.


Linas in tha Sand

HIGHERHIGHSWith HIGHERLOWS: Whenyou look at a chaft you shouldsee immediately if the currentchaft patterncontainshigherhighswith higherlows,if so thenvisuallythe TREND is UPandshouldbe considered up untilsuchtime as it startsbreakingback throughthe swinglows.Oldswinghighswill offerinitialsupport. LOWERHIGHSwith LOWERLOWS: Thesamethingin reverseto the above,Lowerhighswith lowerlowsindicate a strongtrenddownis in progress anduntilthe marketbeginsbreakingback throughprevious swinghighsthe trendremainsdown.Old swinglowswill offerinitialresistance. Thereis muchto be learntsimplybyvisually examining thechaft. GeneralPatternTools




TRENDLINES: your Wheneverything elseis not clearyou shouldalwaysreveftto enclosing currentpatterninsidetrendlines. A trendlineis drawnup or downusingpriceextremes.

Irrf

*1,

'fl{

t*tt*,0,*;il# Er*akr . SEll $ell Cunfirm

I hr bsft opparhrnilies come wtsn tha trEnd lilre ir srrpporting 6 TrEnk rtruLirrrs"

If you are unsureof the pricerelationships andyou everneedto baseyour youcanusethe trendlineapproach. analysis of trendon simpleparameters TRENDTINESact as a broad guide to the general market direction, they also help to keep your mind thinking about which direction offerc the best trading oppoftunity. It always pays to rememberTRENDLINESwere made to be broken. They are most likely to break when they are suppofting a weak market structure such as in this example, A populartheoryamongst tradersis thatoftenwhena trendlineis brokenthe marketwill returnto the levelof the initialbreak.I havefoundthisto be an oldwivestail. Sometraderswill buy or sell on a test of the obvioustrend line and place their stoplosssomepointsawayon the othersideof the trend line.If the trendlinebreaKtheywill takea reversepositionandthenusethe trendline as a guideto marketstrengthor weakness. Sometimes the marketwill come backto test the breakof trend line similarf to the way a marketbreaksa highor low andthen comesbackfor a retestof the breakbeforeresuming the trendit hasjust begun. It is handyto knowthesethingsbut I onlytradeoff trendslineswhenthe marketis showingobvioussignsof exhaustion. GeneralPatternTools


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TRIANGLES: SymmetricalTriangleor CoilingPattern: The symmetrical triangleis a patternformedin a trend wherethe market goessideways for sometimemakinglowerhighsandhigherlows. Anotherdescription we havefor this phaseis COILING,that is the marketis buildingup energyto go somewhere. The longera marketspendsCOILING the ensuing the more unpredictable movewill be.The reasonis that all the pafticipants, bothlongandshoft,are gettingneruousaboutthe futuredirectionand preparing to bailout if their positiongoesthe wrongwayon them. You have to ALWAYSremember that the reason markets move one way or the other is becauseone side is capitulating.Trianglesform when buyersand sellercare in a state of balance.

t Bggqlogt goigfs-

I

il*ll

I

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points Breokout Coi I ing llltarkef Pattern

Edwards andMageewouldsaythatthis patterninfersa breakout will cometo the upside.My experience tells me that you couldexpectthe marketto go eitherway. Onceenoughtime haspassedfromthe originalthrust,whichoccurred before the congestion began,any momentum the markethadonewayor the other hasbeendissipated. Betterto beout andwaitfor a confirmation breakout. There are variousdescriptions for trianglesand each has a different implication. Personally I thinkthat whentrianglesbeginto formtheycanbe misinterpreted and just continueas enduringrangecongestion. Triangles are more reliablein fast moving markeb. GeneralPatternTools




TRIANGLES: ASCENDING& DESCENDING

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= Flattop withascending Ascending bottoms. If the ascending triangleoccursin a fast movingmarketthe higherlowsare an indication of the breakoutpotential. formof identification Anymoveexitinga triangleshouldhavesomeseparate triangle and the descending to confirmmarketdirection,i.e., the ascending havethe doubletop or the doublebottombreakasa formof confirmation. Thedescending trianglehasa flat bottomwith lowertops. The lowertops implyweakness so you wouldsellon a breakof the double If the marketwereto go bottom,whenthe marketconfirmsa continuation. up you wouldbuy only whenit getsout of the areawhereit couldstill be forminga rectangle.

fr'

T+

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I

GeneralPatternTools


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SectiOn 1: chapter14:

Gaps, Gap Reversal Days, Average Daily Range GAPS: Yearsagoin the dayswherewe hadrestricted tradinghours,i.e.,whenthe markets wereclosedovernight the gaptheoryprobablyhadmorerelevance. A GAPoccurswherethe marketopensthe nextdayoutsidethe rangeof the previous day. Therecouldbe a numberof reasons but the majoronewasthat somenews hadenteredthe marketin the afterhoursandcausedtradersto believethe marketwouldbe influenced to go up or downviolentlyon the comingtrading day. Justbeforethe dailyopeningof the marketthe marketmakerswouldmakea call indicatingwherethey were preparedto buy or sell, generallythe call wouldreflectthe buyingor sellingordersthey heldin handpriorto the open outcry. s&Ps8a date

hi

This wos fomousin tha 5&P pit bock on tha 333.88 r+o[*tl. doysEfter tha CRASH Ztnd Oct 1987tv.ro -"f low.ThEmsrkei opcned59^& dovmfrom a++r ' tl. the prior doysclosa.Andoll the floor' up thansold I trodcrs boughtit took it back ii off ogainffd then qt tha endof thc doy Accereration6Ap -rrrT I ii had recoverEdback inio ihc prior rdngc 8?1BBZ

, * t t t r ? l go r r l l*ol

GscleTrader

Io

ricrte fi?lEZB l'fain

<- Exhousfion S,4P lllsrkat opcnsuay balowprior doy

1s1.EB

8?E9ZB

t

t 8?1BBg

tl

r

87L8?'2,

r

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8?111?

8?13B3

Thestorybehindit wasthat someIargefundmanager hadplacedan orderto liquidate on the OPENas he was $100million all his fundsS&Ppositions underwater. Gaps,Gap Reversals,Avg Range

Sectionl: Chapter-14



Theorderclerksentthe orderto the floorpriorto the openbut no numberof contractswas mentioned. This all happened1 minutebeforethe market opened. Theoperatoraskedhowmanyandthe replywas,"sellas manyasyoucan!" Thosein the "know"on onesideof the pit werecallingthe marketdown50 andon the othersideof the pit thosewhodidn'tknowof the sellorderswere callingit unchanged. Within30 secondsto one minutethe buyerson one side of the pit had cleanedout the sellersandtookthe risingbid acrossto the othersideof the floorandthenbackagainastheytookprofits. As the storygoes,as told to me by a Eurodollar trader,therewere21 new millionaires madein the first2 minutesof tradingthatday. GAPSTODAY: Gapstodayvary in significance due to manyfuturesmarketstrading24 hours.In fact if you chaftedthe 24 hourdatatherewouldmostlikelybe no gaps.Welltherestillcouldbe in somemarketsas economic or production or croprepofts,are released at the marketopening. The realproblemwith the after hoursmarketsis that everythingis doneon lowvolume.Whichmeansthat a minorityopinionof wherethe marketwill go canbe overruledveryquicklyoncethe daysessionopensandmoretraders assume a differentopinion. (thesearethe guysthat tradeoff the flooreachday Thethingwith LOCALS providingliquidityto the market)is thattheyhavea tendencyto takeon the orderscomingfrom the retailcustomers because they think they can move the marketthe opposite way. Thesituationin the S&Pis uniqueto the S&Pin as muchas manyrepoftsare releasedat B:30amET an hour beforeWall Streetopens.The European marketsare openand they havea tendenryto reflectwhat they expectthe USmarketsto do on the day.Theearlymorningtradersusingthe electronic GLOBH(trading mediumcan run the market up or down based on expectations of what they think will happenwhenthe mainoutcrymarket opens.Valuations canmovewayout of syncwithwhattradersliketo call"fair value".FAIRVALUE is basedon the physically tradedstocK index. FUTURES MARKETS can trade at a premiumor a discountto the CASH MARKET. Futuresmarketswill trade at a premiumto the cashwhen the expectationis for the marketto go UP.The reverseif they expectit to go DOWN.Duringthe dayit is important thatyou monitorthe SPREAD. Gaps,Gap Reversals,Avg Range


I

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The SPREAD be it a premiumor a discounton the futuresto the cashwill provideanotherclue as to the future expectations of traderspushingthe marketin onedirectionor the other.

t t

Nowbackto GAPS:

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Thereasonis that largefundswill oftenSELLfuturesbeforetheydumptheir of stockwill stockon the marketas they knowthat dumpinglargequantities forcepricesdown.Theythen selltheir stockand buy the futurescontracts backaftertheyhaveit done. Whenthe marketGAPSfrom the previousday there is a beliefamongst thingand technical tradersthat GAPShaveto be filled.It is a psychological timeandtimeagain. thatis all.Butyouwillseeit happen So what we get from this is that the levelthat fills a GAPcan also be a pointto buyor selloff. I'm not bigon sellingor buyingthe levelthat decision level,Linein the Sandor a retracement fills a GAPunlessit is a recognised it paysto think aheadwhen gapsappearon your 1:1 level.Nevertheless chafts. ThebestexampleI couldgiveyouis onelikethis. S&P5BA 5E/95 date B3B5B5 hi 933.58

]i+

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6ri? '

I

| Tr

l-

SmnllGoP/'-.ll [' FillstheGAFand6AP5

rI r outthe next doy

t\ltorketfinds support on the €AP braakout

J I

1o rlate

Hain

?8fi.58 8383i"Z

B3E3B?

838318

B3B3Zfi

B3B4B9

B384ZZ

B3B5B5

of the waytradersacton Nowthisis not a surethingbut it is a goodexample theory. in the GAP massbecause of theirbelief On a day-to-daybasisusingintra-daydatathe GAPtheoryhasto havea placein yourthinkingbecause it eithertellsyouwhetherthereis strengthor is displayed on an weakness at that level.As eachnew pieceof information intra-day chaftyou needto readthe signs. Gaps,Gap Reversals,Avg Range




Thisis a 60 minutecharttakenoverthe periodwhere the GAPon the prior dailychartwaswaitingto befilled. Qcharts CSU

sBs.A6

GAPREVERSALS

8SS.BB 8S3.BB

t

887.08 881.04

I I

875.BB 889.BE 863.BB 057.BB

t

s51.BS 845.BB s3g.BE fla in

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E3/2I

E3/28

B3/ZA

64/gZ

8,4/87

9,4/IB

VARIOUS TYPESOF GAPS:

TYPESOF 9,4P5

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DAY: GAPREVERSAL AND AN OUTSIDEREVERSAL sfiF58S Higlr LLtq Egrr

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This tignol i* oflvoyc going to be c 5I6i,! of c major chorge rn tr-crd. Thc nargc for rhc dcl wc

EJB531

or+r d+ublc fhc *rcmgc

mnge ,

S2ffit:I

Youarenevergoingto seea reversal in trendsignalbetterthanoneof these. you When takeintoconsideration the magnitude of the daysrangecompared with the averagedaily rangeyou can see the magnitudeof the swingin sentiment thattookplaceon the day. Onthisdaythe marketwason a newall time lowfromthe March2000high andthe lowfor the daywasexactlya 50o/o declinein pricefromthe all time high.This is a commonGannsupportlevel.Technical buyersweresitting thereprepared to buyandtheydidat the 50o/o to the high. discount s&P5A0 High Lor,r Fge

366.BB 773.A9 193.BA

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<-- eAPREVERS/{L b/qv & OUTSIDER,EVERSAL

n E A D T

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6Z,6719 EZBTZE

BaBSBZ BZBEBS 028816

A Gapopeningoutside reversalday is the strongesttechnical reversalpattern. Gaps,GapReversals, Avg Range

67


DAYS: GAPREVERSAL

I I

to the S&P500on Fridaythe 6h June Thisis an exampleof what happened 2003.

t



I

HiB3.t-15

[charts CSU 1611. BO

1008^4

1085. BB

t

s|!|.00 sst.B0 s87.AB 981.BB s?5.00 s6s.m 963.BO S5?.BB 9s1.AB ffi/ffirw

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986.0B

SB?.?5

86/85

The market made a GAP OPENINGeven in the face of increasing UNEMPLOYMENT NUMBERSreleased an hour before the open. wasthatthiscouldhave Unemployment hadrisento 6.10lo andthe consensus beenexpectedat this stageof the forecastrecovery.

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t

TIHE CYCLE rfil AZTSLA TB] AZIZAZ

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rlags 53 degs 53.8 ueeks ?.6 Uears 8.1,17

I

before.reversing, The rallycontinuedup to the 1008^4level(7 times1214) points 1008^4was45 up fromthe 963^4doublebottomof the 3'oJune.The ls impulsedownfilledthe GAPand foundsupportat the previousbreakout of similardegree high but t9^2 down overbalanced the prior corrections position. up of 9 points indicating The rally back the marketwas in a weak could not get past the openingprice and started down again finally terminating the downmovefor the dayon the 50o/olevelof the lastwaveof similardegree.The rebsonfor the reversalcouldhavebeendueto the time ryclespresenton the day- manyinformedtradersknewof them. ClaleTrader

S+P 5ffi Ef,SH

PRIJJEf,T IOH tcl 83B3tZ tT1 838686 drgs BE degs 83.S u e e k s 1 2 -3 gears 8.233

:tAOO/t.61&

This is o SWINO CHART I keep of imporiort swings from ihe baginningof tha

I

BENRAltARKET Scroll

tiuirr$ =

Gaps,Gap Reversals,Avg Range

6 Jun &3

.....

68

t t

fA?.8S


I

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wotth his "salt" was One thing to rememberis that everyELLIOTTICIAN for a in newsletters awareof thesetime ryclesand they wereforecasting downturnto a heatedmarketat thistime. I am not makingany forecastsmyselfbut to havean all roundviewof the trader. to the professional markettechniques that movemarketsis important

t

as DAYshouldneverbe underestimated Theimportance of a GAPREVERSAL DAY. REVERSAL it sometimes asan OUTSIDE holdsthe sameimplications

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Aswe moveon fromthis marketpositionall we haveto do is followthe daily or non-conformation signalsfor guidance. Eachdaywe will get confirmation thata highof somesigniflcance hasformed.

t I I I I I

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I'll run you throughthe important thingsI will be lookingat comeMonday justto showyou. ES63r{-5

Qcharts CSU 1818.SB ffia?.oa 1:E,g4.B8 1881.gB

ss8.68 sss.EB

If tha 50 lsvel 986 holds in eorly trcding ilt\ondoythen the morket hos two lesistqrce points obova ii of 989^2 ord 994^4 a 38.? relroce of Fridoy's ronge ond the 1:1

lil : P95

sgz.Ba 98TI.BB s86. gB Sffi.BB 988.08 86/ffi/ZEE3 l'lain

a66,/s4

B6/ffi

65/95

ffi/EE

m/86

65/86

To negatethe implications DAYthe marketwouldhave of the GAPREVERSAL the of the TIMECYCLES to tradeabove998^2.To negatethe implication marketwouldhaveto tradeabove1008^4. The nextlevelsdownthat couldact as supportshouldthe 50o/oretracement comeout firstthing Monday are : 1 . TheLINEIN THESANDlevelat 979. 2. The1:1of the l9^2leg downat979 of similardegree,this 3 . Thenequalwavesdownwiththe priorcorrection is 3B^4downandliesat 970. 4. Thethreedaylowis alsoat970^2

Gaps,GapReversals, Avg Range

69




Youcanseetheselevelson the 15 minutechartI presented on page68. If you prepareproperlyeachday you will neverbe in for any surprises if the marketdoesdo something unexpected. 0charts

CSU

Current f,ange Z,2.58 prior rdnges 45.88 B.sBE 15.88 1,488 33.?5 8.867 18.58 1.364 51.84 B..t4t 38.58 8.584 31.56 6.714 2r.25 1.85S 3S.SB 0.5??

I t NExt Wove boek of similar daE'aa

-38.5 r.E6/ffirzaT3 Hain 84/39

I A5/ffi

BS/LS

I

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Hereis a chartof the recentsignificant swingsthe markethasmadeon the recentrun up. This marketwould haveto declineover 38.5 pointsand overbalance the lastwaveof similardegreeto confirma significant top. Usingmy methodsyou will alwaysmaintaina flexiblepicturein yourmindof whatthe markethasto do to confirmwhatthe currenttrendis andin which youshouldbetrading. direction

This is the BULLISH HICTUREtha morket is pointingto the FUNDS

CgcleTrader

Itff ZBg = 886.

Io date

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?67.58 8z78ln

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Froman analyst'spointof viewthis marketwas considerably at overbought currentlevels.But it is still clearlyin an uptrend.In the biggerpicture955 wouldneedto comeoutto forceyouto adoptan overallbearishscenario.

I I


I


70

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AVERAGE DAILYRANGE: 4 l'tn1 984.23 lfi hrlz s 5 1 .g s 33.14

s&P5A0 High Lorrr Rge

1608.58 ?BB.5B zza.Ba


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AVERAgEDAILY RAN6E Todoy's Ronge zz.4B

B3B31Z

A3B3Z8

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ffiA581

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430686

TheAverageDailyRangeovera campaign cangiveyou an insightintowhat to expecton anygiventradingday.On dayswherethe markettradesinside the averagedailyrangethe speculator andthe interestis usuallydiminished place. marketis lookingfor energyto go some If you keepa monitoron the averagedailyrangeyou will knowif the trading environment is actingin a stableor erraticmanner.Whenthereis actionthe rangeswill expandandoffergreateropportunity to the daytrader,thisin turn will attractgreaterspeculator interest.It followsthat on largerangedaysthe volumes will increase sovolumeis yourclueto whethertodayis goingto be a largerangedayor not. The hourlyvolumefor the day in the 1$ hourof tradingis mostlyalwaysthe greatestduringeachtradingday so the clueis to monitorthe volumefrom afterthe 1* hour.Whenyou get higherthannormalvolumesin the 2ndand 3'dhoursof tradingit is likelythatthe volumefor the daywill be greaterthan averageandthat the AverageDailyRangewill be exceeded on that day.This will giveyouthe clueto whatthe afternoon sessionmayofferas if thereare moretraderstakingpositions earlyin the daythenthe morechancemanyof themarelikelyto be pressured Thisis onewayor the otherin the afternoon. justsomething to thinkabout. you can The moreyou thinkaboutwhatyou aredoingthenthe moreSIGNS find to assistyou in your decisions.The problemwith mosttradersis that theyforgetmanythingsthat couldbe important andonlysee to theiranalysis them after the event.You haveto keepgoingoverthe thingsyou do day yourself. afterdayto keepimproving Everyday you shouldreviewwhat you havedoneon the day, studythe chaftsto seewhatyou missedandlearnfromit. Eachdayyoucanget better! Gaps,GapReversals,Avg Range




VOLUME CHANGES: ,otlffi--ll

ru"a 16**l

I- Arsessims

Low ss7.s0

-:;

Cbse 1005.50

. Ir,

.,*?+

i:* i;J"-guts6r+nr+ilj'11t+t+ur*+u' Vot t:+,etO -ll

Doily Ronges

Doily AverogcRongefrom itlolch 12:15.50

9.75

t7.75

13.75

TodayI figuredon the GAPREVERSAL beforeit wasconfirmedbecauseI had all the information At first it lookedlikean Acceleration Gap, at my fingertips. but afterthe 10:00ambarwasdownandthenthe Dojibarcameon the next bar it was time for a rethink. Thenyou can seethe healryvolumeon the 11:00amdownbaryou wouldhaveknownthat the earlybuyerswerebeing cut to bits.The 11:30ambar madeverylittleimpression on the previousbar andon abouthalfthe volume.Sellersattackedagainlookingto fill the GAP andtheysucceeded in doingit. Therewasanotherthingthe declineintothe youcan 1:00pmbarexceeded the 38.2o/o retracement andwhenthishappens nearlybetthat levelwill fail90o/o of the timewhenit getsthe nexttest. If you prepareproperlyand knowwhatthe othertechnicalandfundamental tradersare thinkingyou havea betterthan 60% chanceto makemoneyon the day.Thecasinooddsareonlystackedabout51oloin favourof the Casino andtheycanmakemillionsfromlazypunters. Onething you must keepin mindaboutthe marketis that it is a LIVING THING.It movesin one directionor the otheronly becauseone side has moreinfluence thanthe other. Beinga Fridaythere could have been other influencesfrom the buyers weakening as the weekhad beenan up weekand manytraderslike to go homeearlyon Friday's.If they havehad a goodweekthey may closeout theirprofitablepositions andgo flat overthe weekend, Mondaytheywill start from fresh.You needto understand the traitsof professional tradersif you wantto becomeone. Gaps,Gap Reversals,Avg Range


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Tradingto WIN Course- Oneday at atime


Tuesdayl0e, June 2OO3: Mondaythe marketopeneddown and groundits way down to a low of 972/'2.This left the threeday low intactat 970,so the threeday low for at 983^2 up 11from todaywas972^2. Theinitialmorningmoveterminated point yesterday's the 9 correctionfrom Friday. low,this moveoverbalanced to 976^4 fillingthe The new moveup was followedby a 61.8 retracement GAP,this correctionwas 6^6. Then a retestof the days high was made the priorcorrection followedby a correction of 6^2 whichdid not overbalance to the61.8. now. The3-day All signsare pointingupwardsuntilthe 6^6 is overbalanced swingis stillbullishaftertoday'strading. ElliottWaveexpertissueda As I expectedRobertMinerthe self-proclaimed newsletter over the weekenddeclaringthe Fridayhigh as the highfor the next6toSweeks. Qcharts f,SU 1815. BB

ESB3i{-5

ffill.48 1BB?.BA

lrlo confirmoiion this is a pcrmoncntTOP

1883. AB

sgs.Ba sgs.EE ssl.8B g8?.04

990^2

s9'2

s83.BB 9?S.AB 9?5.80

HIGHERLOWS

s?l.88 l'lain

and as the 970 The markettodaymadea goodrecoveryLATEAFTERNOON failure(38^4 downand the previouswaveof similardegree)area is still intactthereis no confirmation thatthe highis anythingpermanent. Nowthe 50 andthe linein the sandis the onlythingbetweenhereanda new high. ONEDAYATA TIME If you just movealongeachday followingyour rulesthe marketwill keep givingyouSIGNS of whatit is likelyto do next. Gaps,Gap Reversals,Avg Range


Tradingto WIN Course- Onedayat a time


Alwaysmonitorthe longer-term trendindicators, as thesewill tell you what the longer-term systems arelookingat. S&P5BB High Lou Rge

3 bcy Swing - UP

1S68.56 ?88.58

zza.aa

T R E lt I T B R D E

?

TigZag

4 t{ff1 985.58 18 HffZ 955. 5? 34. BB

i{orket hosto break 97O to confirm a chonga in t'r;erid. Closetodoy 986.7 STOCH lAB 75 %tl ft11

n v z

z5

t{

B

Thischapterappears to be gettingout of stepwith its themebut I preferto illustrate the thingsI do as I go along.Thiswayyou will learnthe contextof you. howI useallthe techniques I amteaching Themajorlessonhereis that I don'tknowwhatthe marketwill do, I canonly guess.But I do havewaysto tell what it hasto do to changethe attitudeof the majorplayers.I can developa tradingstrategyaroundthe SIGNSI am you.Thatis all I needto doto makemoney. teaching Forecasting will not makeyou any money,you needto knowhowto tradeto makemoney.Youneedto knowwhatthe playersarethinkingandwhatthey are likelyto do to makemoney.No amountof hopewill do it you haveto workat it andfollowrules. If the marketis goingup you buyit, if the marketis goingdownyou sellit. It is assimpleasthat. this weekandas theycome Thereare a lot economic reportsto be released to handtheywill exeftnewinfluences on this market.It couldgo eitherway in my opinion.A coupleof daysbackI thoughtit hadthe chanceof going it is goingdown. down,nowI am notsosure,it hasn'tconfirmed ButI do haveseveralthingsup my sleeve,as I knowif it breaK970 it will havechanged if it doesn'tthenthe trendup is still intact.Eachday direction, I candealwiththe micromovesastheyoccurandgo homefreein the mind is everything in this business as andstartfreshagainthe nextday.Flexibility soonas you try andforceyouropinionon the marketit will kickyou in the teeth. Gaps,GapReversals, Avg Range

74


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Tuesday17h June 2OO3: I havebeenawayfor a weekandthis is what hashappened. The970level held,therewasa selloff backto a 61.8Thursday andFriday(another2 day correction) but Mondaythe markettook off runningagain.The 3-daylow remained intactsothe swingremained up. Scharts ESU 1815.BB 1811.86 1BB?.BB 1883.86

Ncv,rHigh 1014^6

ESBSU_15

32

Controct Rollover

1zth

g9g.BB

sss.0B sgl. BB g8?.BA s83.BB S?S.BB

: Fridov' 1 3 r h ' : 1 6 r hi t Z t t t

s?5.08 E6,/L?/aEA3 |1ain

Todaywe madea newhighbut the rangefor the daywasverynarrow,9.75 points.The patterntodayformedan Ascending is Triangleso the implication for higherlevels.This is beingconfirmedby the lengthof the two-day advance at 32 pointsversusthe previous advance of 30.5points. To datefrom the marchlow of 788.5we are up 226.25to this new high. OpenInteresthasbeenbuildingat a rapidrateandis nowat its highestlevel in two years.All dailytrend indicators are readingextremelyOVERBOUGHT. The talk aroundtown is that the FUNDSare buyingso they can show participation intothe endof the quafter,aftersucha dismalpeformance over the pastthreeyearstheydarenot missout now, All-in-all the sceneis set for this rallyto cometo an end.Wearegettingvery cfoseto an impoftant61.8retracement of the January2002- October2002 range,thisliesat 1021for the S&PSPX(cashindex). Thereis a FEDEMLRESERVE meetingcomingnextweekandthe speculation is that they coulddrop the fed fundsrate by 0.5o/o. The rate is currently L.25o/o so we are livingin interesting times.The realestatemarketis as over cookedas I have ever seen it, it is hard to imaginethat the trend is sustainable. Gaps,GapReversals,Avg Range


Tradineto WIN Course- Oneday at a time

ilate hi


AZETB? 11?6.S?

Cgclelrailer

t

sPX - 5&P500 lo date

T I I

? E B .S 3 ffZ1818

I'lain

B1BSZB

Wednesday18s June 2OO3: triangle Tradingtodaybeganon a jittery note and negatedthe ascending DOUBLE theory.The futuresmanaged to strugglebackto makea TWO-DAY TOPbeforeweakness setin again.

1015.56

TOP TWO-D/4YDOUBLE

1614.00 1012.58 1411.BE 1BBg.58 1088.06 1866.5S

10s5.as 5I6N of WEiKNESS

1BB3.59 B,6,/I8/Z0E,3 gE/t? l{a i rr

llll

6E/t7

I I I I

Bj6/I?

86/1S

0/6,/18

E6/lB

t I I I I I I I

After I saw the openingt2 minutesI realisedthe marketwas mostlikely goingto be choppyagaintodayso I wentto bed.

I

On reviewthe only clearcut tradetodayI sawwasthe SELLat the double makingthe typeof top,the restof the daywasmarredwith constantoverlaps tradingI do very difficult.The past two days rangesare indicativeof a confused market.Therangetodaywas11.5points.

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Qcharts CSU 1815.BB 1011.68 taoi?.96 1863.SB

st|I|.as 995.64 s91.00 98?.08 s83.BB s?g.BB

This mErkci is raolly storting lo get boggeddown - thE trend is in doubtl

975.68 E6/1B/?g/g3 Hnirr

BE/lI

66/13

The only tradesI wouldcontemplate at the momentwouldbe a BUYif it brokeout throughthe two-daydoubletop or a SELLif it breakstoday'slow, whichhasnowbecome the 2-daylow. The pasttwo daysrangeshavebeen9.75 and 11.5pointsso what will be happening is that STOPorderswill be buildingup just outsidethis 2-day range.The averagedailyrangefrom the Marchlow has beenaround15.5 pointsandthe 3-daySWINGhasbeenup for 20 consecutive tradingdays. right now and the to showsignsof exhaustion This campaignis beginning gone fast too soon. thatthe movehas too MEDIAis toutingcomments llave Trader

lst Monih ContinuousFuturEs

IlffItY

tsl ffiA3lz tzl 83661?

1.618 b

rlltu. . . . Galendar

This coufd provc io be axlramely imporiont - confirmqtionis requirad.

s?

Ilegrees 94-4 Ilisplag 6?

HEEI{S 1 3 .S YEARS 8.262 PEICE... RffI{GE zzd.3B CHAHGE za.?Bft Bat ios

1.000

rld\[hltttil IPIrice

ab= 1B?.ZB cil=

173.38 cillab=

1.61?

up to speedI discovered Nowthat I havehada bit of timeto get my analysis high.Thisis importantstuffin ElliottWaveterms, thisgeometryat Tuesday's professionals longto seeit. it won'ttakethe Gaps,Gap Reversals,Avg Range




SectiOn 1l cnapter15:

OpenInterest in FuturesMarkets: The first rule to learn about Openfnterest is that it can only rise as additionalsellersenter the market. Somewill arguethat OI risesbecausenew buyersare enteringthe market but this is a FAISEBELIEFbecausebuyerscannotinstigatenew positions unlesssomeone sellsto them.Buyersonlyhavetwo choicesandthat is they eitherbuy from a new selleror they buy from an existingbuyerwho had alreadyowneda longpositionandis quittingit. In the lattercasethe newbuyeronlyassumes the existingpositionandopen interestdoes not rise. The sayingis SellersCOVERpositionsand Buyers positions, LIQUIDATE dont everforgetit. The secondrule to learn is that when OpenInterest is decliningthe existingsellersare closingout positionsand are not being replaced by new sellers, Largefluctuations in the OpenInterest(sumtotalof all contractsoutstanding) give you a clue to the positionsof the Fundsversusthe positionsof the Commercials or the generalpublic. The top tableshowsthe OI for the ESE-Minicontracts andthe lowertable showsthe OI for the SPpit tradedcontracts.The pit contractis 5 timesthe quantityof the E-Minicontract.Thissnapshot wastakenthroughthe rollover periodfromthe Junecontractsto the September contracts.

l.Lun{3 isep-03

112 57

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I

iUEC-UJ

Itvtar-ol lJun-U4 iseo{q Dec-04 Total lDelta

OpenInterest

t

78


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A cursorylook at the tableswouldindicateincreasing Sellersenteringand accommodating the exuberant Buyersasthe trendup hascontinued. S&F5BB High Ipu *ge

4 t{Rl 1885.85 18 r4RZ 5 7 9 .6 Z e5.43

Tha botle betwocn Buyors & Sellers

1615.88 ?88.58 a7-39

Uolunre t9?o?'8 I

n E H D T R R D E R

0per Interest ?s8?84

I'Iornrolly on a contrqct rollovar OI dacreues os Sellcrs codr qrt positiotrs on ihe finql settlsnent price of the

rtlqrkat is up on high volumeond increosing OI

Y

z ll

1

838618 1SB?.?B 1815.88

1BB4.S

It wouldappearright now that the willingSellersare holdingon the wrong side of the marketdirection.But there could be anotherreasonfor this unusualsteepincreasein sellersand that is they may be playingout an optionsplay.Theycouldhaveboughton the moneycallsat a cheappremium for insurance andplayedfor the marketto go downby selling.In anycasewe This will find out soonenoughas we aregoingintotriplewitchingtomorrow. is whenthe lune contractexpiresandsodo the Juneoptions.

Price 0-0O Dde tFfl $83 Opa10(ts40 Hgh 1011 50 Low tt!07,91 q@ 1011.4O Csr % 0O I Ears 23 Vol 1 2lA

lttir'rro,rrt-C T rTl

Thrs is the new SEPTEiIIBER coniroct cctivily - lhe rcceni week is fhe pcriod where oclive troding begire r.niil the outgoing JU|.IE comtroct expip€s.

Thethingthat looK oddto me (seethe tables)is that this pastweekthe OI in the September PitContract hasrisenrapidly. OpenInterest




Thefiguresfor todayareyet to be seenas they are repofteda day in arrears on the chart.The ESE-MiniJunecontracthasretaineda largerthannormal OI indicating theymaybe hedgingoptionspositions. In anycasethe thingwe needto knowafterthe expiryof the optionsandthe Junecontractsis how muchopeninteresthasremainedcurrentin the new September contracts. Withthe S&P500andthe E-Minithereis verylittletradingactivityoutsideof the currentlytraded ld month contract.This marketis not like a grain contractsuchas Soybeans wherelong-termhedgingor speculation occurson prices futurecrop versusthe supplies heldin hand. The realityis that as longas you storeyour beansand keepthemdry they are still one and the samething,yet you couldstorestockcertificates and they mightnot amountto anythingin the future.So why hedgethem?You usethemasa toolto buyor selloff basisthe currentstrengthof trend.There is a completely differentmentalityrequired. I often wonderwhy the averagepersoncannotunderstandthe differences betweenstockmanipulators andnormalcommercial businesses. The stockmarketmanipulators haveit easyreallywhenyou considerthe waystheycantry andmanipulate the marketsusingonlypaper. Thecluereallyis to try andunderstand technically whattheycouldbe up to. Fundsand Commercials Both couldbe both trade systematic approaches. tradingin the samedirection or theycouldbeopposed to eachother. The way we determinethis is throughthe weeklycommitment of traders repofts. The CFTCrequireslargetradersto repoftfuturespositionson a weeklybasis. Tradersarecategorised as FUNDS, COMMERCIAE or non-repofting. The FUNDS or the COMMERCIAIS arethe oneswiththe grunt,the littleguys are not very impoftantbecausethey are the oneswho losemostof their moneyovertime.Wellunlesstheylearnthe business andknowhowto acton the knowledge Problemis mostof themdon'tknowenough that is available. aboutthe market,I cantell you first handbecause I meetso manypeople joined who have attendedseminarsor the Club144room of mine that wouldn'tknowwhatdayit wasin termsof the marketposition. OpenIntereston its own may not tell you whatthe marketis goingto do todayor tomorrow,butwhenyoucombine the factswithall the othertoolsat yourdisposal it all begins to addup. you have to follow a You should never forget that to be a professional professional plan. Openlnterest

Sectiont: Chapter- 15


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Thursday19e June 2OO3: Todaythe marketofferedmanytradingoppoftunities but beforeI explain them,hereis a biggerpictureof howthe perceived suppoftsactedas signal pointson the day. The marketis now backto wherewe staftedout on Monday Believe whatyousee! andlookinglikeit is in a weakposition. Qcharts CSU 1815.08 IBLL.gg

tw?.8a 1m3.00 slg.0B st5.BB s1.BA s?.46 s83.AS c7s.Ba !r75.46 E6,/LS.ZAB3 l"la ir"l

E6,/AS

A6/LL

86/16

ffi/Lz

ffi/L$

Studythis chartbelowas it containsmanyexamples of whereyou cantake you tradesthe wayI havebeenteaching to date. -l t,ter*ut l---l

,"rlffi

f- Ailssbns i

'rEe l uw.ul )de 06fi9fi3 'im 09:30:00 )pen 10@50 {qh 100S50 .ow 100750 ]E 100875 lsr % -0.7 I Bars -1 6 lol 13,022

THIS IS Wt IKING LIKE A 5WIS5 WATCH TODAY. 00 1 008 86 r70 7%

180715r51 8%

Buy 10o3^4 2 DoyLow1003

ubt

-

lffiEEil

Taroet

| 1:1and 61.8 |

Achieved

Supports

;

/YtoJor

oErl

Buy )En

ore mode to be bnoken

, r"r.."-::\F-

,,,,,,lrlrrlr rnl,rrrlilllllllJllilrlh llllt',,r, I

1100't

rlrrlrl,l

As the marketmovesalong you just have to keep re-adjustingto the you presented opportunities basedon my rules.Youdon'tneedto be Einstein just followthe SIGNS.As longas you stopyourselfout quicklywhenthey don'tworkyou will makemoneyoverthe long-term. The onlyway you will positions loseis if youcontinue to holdlosing andletthemgetoutof hand. Open Interest

8l




(ES& SP)COT(Commitment LastweeksCOMBINED of Traders) CONTMCTS reporthadthe Fundsand Commercials net shortat similarfigureswith the (smalltraders)holdingthe otherside. non-repoftable Total 5&P500 NET positions (5P&ES contrncts axprossadas 5P) 150000

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t

100000

50fir0 -Non-Commercial Net -Qsrnrngysisl l{gl

0

Net

-580t10

-100000

Reportdctc: l0th Ju* 20t13 -150000

*"{'$-"$"$.}4"S#f"lS.}'$"$.kF$tF{"'$*:"e Date

meaningnewsellersandnew Goingintothisweekthe OI wasstillincreasing interestis comingfrom. buyers.Theideais to findout wherethe increasing The net positions andthe of the threegroups- TheFunds,the Commercials positions Non-Reporting are impoftantto monitorwhenyou seethe market reaching or OVERSOLD condition basisotherindicators. an OVERBOUGHT The big pit contractchangesthis weekare interesting but we alsoneedto in examine i.e., the ES the the combined contracts, and SP total. s6p soo srocr{ rrrDEXFUTUP.BSolrlY posrTro$S

FIT TRAbEb CONTFACTONLY .LS OF t]6.rr?,f03 -l

NO$N.BPON.TABLE POSITIO}IS

-;;;;--;;;;;-;;;il;;;i-;;;--,--;;;;;-l--;;;;--;--;il;-i--;;;;-,-;;;;;I

UO}I-COIIIIBgCIIL

{ 5 6 0 5 0 0 r ! i l D E XX S 2 S 0 . O 0 } CO}IIIITIIEIITS s5,?83 9e.34r eI,O?1 CIIAIItrESFS,O![06/10/03

s . o o s 1 2 5 . 5 5 ?|

TOTAL

lc0r{HBRcrsr | |

I

OPEI.I $'ITBRE$T:

519.S8?

{CH}I,IGEM

50r..14r

596,T4r

0PBII IIITEREST:

9,255

614.?53

19A .1AI

EOA.040r84.02S

?9.8641

??,r8o

8r.e39

2.684

-1.3?S

In the wcck fill Tuesdoythc FUNDS infl.,eoscdnct shori positions by 20.56? qnd thc €ommercialsmouedinto o net long positiorr but not hy much conridering the numher of contnccls thcy arc holding os o group. The non reportoblc positians fo'tour lhe long sidc. So it is thc FUND5 uee$qsthe COJdTI4ERCIAI-S ond the PI,BLIC.

OpenInterest

82


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E-IINN SdP 5OO STOCR TIIDEX - CHIC.E.GO }IBRCAITTILE FUTI'nES OULY DoSITIOUS .tS OF 06,rr?,/03

No!I-Co!$IEECr.*.[

($so x s6p soo ilrDExt

a7086

35364

36.658

LOrrE I

Volues redueed fo I fiffh 386.279

661,114

|

TUTAL

I

I COUTIITIIBIITS L35.429 L76.A2Z

EXCIIf,IIGE

479.366

I

$HOnT I

r.outr

OFEI,I flIITEREST:

| SIIOD.T 94S,ZO3

189,040 8?r1.594

466.43?

?O.609

-32.L6?

20.9ZO

61e56 LaZZaa 95673 17491S 93367 14le1

CH.LII68S FROII 06,/10/09 3Z,ZS3'I {CH}!I6E I}I I}PBII IIITEREST: -L?2O77 ?,918 ZS.St? 35.92O t1?.893 64,415 11.333

Clo=ingSHORTS

POSITIO}IS

IncreosingSHORTS

rtcducing longs increosing Shortr

When you exomine the ES eortro€tE it is the tleverca of the PIT contraetE so lrou nced to combine both rcports to get o sleqr pieture .

Weekly Funds Funds Commercials Commercials Public Chanqes Lonos Shorts Lonos Shorts Lonqs SP s00s 25567 62920 464L7 2684 -26415 7L84 -6432 ES(1/5m) 595 23578 -848 -3748 Net 70t04 s600 6999s Net No Net Analysis Buvers basicchanqe Sellers

Public Shorts -L375 4L84

2809

Thetotalopenintereston the 17frlune 2003combining the ESwiththe SPin termsof the biggercontractthe SPwasrepoftedas a gigantic987,820open contracts. Thismeansthereare493,910longsand493,910sholG. The Previous weekthe totalopeninterestregistered in at 901,606meaning we hadan increase in the weekof 86,2L4contracts.Halfarebuyersandhalf aresellers. Theaddedvaluefor the weelqat the closeof business on the 17h June,for the contracts on eachsideis $250x 1010x 43,t07or $10,884,5L7k (11 Billion).Moreimpoftantly thoughis that the openinteresthasrisen10o/o in a week. FromMay20h(totalOI was663,892) the OI hasrisenby 323,928 or 49o/o. Thispaceof increase in OI is unsustainable in a risingmarket,as eventually we haveto run out of buyers.Whenwe do andthe sellershavetheirwaythe marketwill fall underits ownweight.Therewill be no buyersleft to saveit! (Publicin the ES)takingprofitsandalso Therearea few smartnon-reporters gettingintopositionfor a turn rightnow! Thecracb are showingup in the dailypatternsrightnow,that is why I am currently lookingfor shofttradingopportunities allthe time. OpenInterest




Total 5&P5OONET positions (5P&ES confrocts axprassedas 5P) 15m00 10m00 5m00 trlarch Lorr ->>

Nlgt Nlsn-Qsrnrnsysi2l -commercial Net

0

Net

-5IlB00

Report Dcte: l7fhJrnc

2OO3

The basicNETpositionremainsmuch the samethis week but if you look at the patternat the Marchlow you will get the idea of what to expect.On the declineinto the Marchlow the NET publicwere liquidatinglongs,the NET commercials were coveringshortswhile the NETFundswere sellinginto the decline.

S&F5BB High Lou Rge

t|3s. AB ?88.58 146.58

OpenInterest rising in o folling mqrket

B3ATL4

B3ALZg

ASAZtr

a3EZZ6

B3A3LZ

Eventhough the NETpositionsof the PUBLICand the COMMERCIALS were rapidlychanginggoing into the low the overallOI was still risingwith the trend. Open Interest

84

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-10m00

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Afterthe Marchlow andthe sharprallythe shortswerecornered andhadto cover.They staftedto buckle4 daysbeforethe high forcingpriceshigher (theyhadto buyto get out remember) andevenwiththe dropfromthe high andthe closureof the Marchcontract to cover. theycontinued

S&PsBA High Lou Hge

985.A0 7S8.5S 116.54 Folling Opan Inierasi on a Rising Morket

<--Thisl day drop wqsq euhuloiive resuh from AtorchControetexpiry ondolsoShort covering.

Several observations I havemadeoverthe yearsarethese:1. Whenthe net Commercial against andFundpositions arein agreement positions the non-repofting therecouldbe violentmovesahead.The publicare not as organised of the or as professional as the operations Fundsor the Commercials andin any showof forcethe Fundsandlor theCommercials willwin. 2. Whenthe Fundsarein oppositenet positions there to the Commercials is a battleof systemsin place.Thesewill be resolvedin time but it paysto monitorthe changes as pricesmovealong.The reasonis that if onesideattacksor capitulates at the trendcan reverseor accelerate a rapidpace. positionsare likelyto end up losingthe 3. The publicor non-repofting due to the abilityof battlebetweenthe Fundsand/orCommercials thesegroupsto fundtheirpositions almostindefinitely. 4. In agricultural commodity contracts the Commercials aremorelikelyto controlthe marketovertime.The reasonis that they controlthe carry overstocK. 5. With eachcommoditycomplexyou needto studythe fundamentals and comeup with a sensibleview as to whichsideis actingwithin reason. Onceyou havea view of what seemslogical,especially basisthe current trend,it will be simpleenoughto comeup with an analysisof whetherthe marketwillfavouran up or downdirection.

OpenInterest

85


7



If you lookat the currentpositionof the S&P,right now you wouldhaveto concludethat the markethasalreadyturneddownor will do so sometime immediately in the future.The 2 daytrendhasreversed andthe 3 daylooks asgoodasdown. 0charts CSU u15.AA

ESA3U-1A

1S1Z.0g 1009.04 1886.BA 1Bm.AB 1098.aB s9?.9A gg4.0a sg1.86 988_AA 985.88 B6,/11

g6/14

66/16

06/18

B6/tg

ffi/a

Youneedto understand that as soonasonesidedecidesto takeprofitsor cut existinglosingpositions on masstheywill propelthe pricein the direction of a buyingor sellingimbalance.

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OpenInterestanalysisis a commonsenseanalysisprocedure that you need to go throughat leastoncea week.Maybethe resultof whathappens in this currentS&Psituationwill highlightit. Wewill see,but whenyou combine the 1.618geometry on the 17frJunesee51:C14:P77 we havea compelling case for an intermediate degreehighto be in place.

t

Wealsohavea situationwherethe marketadvancehasrun for 3 monthson speculation recovery,but thereis still no realevidence of an economic that justified the recentbullrallyis to the eltent that it hastravelledrecently.

t t

Theonlythingyoucouldsayis that we mayhaveturnedthe economic corner andthingswill improveovertime. OI saysthe majorityof professionals don't believewe arein a newbullmarketyet - theythinkwe arein a hugetrading rangemarketandwe areapproaching the topsideof it rightnow. Whichever the case,if we take it one day at a time and useall the toolsof analysisavailable to us,the marketwill tell us what it is goingto do next.At worstwe couldbewrongfor 2 days. If we stickto onesimplerule- BUYwhenyou seethe marketgoingup and SELLwhenyouseeit goingdown- youcan'tgo wrong. Openlnterest


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SectiOn lt cnapter16:

News Events I Repoft Days I Economic Fundamentals: FUNDAMENTAL VALUATIONS: Beforeyou can understand the effectthe NEWShas on the marketplayers youhaveto understand the underlying reasons why.Thefollowingis a simple explanation, but morethanenoughto giveyoua clearpicture. Many brokeragehouses,investmentfunds, both corporateand private, employa valuation approach to investing in the stockmarket. 1. In normaltimesinvestment housesexpectgrowthin stocksbecause the companies comprising the INDEXare profitableentities.If they weren't they wouldn't be in the top 500 stockswhen you are evaluating the S&P500. 2. Profitable companies are expectedto continuegrowingand thereby increase Theseincreasing valuations earnings. wouldincrease earnings (value basedon the existingcapitalization of all shareslistedon the exchange) andthe rateat whichtheypaydividends. 3. Analystsfrom all levelsof the investmentadvisoryfraternityissue EARNINGS ESTIMATES for the quarterandthe yearandrateindividual stocKasa BUY HOLD- SELLin simpleterms, 4. The individual listedcompanies to the alsoreporttheirown estimates streetfor eachquafterandyear. The FUNDAMENTAL reasonstockpricesriseor fall is primarif basedon the investorperception of future companyprofitsand dividendsand how the returncompares to the current10yearBONDrateof return. ECONOMIC CYCLES: Economic cyclesare knownto be eitherstableor they riseinto boomsand declineintobusts. Consumersentiment,employmentrates,capacityutilization(capabilityto meetdemand),inventories, interestrates,consumer value creditavailability, of the $, exportandimpoftimbalances area generalwaywe canunderstand if the economic note. rycleis on a positiveor negative The consequences of the economic cyclewill havean impacton earningsin variousmarketsectorsas productpriceseitherriseor fall basedon demand. NewsEvents,EconomicReports

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COMPANYDIVIDENDS:

The investormay or may not knowwhat motivatesthe profitability of the get in companyhe investsin but he doesunderstand return he will the dividends if the company is in a position to keeppayingthem. If the dividendratefallsbelowexpectations an investoris likelyto consider movinghis investmentelsewhere this is knownas sectorrotationin the investment world.

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SPECULATION: Speculation in the stockmarketis basedon the assessments of massesof investor's in regardsto perceptions on the fateof futureearnings. Therecanalsobe the perception by investorsthat somestockswill havehuge potentialin the long-term;or a perception will have that somecompanies poorfutures.Theseperceptions arethe causefor buyingandsellingstocks. Not all investorsare that astuteso they will buy and holdevenwhenthe investment sours.Butprofessional investment houseswill"manage"portfolios in a waywherethey movefrom sectorto sectorastheythinktheycanspread theirriskandtry andget betterreturnsthanthe overallindexwouldprovide. Strangely veryfew investment housesbeatthe overallreturnof the INDH(. Neveftheless theseare the conceptsas to why the marketmovesUPand DOWN.The marketmoveson accountof the actualpafticipation of the playersandtheiroverallperceptions of value. Psychologically the marketmovesas a wholebasedon why investorsare buyingor sellingstocks- a simplenewsreleasecansetthe ballrolling. Moneymovesin andout of the marketfromstocksto Bondsandto cash.At ceftaintimesBondswill becomehot andthe sharemarketwill becomeweak becausethe Bond marketoffers better returnsat the time. Other times moneywill flow backwards andforwardsfrom the stockmarketto cashand backagainpoweredbythe actionsof shorttermtraders. LONG-TERM INVESTORS: Long-terminvestorssuchasWarrenBuffethavea policyof buyinginto stocks of companies that havea goodcashflow,a goodprodu@a solidassetbase good and management. Playerslike Buffetseldombecomespeculative and buycompanies with unknownhistories. If the companies stockpricebecomes overvalued in histermshesellsup andmoveselsewhere. Hispolicyworks! News Events,EconomicReports

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A simpleinterviewwith a personlike WarrenBuffetcouldinciteinvestor buyingor sellingdepending on whathehassaid! THINGSTHATCOULDMOVETHEMARKET: IndicatorReleases. 1 . Government Economic 2. Largecompanies earnings reporting releases. value the 3 . Changes in the of US$. 4. FEDManipulation of interestrates. earnings. 5 . Newsof a naturethatcouldaffectfuturecompany It paysto watchthe NEWS!Evenfor the short-terminfluencesomeof these eventsmayhaveon the market.

THENEWS: The newsprovidesyou a meansof evaluatinghow the next eventbeing repoftedmightlikelyaffectthe dailymarket. Mosttimesif thereis any significant by some reportdue it will be preceded speculation asto its likelyeffecton the stockmarket.Thefuturesmarketmay havealreadydiscounted or inbuiltinto its pricethe likelyeffectof the repoft on the marketbeforeits release. Oncethe newsis in the marketthe futures willthenadjustto the news. Weekof June23 - June27 83.8 s5.0 85.0 Jun24 10:00Consumer Confidence Jun24 14:15FOMCMeeting Tucsdoy- no reports Mondoy (1st ofZ-day) -2.3% 1.0% Jun25 BE:30Durable Orders M a y 1.0% 5.80M 5.84M Jun25 10:00Existing Home M a y 5.90M Sales 1000K 1830K 1028K Jun25 10:00NewHome May Sales Jun25 14:15FOMCMeeting Bnd of2-day) a1 1.9% 1.9% Jun26 08:30GDP-Final 1.9% G1 2.5n/o 2.5o/o 2.5To Jun2E DB:30Chain Deflator-Final 42'IK Jun26 08:30lnitialClaims 86f21 425K NA 35 35 Jun26 10:00Help-Wanted May lndex Jun26 14:80FOMCMinutes

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Nearlyeveryday there is somereportor anotherthat hits the marketby surpriseor confirmsthe latestpricedirection.Mostlytheyareeitherreleased at 8:30amor 10:00am NewYorktime.10:00am is a criticaltimeto watchon thisweek. anytradingday.Aboveis an example of the reportsto be released

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Throughout to certain this manualyouwill seewhereI havemadereferences precipitated newsreleases heavybuyingor sellingon the day. or eventsthat

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Tradingto WIN Course- One day at atime


Generally the impactof individualnewsreleases on the marketwill be shoft lived,but it can be enoughto causelargetradableintra-dayswingsin the futuresmarket.It is not unusualfor the futuresmarketsto leadthe cash index up or down outsideof the exchangetraded hours basedon a perception traderswill buyor liquidate certainsectorswhenthe that physical dailysession opens. BLOOMBERG: I watchBloomberg eachday whilstin my officeas they coverall the NEWS releasesof importance. They conductinteruiewswith leadingauthorities, CEO's,Economists, MarketStrategists,and InvestmentAdvisors.All these thingscreatea moodaroundthe dailymarket. Reading impoftantfor a daytrader. the moodaroundthe marketis extremely OftenBloomberg will interviewtradersfromthe floorof the S&Ppit andask them what they expectof the marketduringthe day. You can see by what they say what is on their mindsthat day.You haveto alsoremember that just guys someof these aretrading100'sof millionsof dollars on an opinion andon somesmalltechnicalknowledge. Thebigtradersarealwaysawareof the oversoldand overboughtaspectsof the market- they knowwherethe buyingor sellingpressureis beinggenerated. I haveseenbig tradinghouse trader'sjust standon a priceandtakeon all comersat timeswhentheythink the markettrend shouldreverse.Oncethey exhaustall the buyersor the seller'sordersin the market,the pricewill movein their direction.Whenit getsto wheretheythinkit shouldgo theycoveror liquidate the play. I said at the beginningof this manualthat tradingis a thinkingman's occupation.Wellit is reallya highstakespokergamewith a difference. In this pokergameyougetto readthe cardsbeingdealtto you beforeyou place your bets.You can chooseto bet or check- if everythingis in your favour you bet, otherwiseyou stayout. Youshouldjust wait untilyou seea hand that lookslike4 Acesandthentakethe bet. Knowing the mostprobable workto stay directionof the marketpricerequires on top of it. Knowingwhat the marketpriceis likelyto do in the next 30 minutesis a licenseto printmoney.It all beginswith knowingthe strengthor weakness of the playerson the day.Forthis you needto be informed,you alsoneedto knowthe currentmarkettechnical levels. suppoftandresistance News Events,EconomicReports


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Youneedto understand the habitsof the players.Whenyou haveall these to stad the rightoppoftunity thingstogetherit is just a matterof selecting pickingthe moneytree. Don'ttradeunlessyou areinformedis the bestadviceI cangiveyou.WhenI tradeI amTradingto WIN - notfor anyotherreason. Monday23'dJune 2003: Todaywe havejust passedthroughthe Solstice, this cannormallybe a date What the GANNdevoteeswouldexpectto see a changein trend possible. theyexpectout of this oneI couldn'treallyguess.Butit is a dateeachyear to watchin all markets. Mylastchafton page86 wasa goodindication of whatto expecttoday. You see if you had beenstudyingthe openinterestand the 3-dayswing youwouldknowthata correction to this levelsandthe Overbought oscillators uptrendwas OVERDUE. And it was showingall the signs that a new downtrend wasin the process. Whythe hellwouldyou buy it wheneverythingpointsto easymoneyon a decline? whenthe marketis tellingyouit wasgoingdown. Especially work in Whenyou guysseethe reasonswhy psychology andfundamentals youwill havemadeit. withthetechnical Monday it openedon its highandproceeded to fallover.EasyMoney! ficharts f,SU 1015. BB

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Tuesday24thJune 2003: Insidedayrange9.5 points. All I want to point out abouttoday is the effect the repoft releasedat 10:00amhad on the players.The marketopenthe day with a rally.The previous largestcorrection sincelastweeK highhadbeen11.5pointsup.At 10:00amwhen the reportwas releasedthe marketwas up 11.25from yesterdays low (on a 1:1 reversalsignal).The repoftwas not as goodas expectedand it addedcredenceto the technicalsell that the professional traderswerewaitingfor. ESO3U-5 : . ConsumerConfidcnce Report roleosed , : at lO:OOon - com€sin qi 83.5 under the

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The major announcementof the week is the FOMCInterest Rate announcement is thattheywill dropthe at 14:15pmWednesday. Speculation rateeither0.25or 0.5olo the rateis currentlyL.25o/o. Howthiswill affectthe guess marketis anyone's about fromChairman Greenspan but the comments the stateof the economyaresureto havean effectonewayor the other. Thereis speculation that the FEDRATEwill eventuallygo downto ZERO beforethisrycleof ratecutsis overanddonewith but that seemsunlikelyto me. The highestFEDratein this cyclewas 6.50/o in May2000.Sincethenthey progressively havebeen cuttingit in an attemptto fire up the economy. Unemployment hasrisenfrom4o/oto 6% in the past2 yearsas businesses work on cuttingcosts. The problemwith theserate cuts is that they have createda debtbubbleas refinancing hasbeenrife in the recent of mortgages 2 yearsand they havealsocreateda RealEstatebubbleneverseenbefore. Thecommentwasmadeto me todaythat a onebathroomhousein SanLuis Obispothatwasworth$150k8 yearsagois nowsellingfor $500k.

NewsEvents,EconomicReports



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is similarto Mythoughtson the paththe FEDis takingto rampthe economy the difference whattheytriedin Japanandthat hasnotworked.Neveftheless different,so it betweenthe US and the Japanesementalityis completely mightwork.Whether it doesor notis notgoingto botherme. futuresmarketsis that you The beautyof this business of tradingleveraged canbuywhenpricesare goingup andsellwhenpricesaregoingdown.All you needis an officeat homeand the communication my tools.Basically proof.I don'toweany moneyto the bank,everything I business is recession haveI ownoutright,whichis a goodfeelingwhenyou realisethe stateof the on my house, worldright now.I haverecentlydonea completerenovation newkitchen,bathrooms etc.,I boughta newcar lastyearandI havea new boatsoI amsetfor lifeno matterwhathappens. Youcando the sameif you learnto tradethe way I am teachingyou.Keep your eyesandearsopenand followthe dailytrend.It is not difficultit just theywill not do the takestime anddedication. So manypeoplefail because dailyworkor theywill not takethe timeto get a holisticviewof the markets theytrade.

NewsEvents,EconomicReports


Tradingto WIN Cowse- Oneday at a time


Wednesday25s June 2003: Thebigday! FOMC announcement wasdueat 14:15pm ET. Wellit staftedoff witha rallyintothe 38.2of the rangedownfromlastweeks high.This rally terminatedon a 1:1 up move. The rally hit the rocksat 11:00am moveabovethe 990^2high. andcouldn't Qcharts CSU ffi15.96 1911. BB

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At first the marketshruggedoff the DurableGoodsOrdersreportearly morningit wasa badfigureasit camein at -0.3oloon a consensus of +to/o. From11:00amuntil about25 minutesbeforethe FEDannouncement the markethoveredaroundon extremelylow volume,I had soldit a coupleof timesbut had beenstoppedout, then I caughtthe first thrustdownbefore the repoft.Priorto thatI hadevenboughtit intothe 1:1for a quickscalp. Themarketgyratedon the reportannouncement but that is normalas people squareup theirpositions andre-settheirobjectives. In the first 5 minutesfromthe reportreleasethe markethaddived5 points and then recovered settingup anothersell.This was a ripperthe market divednearly9 pointsin a hurry I wason that for 7.25points. Afterwards the marketreturnedto the LINEIN THESANDfromyesterdayand this morningandsoldoff. I missedall this because I hadbeenawakefor 20 hoursandwastradingon adrenaline but it wasrunninglow andI hadto go to bed. Neveftheless it wasa very profitableday. I made7 trades- the first 4 were not that flashbut the worsepositionI got into was beingdowna net 1.75 pointson the first two trades. News Events,EconomicReports


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I recovered to +2.5 net on the next2 trades.ThenI lost1.5on a sellin the no volumezone. Managedto catch3.5 out of the sell off prior to-the selloff. announcement andthentook7.25out of the postannouncement If I hadhavebeenfreshI daresayI wouldhavesoldthe 986testat the line I in the sandbecauseI wasconvinced it wasa sell basedon the evidence. toldall my guysin theTTWroompriorto it in anycase. Qcharts ESU SII3.BB gg1. B0 No Voluma Zone

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Whenthe fat ladysingsyouhaveto bethereto makea move. The information in this chapteris as impoftantas any otherchapterin this manualbecause of the news. it mustimpress on youthe impoftance I couldn'ttradewithoutmy newsservicesbecauseI wouldfeel like a blind manwithouta stick. of WhenI combinemy tight stoplosspolicywith the technicalknowledge I am on wheretradersplacetheirstopsandthe valueof the newsreleases top of it mostof the time. Thereis absolutelyno needto forecastwhat the marketwill do usingmy tradingapproach. traderswill All it is necessary to knoware the levelswherethe professional market moves along.The act.Theselevelskeepchanging all the timeas the levelsor asa signsareclearlyobviousmostof the timeas eitherretracement the logicalbuy 1:1 geometryin the wavesof similardegree.Asyou approach you will be demonstrating or sell levelsthe newswill help or the market All you haveto do indications or oversoldconditions. of intra-dayoverbought is go withthe flow.

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Section


1: chapter17:

FailSafeTradeEntryTechniques: ENTRYTECHNIQUES: Mybestentrytechniques to entera tradeare: 1. 2. 3. 4.

Buya breakout of priorresistance. Sella breakout of priorsupport. Sellintostrengthwhena bearcorrection looksexhausted. Buyintoweakness whena bullcorrection looksexhausted.

In all casesa tight stoplosspolicymustbe implemented. Youwill be rightor wrongaboutthe levelyou selected in no timeat all.Thereis no needto risk morethan6 ticksif you canexecuteyourorderwithin3 ticK of the decision pointyouselected to takethe trade. EXITTECHNIQUES: 1. 2. 3. 4.

Exiton a pre-setstoplossif the tradedoesnot workimmediately. Exiton a breakeven stopif the positioninitiallygoesintoprofit. ExitwhenI feelthe marketmomentum hassloweddown. Or exit on a trailingstop I movealongas the trade becomesmore profitable.

Beforeyou get into a tradeyou haveto havean escapeplan,that is the reasonyou shouldonly trade liquidmarkets.Marketswithoutliquiditycan trapyou.Thatis why I nevertradeoptionsthesedays.

PROBABILMESON EACHTMDE ENTRYBEINGSUCCESSFUL: Whetheryou givethe marketroomor placea closestoplossthe probabilities of success are still onlyaround40160.Thereare occasions wherethe odds lookbetterbecause of the fundamentals trend. or the market'sestablished Theseextraspecialoccasions cometo be recognised by experience andfeel for whatthe marketis doing. When you combinechaft formations(patternanalysis)with fundamental youareon yourwayto beinga professional obseruations trader. TradeEntry Techniques

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Entera breakoutof current resistanceor suppoft: The 1* entrytechniquea noviceor beginning tradermustlearnis to find a placein the marketflow wherehe can controlRISK.The professionals are awarethat thesetypesof entrieshavethe greatestchanceof success. The breakoutentrymethodis the simplestof all disciplined entrymethodsto learnand practice.This is wherea marketbreaK out of a knowntrading rangeintoa newzoneof activity.

TR{DE WITH THE TRENDON BREAKS

BUY EREAKOUTS UsE CI.OsEINITIAL STOPSANb i{OlJE IT,I fr TRAILIN€ PRCIFITSTOP

The practicaltheoryis that marketsfind levelsof supportor resistance where tradersbuyandselloff whenthingsarein equilibrium. Theselevelsareeasily identified on a l-minute,S-minute, 3O-minute, 60-minute anddailychart. Theunderlying benefitof theselevelsis that"stops"buildup in the marketon the othersideof theselevels.So that whenthe marketpenetrates them,if they are there in abundance, the marketflow will facilitatetrade and the marketc;tnmoveintonewlevelsawayfromthe existingtradingrange. TR,ADTN6 BREAKOUTS AND R,ETEsTs OF BR.EAKOUT5

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If the marketadvances cleanlythroughthe breakoutpointit couldpossibly suffera re-thinkthrougha lossof propulsion andfadeitselfbackto the break level.Thisis calleda re-testof the breakout andis anotheropportunity to buy or sellwith limitedrisk. If there is no abundance of "stops"then the marketwill makea '.false breakouf'and retreatbackinto the priortradingrange.In whichcaseyou don'twantto holdthe breakoutpositionyou mayhavetaken. Prettysimplestuff but extremelyeffectiveas a tradingtool. If you get a falsebreakoutandget stoppedout thenwatchcarefullybecause the lowersupportwill bethe priorbreakoutpoint.

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Tl Prtce com€sbock through fhc line in the sord ord overbolorces prior corrections before the BUY Breokout VOU SELL

The breakoutentry methodworksmorereliablywhenyou are tradingwith the dominanttrend,i.e., the dailytrend.But intra-dayon a S-minutechaft youwillfindit an effectiveentrytooleitherwiththe trendor countertrend. If you keepyour stopsas tight as possible, like no morethan 3 ticksinside the breakoutsignalyou cant losemuchandall you havedoneis payfor the oppoftunity. pointsarethe primarybasisof my tradingplan.what I am looking Breakout for all the timeis a placewherethe trendwill continueto makeadvances and a safeplaceto enterwhereI cancontrolthe risk. If you can masterthis methodof tradingyou can-makea living in the speculative marketswithoutdoinganythingelse.All you haveto be awareof is the forcesapplicable on the day. The bestpatternset up for breakout entriesis in a runningmarketin the direction of the maintrend.If the setup is thereyoutakethe trade,

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chaft,it could Myideaof tradingis to tradewiththe dailytrendon a S-minute off the openingpricewill be countertrendthat day but the dailymovement tell you in anycase.Position tradersshouldonlytradewiththe medium-term trenddailyindicators.

Daytradingsessionbreakouts versusDailychaftbreakouts: Normally it is onlypossible to tradewithclosestopsduringthe daysession. Breakouts on a daily chart can be violenteventsor like climbingout of quicKand.Bythat I meanthe marketwill comebackandhit yourstopbefore proceeding you planned. Thisis the reasonwhyanyoneother in the direction Mostbelieve thana daytraderwouldusesuchclosestopsas I recommend. thatyou needto givethe marketroom.I dont I believethat,youarerightor wrongimmediately andthenyou re-groupandhaveanothergo. To avoid all the disappointments encounteredby those peopletrading breakoutsystemson DAILYCHARTS one needsto managethe tradeentryby workingwith a 5 and60 minutechart.All the t'armchairHarry's"losemoney Mostsystemsrequirethem because theycan'tmanagetheirtradescorrectly. to give the market "lots of room". I have seen so many instancesof profitable andthenultimately automated systemstakinga position,becoming you had phenomenon you this endingin a loss.If havealreadyexperienced betterreadon andlearnhowto avoidthis. Wedon'twantto givethe marketanyroom,we wantto be rightimmediately or we wantto be out! Sowe mustfind tradeentrypointsthat relateto the currentintra-daymoodof the market,if we get a runnerwe can hold it. Position tradersshouldlearnto finessetheirentrypointsusingthe S-minute patterns thiswayyoucansaveyourselfa lot of pain. 5-minute chaft: TheS-minute all of the time.Thedailychaft chartcreatesentryoppoftunities doessoveryinfrequently. 60-minute chart: The60-minute of all as it shows chartdefinesthe breakoutlevelsthe clearest tunedinto. the dailytrendsandthe levelsthe tradersarementally TheDailyChart: Provides for changeof mediumtermtrendmostof the time. the parameters It is not wofth muchto a day traderotherthanto tell him whatthe restof theworldmaybethinking.





The double or triple highs or lows breakouts: There'san old sayingin this business that any old top or bottomcannotbe going testedmorethan4 timesif it is to provideresistance or support.Once it is on its 4u'test then the chancesit will breaknexttime are way in the favourof a break.If it doesnot breakandthenconfirmsa directional change thenthe reversewayis the wayto go. Youwon'tget to manyof theseon a dailychartbut theyoccurtimeandtime againon a S-minute chaftandoffergreatopportunity to profit.

BREAKOUTTR.AbES Formotionsyou v,rillseeon occcsions

If the trend before the congestion is clear then the BREAKOUT shouldsucceed, You couldsee a seriesof tops or bottomsthat were formedover a two or three day period.Theseare the best breakoutoppoftunityyou will get because the markethas giveneveryonea chanceto movetheir stopsinto placeaboveor belowwherethe breakout wouldoccur. Whenthe breakoutcomesall the peoplearoundthe wrongway"run for the hillssoto speak". Don'twait for a re-testof the breakoutin circumstances like theseabove because it will nevercome.The trend has beenconfirmedon the breakout andeverysmarttraderwill knowit. Theseareopportunities sometradersjust wait for andwhentheycomethey "load will the boat".Thatis theywill tradehugepositions andthe imbalance of ordersgoingwith the trendareso greattheywill eat up any resistance so fastyouwon'thavetimeto blink. Youshouldthinkaboutyourtradingplanin situations likethesebecause they giveyoua chance to doubleor triplethe sizeyou normally tradeandgo for a killing.


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Selling into Strength or Buying into weakness!

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Marketstrengthis an upwardmovement;Marketweaknessis a downward movement.So it followsthat STRENGTH in a bear trend is a correction, WEAKNESS in a bulltrendis a bullmarketcorrection.

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BEARTRENb You must always favour the direction of the prior larger degree trcnd. Whenyou seeformations unfoldinglikethesethe marketis tryinglikehellto go up in a beartrend or go down in a bull trend. It helpsif the line of resistance or supportis locatedon a knownretracement levelbecauseit gives youthe chanceto placeyourstoploss just aboveor belowthat knownlevel. Thereasonis that at timesliketheseyou are likelyto get a FAISEBREAK just aboveor belowthe congestion beforethe reversalactuallystartsto takehold. A falsebreakin circumstances liketheseis what is knownas a failedsignal anda failedsignalis the strongest signalyouwilleverget. Onceyou seea confirmation of a falsebreakyou can instantlydoubleyour positionif you wish.The reasonis that as soonas the localsseeit theywill just bombardthe marketwith ordersandaccelerate the reversal,basically it is a no brainertrade. you needto seethe blackcrowsif sellingor the whitedovesif Justremember youarebuying. Marketpatternsare a measureof the psychological forcesat work in the market.Theyshowthe thoughtsof the buyersor sellersin the market.When onesideis up againstthe wallthe superior sidewillstickit to them. Youhaveto learnto thinklikea traderif youwantto becomeone. TradeEntry Techniques

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I don'twantto makethis sectionovercomplicated but the generalideais to find levelsthat haveeitherbeenresistance or suppoftbeforeandusethemto initiatetradesoff with limitedrisk. The pointis that thereare othersmafttraderswho will be lookingat doing the samethingandas youall movetogetherthe chances areyouwillturnor accelerate the marketby yourjoint actions. UNDERSTANDING OR WEAKNESS: GENEMLTRENDSTRENGTH TheDepthof the marketcorrections. It is all a matterof patternbeforeyou determineto buyor sellthe strengthor weakness havingregardto yourperception of the majortrend.

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t If the currentcorrectionis only a reactionand leavessomespacebetween the previousimpulselevelin the seriesit is morelikelythat the strengthor weakness at the timewill fail. The marketcouldalso retraceall the way back to the baseof the prior correctionswing level and fail. t n r s r s also knownas retestingthe prior breakout. In mostcasesthe failureto take out old supportwill halt the moveand a continuation of the priormajortrendwillfollow. Thediagramshowsonlythe bearcasebut if you reversethe patternsthe bull casewouldapply. To become an all roundtraderyoumustlearnto identifywiththesepatterns. Thesepatternswill giveyouan opportunity to makemoney! Thesepatternsareyourfirst indication that the currentstrengthor weakness is aboutto fail.Proofcomeslater. TradeEntry Techniques

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BEWAREOF PATTERNS THAT HAVETHE POTENTIALTO SIGNALA CHANGEOF TREND: If the currentcorrectionis overlapping a previousswinghighor low in the seriesof the currenttrend; then the trend cannotbe definedas strong,it maybea consolidation or a reversalof trend.You must bewarenot to take anythingfor granted.

*lor*ct ftloves aborc sccondory Swing low

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Scll Point on o foilurr



POTENTIALCHAN€Es OF TRENDPATTERNS

I likereminding myselfof thissituationbecause the marketcouldbe changing yourselfbeyondanydoubtthat a continuation trendandyou haveconvinced wifl follow,i.e.,the marketwillresume the priormajortrend. Anytimeyou havethatfeelingbeware! Overthe yearsI haveexperienced trend reversals that seemedillogicalto me: whentakinginto accountthe localnewseventsand thosearoundme. Butthe trenddidchangeandconfirmed itselflater. Thepatternof the markettradingrangeseachdaymonitorthe moneyflow in the market,the marketis alwaysright(youcanarguethat oneall you like,I don'tcarewhatyoucomeup with). Thethingis thatwhenyouget overlaps in wavestructures the tradersarenot scaredof the past.You mustaskyourselfthe reasonwhy?The only reason canbe that they havea newagendafor somereasonmaybeunbeknown to you. Themarketpatternis the firstsignof change.Staywiththe patternno matter whatyourpersonal feelingsare. Therewards willfollowasthe yearspassby.





TOPS: ACCUMU1ATION BOTTOMS & DISTRIBUTION TOP & BOTTOfi TATTERNg

ACCUi,TULATION BOTTOllts

DISTRIBUTION

Thesesituationscome along on a regularbasisin the intra-daymarket activity. Accumulation is a resultof buyersquietlytakingon the sellersat a ceftain leveluntilthe sellersgiveup andmorebuyerscomeontothe scene. Distribution sell into the buyerswho think is wherethe sellersprogressively going Finally is higher. the buyers dry up and the marketfalls the market over. formon lowvolumedaysuntil Patterns likethesetopsandbottomsgenerally the marketbreaKout andstaftshittingallthe residentstops.

TREND: RE-ENTERING AN EXISTING The safestway to re-enteran existingtrend is to use the OVERBAI-ANCE RULE: RE-ENITER.INoANI EXISTINS TRENID If ths TREND is to continua the next correciion will not exceedthe ornplitude of this one

Stoplossobove t:l

Allow for a 1:1 t

-U



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t I



That is oncean initialcorrectionhasformedandthe trenddirectionhasbeen amplitudeas a triggerpointto confirmedyou can usethe initialcorrection enterfor a continuation. youare is quitelargeit alsohelpsif the correction If the correction amplitude re-entering to the existingimpulse. on is a priceretracement Buton a S-minute chartin the ESE-Minithesetypesof entriescanbe made whenthe corrections areas smallas 3 points. becausein a Beforeyou do enter like this checkthe S-minuteStochastic In an uptrendit should downtrend it shouldbe comingbackto Overbought. becomingbackto Oversold.

SO FAR: I haveshownyou somesimplewaysto selecttrades,I haveothersthat you concepts andI will find hardto believe,but they are basedon mathematical themto you. needto explainthemin full detailandthendemonstrate Neveftheless what I haveshownyou in the first sectionof this tradingcourse trader. is morethanenoughto turnyouintoa professional All you needto do is developthe streetsenseto go with the methodologies, if you can'tdo that you will usemy methodsat the wrongtimeand because youwill losemoney.I haveno controloveryourpersonal actions. Opportunity tradersoftentradecountertrendwhenthe situationdemands, you haveto get backin stepwith the marketonce yet to be supersuccessful Onlya few talentedtradersrealizethis, thoseopportunities are exhausted. mostotherskeeptradingcountertrend all the time and missthe runstoo often.I havebeenguiltyof this manytimesbut I keeptellingmyselfto watch overcomingmy ownproblem. the marketmoreclosely,I am continually changein Whatyou mustrealizeis thatyou muststayflexibleto the slightest to have my method. You cannot afford a fixed marketsentimentto trade formulait will beenough. view.If youcant do thisthenstickto the breakout Nevertheless thesetwo thingsyou mustunderstand. to the maintrendthat last 1. Trendingmovesseldommakecorrections chart. longerthan1-3days.That'sa lot of barson a S-minute 2. Correctionsseldommakea retraceof the prior primarymovement llorlndlly50o/o is the orderof the or 38.2o/o that is greaterthan61.8o/oi waveof priorsimilardegree. dayor 1:1withthe lastalternate TradeEntry Techniques

105


Trading to WIN Course- Oneday at a time


SeCtiOn 1l cnapter18:

Daily RangePatterns: Everyday is a newdayand it is possible anythingcouldhappen.We should staftthe day knowingwherethe significant 38.2,50 and61.8levelsare.We shouldalsoknowthe levelsof any significant 1:1'sandthe significant MOB levels. If the marketbreaK any of theselevelsand negatestheir impoftance we shouldimmediately updateourchaftfor the onesthatchange. OnethingI shouldalertyou to is the patternof volumeduringthe day. The normalpatternof volumeduringthe day will be highestin the 1* hourand the last hourof the day. Fromaroundmiddayuntil 1:30pmFf the volume generallyslowsdownunlessthe marketis runninghardin one directionor the other.Whenthe volumedropsthe marketis inclinedto trade in tight ranges. TYTICAL VOLUA'TE FLOW DNILY 9:30-1O:3O

12:OO- Z:OOpm

A VOLUME sruKE on c high or low in a low volume pcriod could be levalsol 516l'.1

Whenthe volumeis lowyouwill occasionally seeVOLUME SPIKES astheyare morepronounced on your chaft. Basically they meana lot of transactions took placeat that level.Determining whatthey meanis anotherthingas the standard lineof thinkingis thatmarkets riseor fallon highvolume. Neveftheless in low volumeperiodsa VOLUME SPIKEcan meanthe exact if it coincides oppositeespecially with a knownreferencelevelon the day. Couldbe manyreasonswhy but you needto work them out on the day. Remember I havealwayssaidthisis a thinkingman'sbusiness. 106

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Daily RangePatterns

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Anotherthingto remember aboutlowvolumeperiodsis that PROFESSIONAL TRADERS in big quantitiessuch as 250 or more who make transactions contractsat a time cannot executemore than 250 contractsin one transaction to on the E-Miniat a time.Sothey havecomeup with schemes get try andkeepthe marketin the areatheywishto buyor sellat untilthey set. Forinstance if theywerebuyersat a certainleveltheycanget someone else to placehugeresidentordersto sellat a slightlyhigherlevel.The average DEPTH traderif he is a buyerseesthe SIZEjust abovein the MARKET and figuresthe marketcannotget throughit so he holdshis buyorderback.The manipulators buy up everythingat the levelsbelowand whenthey are set they havethe residentsell orderscancelledleavinga clear path for the marketto go up.The reversecanapplyequallyat placeswheretheywantto establish sellpositions.

t

Sowhenyou seemassive SIZEin the marketdepthandthenall of a sudden just youwill knowwhatis goingon. it disappears

I I

Thissoft of thinghasbeengoingon, on the pit floorforeveranda day.Guys like LouisBorsellino who hadthe reputationas the largesttraderin the pit hassaidopenlythat somedayswhenhe wastryingto establish a positionin one directionhe wouldhaveanotherbrokerdo the buyingfor him whilehe in the opposite stoodon the flooreitherofferingor biddinglesserquantities direction.As soonas his positionwas set he wouldthen try and pushthe marketin that directionby unloading the positions he hadpersonally bought to holdit backwhilehe wasgettingset.

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Thereis nothingillegalaboutdoingthis.Wellnot unlessyouget caught. is that therecouldbe a lot of arbitragegoingon Anotherthingto remember betweenthe pit and the electronicat times. You can see from the between Commitment of Tradersrepoftsthat thereis so oftenan imbalance MostweeK the reporthas Large the Pit contractandthe E-MiniElectronic. positions for tradersin the E-Minithe oppositeway roundto the Reportable theirtransaction costs PITfigures.Just remember theycando this because withthe average trader. areso smallcompared Nowyoumightsayaftermetellingyouall thisthatthe marketis rigged! - I preferto think of it as normal Callit riggedor call it normalbusiness practice. of andas longasyoudo you business I knowwhattheyarecapable canlearnto dealwith it. Humannatureis nevergoingto change,if someone canfindan edgetheyare goingto exploitit. Unlessyou knowall thesethingsbeforeyou put yourhard earnedmoneyon the line you are only goingto be a lambstandingin a paddock yard. waitingto betakento the slaughter Daily RangePatterns

t07




t2:@ - Z:OOpm

Price Oate fre Open r-fth Low Cbs Csr % t Etrs vd

9S:2 08122183 0930:00 1t)11 50 1012-6 1m9.75 101025 {2 -483 13ln

I

t I I

t This doy ws a 6AP OUTSIDE REVERS/4L DAY ondcvan rhoughth€ rnorkct wos down oll doy thc nrorkct wart q.rici belweq 1?:@ qrd Z:OOpm- look ot thc eorly volurrc.

I

t periodthe marketwent into the doldrumsand Duringthe 12:00-2:00pm pattern.Wheneveryonereturnedfromtheir formeda continuation rectangle lunchbreaktheysoldit downfufther.

I I

t I I I I I

OPENINg PR.INT

If the volumewere buyers obsorbirEfhe scllers

Thcy oll boiled out here -->> 24 POIl.lT RANFE this doy

Thc rnorket wos in o continuing downtrcnd

r!\uchcon be lcarnt if you sludy volrrrc

t Justin caseyou arewondering whereI am goingwiththisyou will find out whenI haveshownyou enoughdailyrangepatternsto allowyouto arriveat the correctconclusions. justobserve Butfor the moment thesimplethingsI am highlighting asI go. Daily RangePatterns

108

Section1: Chapter- l8

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WhatI wantto teachyou is to observewhatthe marketis doingfromwhenit opensuntil it closeswithouteventhinkingaboutwhat happened the day yesterday before.Sometimes the influences fromwhat happened canthrow youoffthe beatentrackasthe dayprogresses. The morningsessionis usuallya carryoverfrom what the marketdid yesterday andhowit reactsto the morningnews. period Asthe patternof the dayunfoldsit hasto negotiate the 12:00-2:00pm and mostlikelythe dailystrengthor weakness will becomeobviousas the marketheadsinto the afternoonsession.Well that is what I am always hopingfor but it doesnot alwayshappen. This wos o correclivc

doy in o dournlrad

To tell you r{re truth f couldn'i moke hcad nor toil of this doy OpeningPrint

12:OO- Z:@pn Eoch tirne ii rollicd I fhor4ht ii would *ll

oll ad kccp going doum .__Scneogoin rcllics ond ccr't go ou.

Thisdaytherewas no positiveretracement levelat the low for the dayto go off andthe marketwassideways intothe 12:00otlock zoneandthencame to lifefor someunknownreason.I thoughtit wasa candidate to collapse but it neverdid untilthe nextday.Thenextdayis shownon the chaftprevious to this. NowI will proposea situationto you regardingthe OPENING PRINT.It is commonknowledge amongstprofessional PRINT tradersthat the OPENING areais moreoftenthan not the highor low for the day (betterthan50o/o of the time). Sohowdo we usethat information? Wellyou couldjust jump in at the openingof the marketin the directionof the 3-daytrendandbuyor sellwitha S-pointstopon the positionlikea lot of traderswill do. A betterway is to HOOKthe tradein the directionof the 3daytrend.That meansif it goescountertrendin the first few minutesyou join the tradeas it hooksbackthroughthe openingpricein the directionof the 3-daytrend.Thisis a populartradeandoftenthe othertraderswill helpit workfor you. Daily RangePatterns

109




This was a very interestingday becausethe marketwas openingfrom a holidayweekendandit wasjust belowthe highsof a two andonehalfmonth tradingrange.The ISMIndexreportcamein at 10:00amslightlybetterthan expected.Severalthingswere in the favourof a breakoutbecausethe DJIA andthe NASDAQ Indiceshadalreadybeentradingin newgroundandleading the overallmarket. The Commitment of tradersreportfrom lastweekhadthe Commercials and the Fundsholdingan increasing NETSHORTpositionagainstthe prevailing trend,they had basicallybeenincreasing shoftsall last week.So the day beganas it hadbeendoingnearlyeveryday lastweekby,selling downin the first hourof tradingas theytookmoreshortsonboardandthen rallyingonce they took the pressureoff. Now after today I think they will have to reappraise their strategy,w€ couldsee the marketbeginrallyingfrom the openastheyunwindpositions. Theyhaven'thada veryhappy2 months. TODAy wqslhc &y we bloke out to the upsidc of q two & o hqlf month range fr.om fhe trulle t7 high 1014^6

Ovcrbolonce tl

: Stror€

t I

ttng t rn BF.ok Alt Bncoks norniag

t t

Open

Themarketwentontobreakthe oldJune17andJuly14,1014^6doubletop at 12:19pm on a hugevolumespikeas an attemptwasmadeto holdit back. Evenwiththe 1:1 at 1016therewasno continuing sellingof any magnitude andall the marketdid was movesideways as usualfor the restof the quiet periodintothe 2:00pmzone.Thenat 2:00pmwe bouncedoff an exact50o/o retracement for the day. This was the sign that the marketwas backin business andyoucanseewhereit wentto duringthe afternoon. Theimportant thingsto remember abouttodayare:1. Howthe marketwassolddownafterthe openwhileit wasstill below the 1014^6doubletop as hadbeenthe casemostof lastweek. 2. Howthe marketadvanced to an exact1:1at 1016on a volumespike. 3. Howthe marketregained the trendof the morningrallyaftermakinga pointon the day. 50o/o retracement backto its hypothetical balance Daily RangePatterns

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Todaythe marketopenedwith a GAPfrom the closeof the day beforeand soldoff intoa I-ARGER DEGREE 50o/oRETMCEMENT.

1019.3q116l.B%l

*\*,

lx1's Keep Overbolotcing

HI6HER LOWS

Prie Dale Tm Opa HSh

1010.3 09'|2m 15:35:00 1fi725 1tX85 1o,|725 qN 1017.75 Cs% -0.1 t Brys 12 Vol 6,065

Thehighestvolume5 minutebarfor the dayoccurred on the low barfor the day. Oncethe GAPfrom the openinghad beenfilledthe marketsolddownuntil 12:30pm.A burstof sellingat the timewascleartyabsorbed by buyers.The marketmovedsideways to upwardsuntil2:00pm andthenbrokebackabove the consolidation zone(Greenline).Thesignswereevidentfor the restof the day that the marketwas goingup as the lx1's kept comingout and the marketwas makinghigherlowswith goodimpulsesin the up waves.There wasno apparentsellingat the 38.2andit wasonlywhenit hit the 50o/o level of the week'sdeclinethatthe profittakingcameintoplay. The dailybar couldbe described as a KeyReversal Dayas a new low was madewitha higherclosethanthe daybefore. Thedeclinefromwherethe gapwasfilledretraced6 full pointsandbecomes the benchmark for the nextdaystrading.By this I meanthat we shoutdnot retracemorethan6 full pointswhilethisadvance remainsstrong. Eachdayyou shouldtry andmakean objectivereviewof whattranspired on the day. If you do this then you will get the idea of what I say about professional tradershavinghabits. Onceyou becomefamiliarwiththeirhabitsyouwill be ableto readwhatthey areup to mostof the time.It's as simpleas that- onceyou knowwhatthey aredoingyoucanusethe knowledge to makemoneyfromit.

Daily RangePatterns

nl




The next day:

This is the followingdoy ord bosicollyit is telling us thot lhe onedoy rolly hosstalled in its trocks'

I had no ideawhat was comingtodaybut I did havea plan,I Personally it in S3:C32P34. explained Whenthe day startedthere was not enoughbuyingto get the marketto breakup throughthe 50o/olevelhigh(101S)so the localswentthe opposite target.The 50o/o way knowingthat 6 pointsdownwouldbe an achievable of Friday;srangebackthe otherway was alwaysgoingto be a retracement problemfor the locaisso they took the pressureoff downthere aroundthe alongnot knowingwhatit shoulddo' 1012andthe marketjust bumbled tradersknowthe levels Thethingto learnfromall of this is that professional to actaccordingly. to focuson andtheycometo workprepared If it doesn'tgo the way they are hopingfor theyjust takethe line of least whodon'thavea planor haveexhausted ani playoff ine dummies resistance theirplan. of If you watchthe marketday by day,figurethe strengthsandweaknesses will keepcomingalong. the playersthe opportunities If you playthisgamethe smartwayyoucanwin andeasily.Youdon'tneeda doctoratein piychology all you need is plain street senseand an the playersto do whattheydo naturally. motivates understanding'otwhat Theworldis nevergoingto change,believeme- onlythe pricelevels! t12



t I

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I just had to add these chafts to the counie: you in thiscourse. Theactiontodayreiterates allthe thingsI amteaching + JEq{dtier- Jr}herr'nErvab. @e+mlt €,!DC Ol gS e60 gosiit OTkt: - Globex.S) Dtnrmicl:004:00 .-9jjt!e$_jt:1gq -!: Lrq??o--9:l_1ql09

!

rm00 fi800


1t600 It400 trz0lt ttotttl t

tttL00

r(D00

This CHARTis a good one foryou to study. lt was the last fading day for Aprll 2004. Volume

Poblish€dby e5ignal(ww.aiyrdrom)

Thisday was a Fridayand alsothe lasttradingday for the monthof April 2004. Ed+

J E q u i t i B r -J o & s i n E r ' / a : 6 . @ e + , x t ' tg l D c S 1 E 5

e50 &ori:r Oti:t oiltt6s

thjce's XABCITirl.6i!|

H:11&0

!:103ro

et@9I|*

t4s6

Thls ls the week leadlng up to and including the day above:

?.1$t 1425 11.v1 13fi

|l500 r.1000

tt18.ofr tADD

t0.2s i t

r2500

r.5r! I 27.s I 't0-cl r es.zso.. I 7.1trt"i

r2000 .29,5n 11{t.75

The trend was clearlydornngoing into Friday:

.21,50 a tt00,50

Publirhedby esgnal (ws,sigod,(m)

you in thiscourseyou Whenyou learnto applyall the thingsI am teaching will realisehow simpleit is to find reliabletradingopportunities eachand everytradingdayof the year. Daily RangePatterns

113

Section 1: Chapter - I 8



Section 1: chapterre:

Summary: In thisfirst sectionI haverelatedto youthe thingsI practice andmonitoron you to becomean a day-to-daybasis.Usingthese tools shouldallow profitable extremely traderif youcanmasterthem. I havewrittenmostof this first sectionin realtime to giveyou my thoughts first handas the marketunfoldeddayby day.If you adopta dailyworkethic for youranalysisand preparebeforethe tradingsessionopensyou won'tbe in for anysurprises. Thenas the marketmovesalongyoujust keepupdating yourchartwiththe importantlevelsyoucantradeoff. Thereis still anotherworldof thingsthat I needto explainto you that will giveyou a widerfieldof focuswhenyou needto drawon them.Thesethings arerelatedto old and newteachings andthe practices employed by analysts andtradersthe worldover.Whenyou understand all the practicesandtools worldandsomeof the beliefsthey holdyou will available to the investment havea far greaterappreciation for whatit takesto bea winner. By understanding what other peopleare up to and how they arriveat an willgiveyouan EDGE. analysis It is imperative thatyoustudythe restof the materialin thiscourseif youare strivingto be in the top 0.1olo of the winner'scircle. Youneedto learnthe wholestoryto stayon top of the marketbecausethe marketgoesthroughchangingphasesyearin andyearout. Newsituations canpresentthemselves of knowingwhathas at timesandonlythe experience happened in the pastwill helpyou makeit clear. in the pastandthe Youhaveto havean understanding of whathashappened why.Simplybecause the futurewill onlybe a repetitionof technicalreasons you past knowwhathashappened in the past the in somesimilarformandif youwill beableto dealwiththe futurefar moreeasily. Youalsohaveto knowwhencertaintimesof the yearbecomeimpoftantto tradersandwhy ceftainothercriticaltechnical eventsareimpoftant.It will all you are in the moneyflowof the market.Withoutthisknowledge be reflected no morethana mechanic. If you want an ongoingpeaceof mindwith the marketyou needto know what the other playerscouldbe up to when you reachcriticaltechnical situations thattheywill actupon. SummarySection1

tt4

Section1: Chapter- t9

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you don'thaveto yoursizebecause Tradingintra-dayallowsyouto increase givethe marketanyroom,i.e.,likeyoudo with swingtradingwhenyouwant to stayon the systemtrade. Whatyou shouldconsideris that nothinglastsforeverandit is onlyas good as it getswhileit lasts.The marketon an intra-daybasisis moreflexibleto dealwithanda lot easierto beconsistent with usingmy approach. Thereis no pointin havingto rideout largedraw-downs in youraccountto comeout aheadin the end- that is if you actuallydo. It is betterto take - if you hit and smallbitesthesecouldendup in hugemouthfullssometimes runwhenthe SIGNS arethereyouarebetteroff in my opinion.Thenyoucan go homeandsleepwellanddont thinkaboutthe nextdaytoo muchuntilit comes. As you becomemoreawareof whereto takeyour tradesyou can scaleup yoursizeon the onesthat offerthe besthistorical Whenyouget oppoftunity. intothe bigleagueyouwill beconfident to tradein 20 lotsor more.Thereare individualtradersout there pushinganythingfrom 5 to 200 lob on the reversal signseverytimetheyappear. andcontinuation Anytimeyou canget intoa tradewith a l-point riskfactorandcantakemore than4 or 5 pointsyoucankickgoals. Eachday you shouldbe lookingfor 2 goodtradesand onceyou haveyour wagestakethe restof the dayoff. Themoreyou get to realisethat all this business is, is just a job, you will be muchmorecomfortable withit.

ONEDAYAT A TIME.

t I I

SummarvSectionI




THE IMPORTANTTHINGSYOUSHOULDHAVELEARNT FROMSECTION 1: 1. Payattentionto the NEWS REPORTS. andthe release of ECONOMIC 2. The50o/o Point Rule. Balance 3. The1:1Overbalancing Rule. 4. TheTWODAYCorrection Rule. 5. PriorSupportbecomes futureResistance. 6. PriorResistance futureSupport. becomes 7. ThethreedayGannSwingis the bestmeasure of trend. pattern. B. Rectangles area signof a continuation 9. In a strongtrendcorrections in amplitude. shouldkeepreducing 10.OpenInterestcanonlyriseif newsellersenterthe market. 11.TradersbelievethatGAPS on the daysession chaftshouldbefilled. 12.Volumespikesat geometric levelsarea strongsignfor a reversal. 13.A failedsignalsuchasa falsebreakis oneof the strongest signals. Formoredetailed information on falsebreaKseeS4:C1:P25. Theforemostthingto learnis thatyou mustneverriskmorethana pointand a halfon anysinglecontracttradeyouenter. you enterit the chances If a tradeis not workingalmostimmediately areyou arewrongandyoushouldscratchout andstartagain. Believe whatyouseeandnotwhatyouthink.

SummarySection1

116



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SECTION 2: chapter1:

SacredGeometry- The CardinalRatios approachfor Time & PriceAnalysisof MarketTrendsis a mathematical comparing betweenmarkethighsandlowsin bothtimeand the relationships priceamplitude. throughoutthe ancientworld,suchas Teachers in the centersof education PLATO set their pupilsto practicethe atts founded & those by PYTHAGOMS in orderto exercisethe facultyof and NUMEROLOGY of DYNAMIC GEOMETRY intuition. by a The ancientstaughtthat any situationin life would be represented in nature. DYNAMIC PATTERN for whichthereexistsa precedent geometryre-enactsthe GEOMETRY deals with pure form; philosophical preceding one. unfolding of eachformout of the the The ancientsdeviseda canonof proportion.The canondemonstrates betweenthe SQUARE, squaringof the circle andthe bindingrelationships is equalto of the CIRCLE MEAN.The circumference CIRCLE & the GOLDEN the PERIMETER of the SQUARE.

I

Circle= 8"OOO

t I I I I I I I I

SQUARINGTHE CIRCLE

This diagram representswhat the ancientscalled the 3 phasesof The squareactsas the base,the pyramidis verticalandthe consciousness. circledissects the squareverticallymovingbothaboveandbelowit. SacredGeometrv




NaturesLaw Naturallaw of growthphases,as we knowthem todayoriginatefrom the dynamiccycleswithin the construction of the Cosmos.Beforeone can possibly the significance understand of whatwillfollowin thismanual thereis a needto learnhowgeometric formsareconstructed.

Geometric RatioSeries(1.618) R.N.Elliottin his treatise,'The ElliottWaveTheory",identifiedthat many markethighs& lowsin the DowJonesIndustrialIndexwereformedrelating to eachother on progressive ratiosof the GOLDEN MEAN.Basically what theseratiosrepresentis the progression of cardinalpointsin a GEOMETRIC SPIRAL. GOLDENMEAN

Goldensection Square Root of 1.618

1.618 0.618 1.272

To fully understand the unfoldinggeometrywithin a marketsstructurewe needto be awareof the expanding and contracting relationships that occur withinthe geometric spiral. GEOI'IETRICRftTIOS OF THE SPIRfiL EfiSEI' OH THE PYBRI'IIDOF GIEft EXPNHEf,ND COHTEFCTON THE SOUNFEROOTOF 1,618 SFIRRL PROGBESSIOI.IS l.?7? = Square root of 1.619 End 8.786 = the reciDrocaL 1.?_72

1.618

e.858

e.BsB

e.61S

L,,""\L,=.=\L,",,\

r""7 l-''*"7 l-'*'7 V V

8.78'6

I.BB8

8.618

9.78 6

B . 48,6

8.618

Movingfromthe baseof the triangles in the direction of the 90o(rightangle leg) eachfuturelengthincreases by a ratioof t.272to the preceding leg. Movingin reversethe legscontractby a ratioof 0.786to eachother.0.786is thesquarerootof 0.618,theGolden Section.

SacredGeometry

Section2: Chapter- |

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andappears The GOLDEN MEAN(Phi)ratioof 1.618is a growthproportion Alsoyou everywhere in nature,in plants,in seashells andmanyotherplaces. shouldknowthatthe planetVenus(theclosestplanetto the Earth)orbitsthe Sun 1.618timesfor everysingleorbit of the Eartharoundthe Sun.Put anotherwayVenusorbitsoncefor every0.618orbitof Eafth. TheAncients left us a geometric blueprintwiththe diagramof the "Squaring that the Great of the Circle".This diagramis alsothe exactmeasurements Pyramidof GIZA was built to. I have alwaysbeen surprisedwhy this information wasnevertaughtto me at school.As a resultof my subsequent things,on the studiesin laterlife, I havefoundout manyotherinteresting geometry to can unfoldand still holda bindingrelationship strictwaysthat "squaring the of the circle."diagram. of trendin Overthe past22 yearsof tradingI havewitnessedmajorreversals I follow,thesesometimes deff normallogicwhenit all the MAJOR MARKETS geometric havebeenthere relationships comesto the ratiosinvolved.Butthe for allto see.MostpeopleI knowhaveneverbeenawareof themat the time either,so I havecometo the conclusion that there is a higherpowerof present it maybe is reallynot influence whenthesethingshappen.Whatever my mainconcern;all I am interested in is knowingwhenthe marketreaches levelsof geometricproportionthat align themselvesto the theory of NATUMLGROWTH. Using Geometrywe can prove the ratio 1.618 maintainsa triangular is relationship with the square,the cube and the circle.This association purposes geometric forms must extremelyimportantfor our becauseall rotatefromoneaxisto anotherif theyareto continuetoo relatein the future. TRIRHGUI,RNBRTIOS OF THE GOLDET{I'IERHBELRTEI}TO THE GOLDEHTRIRHGLE. THE CUBE & THE SqUHNE. of Diagonal Rectangle

the

Golden

1 -gBZ necipr.ocal

8.526

Diagonal L-?32

SacredGeometrv

the

Cube

reciprocal

E-5??

of

the

Squari.e

reciprocaL

E-?ts?

Iliagonal 1-41.t

of




TheFibonacci GrowthSeriesof Ratiosare: L,t,2,3,5,8,L3,2L,34,89,L44,233,377,6t0,985..... every future number preceding increases numberandon it goes.Butin by a factorof 1.618to the the true senseof the growthphasethingsmoveby a factoror L.272- when on the geometric seriesnot by 1.618. phasesof growth.The keygeometric I callthesethe geometric ratiosfor my purposes Time& Priceanalysis are: Expandinq 1.000 Contractinq1.OOO

L.272 0.786

1.618 0.618

2.058

2.618

0.486

0.382

3.33 0.30

As a noviceyou may not understand of 2.058or 0.486 the significance because theyareso closeto 2.00& 0.500,but youwill in timewhenyoucan identiffthe rhythm. Whenthe marketmovesoverto a reciprocating unfoldingpatternphaseof the SQUARE we canexpectto witnessarethe or the CUBEthe relationships - the squareratiosand the ratioson the differentplanesof the conscious cuberatios.Sometimes we will experience the ratiosof the circlepinpointing marketreversallevelsat the sametime. You must be awarethat as the geometryunfoldsthe ratio progressions movefrom each levelto the next - they level.No seriesof ratioswill keepsignallingreversalsconsistently rotateas the marketmovesalong.Oneday a 0.618will arresta correction the nextit will be a 50o/o, thenotherdaysit will be a 0.707or a 0.786.Then in strongtrendsit couldeitherbe a 0.382,0.354or a 0.333depending on the rhythmof wavesin the unfoldingpatterns. To understand what I am goingto teachyou now,you will haveto havea flexiblemind. I havealreadyhalfexplained all of this in earlierbooK but nowI thinkit is imperative students I writeit all downthe wayI understand it today.Previous may havealreadyworkedit out but I now havethe luxuryto explainit all over again.My two yearswith the Clublzl4group have enlightened me immensely on howto knowwherethe novicejust lossestrackof whatI am on about. So manyunusualthingswill occurin the marketgeometrythat you haveto be awareof whatwill constituteRHYTHM howthe continuing to understand progressions will relatein the end. All this mayat firstseemcomplicated but if you learnto workwithwhatI will teachyou,youcangraspit. It is notthat hard,it is all a matterof logicasthe marketunfolds.I havehadno problemusingit for wellover15 yearsandit keepson workingfor me. SacredGeometry


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Harmonic RatioSeriesof the SQUARE found HARMONIC MTIOS are generatedfrom the diagonalrelationships withinthe SQUARE. Musical notesvibrateon ratiosof the square.HARMONIC MTIOSrelateto the number2 andsquarerootof 2. Sacred Ratios of

2.000

SquareRoot SacredCut

L.4L42

o.707L

The SacredCut 0.707Lis equallyas impoftantas 0.618whendealingwith proportion.Lateron we will see how the two ratiosintegratewithin the geometry unfolding of a marketstructure. 2. EBB 1 . 4 1 4n 1 . 4 1 4

HHRI.IOHIC SERIES 1,ts88 1 -414 2.OEE 2.S2S 4.EBE

SAUHREROOTOF 2


1.EEE fd-?6? 8.588 E-354 6.256

B.5BB

B

A,7A7

r.BBA

HfiNI.IOHICPSOPONTIOH$FORI'IEI}BT THE SQURNE

Theworksof W.D.Gannhavealreadymadefamousthe useof the ratiosin the squareandthe cubefor the analysis of timeandpricein markettrends. Neveftheless I haveneverseenany mentionof the SacredCut (a Masonic term)in anyof Gann'swork.Theremayhavebeena reasonfor thisas Gann wasa memberof the Masonic wererequiredto takean Lodgeand Mason's to outsiders. oathnotto teachtheirknowledge Expanding 1.000

L.4L4

Contractino1.000

o.707

2.000 0.500

2.828 0.354

4.000 0.250

s.6s6 0.t77

The ratiosincrease by a factorof L.4L42to eachotheror theycontractby a divisionof L.4t42to eachother.I will referto this seriesas the harmonic seriesof ratios.

SacredGeometry




ThirdDimension of the Square Thediagonal of the cubecanbe usedto forma ratioseriesthat continues to hold its pure geometricform in a similarmannerto the geometricand harmonic ratioseries. SacredRatiosof SquareRoot Reciprocal

3,000 t.732 o.577

It is importantfor you to remember theseratioas you will encounter them manytimesin the future. THIRD DIT'IEHSIOH OF THE SSURRE PHOI}UCESNRTIOS 1.986 1 -414 1.?32

t

L.699 E.?E? B-5??

DIRGOHRL OF THEGUBE= 1.?32 nEcIPnoGALOF 1.?32 = 6-5??

If you reviewthe diagrams on 1-3youwill seehowthe squarerootof 3 also canrelateto the geometricratios1.618and 0.618andthe squarerootof 2 relatesviathe squarerootof 1.618(L.272). The systemof ratio relationships evolvesin a strict mannerand leaves nothingto chance. TheKeyRatiosdivisions between1 and2 for our purposes sofar are:-

r.272

L.4L42

1.618

1.732

In a contracting modewe usethe reciprocals of theseratios:Thereciprocal of a numberis the ratioof thatnumberdividedinto1.000. The most impoftant division of I.OOOis half or 0,500 following between 0.500and1.000are:0.786

SacredGeometry

o.707

0.618

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and the

o.577 Section2: Chapter- 1

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The4th Dimension of the Square If we join two squarestogetherand measurethe diagonalrelationship the Squarerootof 5. between the two extremecornerswe getto discover SacredRatiosof s.000 SquareRoot 2.236 Reciprocal o.447 pointfor you to consideraboutthe squareroot of 5 is that An interesting of 2.236is 0.447andis 2.236is the sumof 1.618and0.618.Thereciprocal alsoan impoftant ratiofor ourconsideration. IIIfiGOHRLOF TlfO SqUfinES = 2.236 PRODUCES RfiTIOS 1.066 2-? 3 6 t.60B

5.BBB

1.BEE 6-447 E.zES

ArithmeticRatios ARITHMETICMTIOS are generatedfrom the simple division of whole numbersby otherwholenumbers.A few examplesare listedbelow.

OneOuarter One Third One Half

Two Thirds ThreeOuafters

0.250 0.333

o.soo o.667 0.750

formsas a Arithmeticratioswill playa part in the construction of geometric marketworksbetweenthe majorcardinalratios.The ratiosthat will form formis workingitselfout aheadcanbecomepredictable. Eachnewgeometric Thisat first mayseem from the way the previousform hasbeenunfolding. difficultto recognise becausewe haveso manyratiosto considerbut it is possible. If you wishto makea completestudyof all theseratiosandtheir originsI wouldrecommend by RobeftLawlor,published the book SACRED GEOMETRY byTHAMES & HUDSON. SacredGeometry




t

RocketScience In the past18yearsI havehadthe misfoftune new the difficulties to discover studentsrun into when they are confrontedwith more than 3 thingsto consider. I haveto tell you that it all seemslikesometypeof RocketScience in the beginning.But I havewaysof workingwith it that can reducethe confusionmostof the time. It seemsnow that I am retiringthat I should makea concefted effortto try andclearup the picturefor all to see,instead of just a selectfew. published Mosttheorieson Priceanalysis beforeI camealongtaughtstudents to usethe ratiosof 0.382,0.500,0.618,1.000,1.618and2.618exclusively, as if that wasn'thardenough!Gannmethodology taughtstudentsto workin eighths,i.e., IlB,2lB (U4), 3lB,4lB(Ll2),5lB,618,718et cetera.Gannalso taughtyouto workwiththe thirds,1/3 and2l3rds.Thishasjust confused the issuesevenfurther. Studentsoften ask me, what is important?We have so many ratios to considerthat the possibilities are endless.I agreeand I wrestledwith the problemfor manyyearsbeforeit became clearto me, I cameto the conclusion that everygeometricform had to makesome LOGICAL whenit cameto proportion. SENSE If it didn'tthenI couldcastout geometric the ratiosaheadthatdid notfit the unfolding form. Whatis impoftant to remember allthetimeis this:If a geometricform is workingout relationships to saythe square,thenthe nextcardinalpointof the geometric formwill relateon ratiosof the square.If the geometricform is currentlyworkingalongon geometricratios(the Phi group)thenthe nextcardinalpointwill relateto the Phigroup.I referto this phenomenon Thesamegoesfor geometric formsworkingto the as RHYTHM. groupof ratios. Arithmetic The benchmark divisionof 1.000is a half(0.500)so that is wherewe start. Equality is 1.000to 1.000anddoubleis 2.000.At leastonethirdof the time geometric formswill unfoldon the Phiseries(1.618and sequences thereof) proportions of 0.382,0.486,0.618and0.786.At othertimesthe sequences will switchto harmonics that is whywe or the ratiosof the unfolding SQUARE, get ratios of L.4I42, 0.707L and 0.354 determiningproportionsof importance. formstakeon Thenwe havethe 3'ddimension wheregeometric propoftions matter of t.732,0.577,0.333 a of logic and0.667.It all becomes to workout whatthe geometric formis expanding to. or contracting Beforeyou determine that a marketlevelis importantyou mustconsider the unfoldinggeometric form,if it makeslogicalsensethengo with it. If not wait picture untilthe clear. becomes

Sacred Geomehy

I



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t


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Geometric Proportion: so far we haveto consider Besides the cardinalratiosI havebeendiscussing the rectangle of two squares. factored Thiscouldmeanthat we needto consider everyratioof impoftance geometric formswill contain by 2.000,what I meanby this is that some proportions andsofotth. or 1.236(2x0.618) of 0.764(2x0.382) At first these proportionswill not seem importantbut if you study the geometric completed format its conclusion theywill beginto makesense. To becomeproperlyproficientat identiffingthe geometryin formsyou have the myriadof possibilities. to lookabovethe horizonsometimesandconsider Noonesaidthiswouldbe easyas it is a scientific aft formandrequireslogic to workit to itsfinalconclusion. all of Withoutpattingmyselfon the backI havebeenableto understand all thesethings.I havealso beenableto get other peopleto understand thesethings.Notto manybut I havefoundmy teachinghasimprovedwith theyearsI havebeenat it. It is importantfor me to get my message throughto the studentswho have cometo me for help.Nothingmuchelsemattersto me anymoreas I have everything I wantin lifeandif I don'thaveit I canbuyit nextweek. Beforeyou can becomeproficientat identifoing the futuregeometryin the possibilities. you markets musthavea thoroughknowledge of the geometric Youcanonlyget this knowledge by workingbackoverthe existinggeometry that hasunfoldedbeforehand. I havedoneall this for yearsandyearsso it hasbecomesecondnatureto me. Sometimes I takea littletime andjust sit of downwith a chaft and pull it apartfor hoursto reinforcethe principles geometry I havelearntoverthe years. It is amazing whenyou havea clearheadwhatyoucansee. in The bottomlineto all of this thoughis that the ratiosmustmakeSENSE just the progressions they becomeMNDOMnumbersandare not otherwise woftha bumper. For trading purposeswe must be sure that we have a RHYTHMin the ratios if we are out to select a price point that the market should revensetrend on. And I guess that is the only reason why we endeavourto use these methodologies.We want to have an edge againstthe other market playerc.We want to know when to buy and when to sell as fast as the market can tell us. I have becomepretty good at it so there is no reasonanyoneelsecan't learn to do it. SacredGeometry




Section 2= chapter2:

GeometricRatiosin Market Corrections: In previous of the way explanation booksI havemadea morethanadequate wavemovements canrelategeometrically but I am goingto writea complete newexplanation for thistext. Thebasicsof the theorythat marketwavesmustrelategeometrically hinges on the ElliottWaveTheory. Elliottstatedin his theory that, "All Wavesof similardegreewill relate geometrically in PriceAmplitude". Neveftheless can becauseof the complexity and the way this phenomenon occurwe needto approachthe theoryin a simplisticway first and then extendourviewsto includemorecomplex thinking. To beginwith the currentmarketwavemaybe a correction to a longer-term trendor it maybe a continuation of a largerdegreetrend.

Justsowe haveourfactsstraighta MARKET WAVEis a legeitherup or down points. betweenobviousswing Themaindirectionof the waveswill determine if we arein a bullmovement or a bearmovement.

CorrectiveWave Relationships


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[c],BryceGilmore2004

PRICERETRACEMENTS:

t I I I I I I I I I I I I I I

Priceretracements in an ongoingtrend. arecorrections Priceretracement levelsareour number1 toolwhenwe arelookingfor levels wherethe marketwill reverseandresumeits larger-degree trend. The38.2,50 and61.8arethe majorratioswe needto focusourattentionon because thesearethe levelsthat eventhe noviceanalysthasbeentaughtto monitor. Justthe samethe 38.2- 50 - 61.8will not markthe reversalpointsmore thanaboutonethirdof the time.Therewill be timeswhen33.3,35.4,44.7, 48.6,57.7, 66.7, 70.7and70.7willSQUARE THEGEOMETRY. It is all a matterof whatwentbeforeto determine if the 38.2- 50- 61.8will workor not. It mayseemcomplexto you rightnowbut onceyou knowall the otherways that wavesof similardegreecan relateyou will have a 90o/ochanceto determine whenthe levelswillworkfor you. To reallyunderstand what I am sayingyou are goingto haveto be patient andtake it one stepat a time untilyou can graspthe intricacies of market geometry poweful you will everlearn. andhowit is the most tradingtool Butbeforewe go on just let mesaythata priceretracement levelon a 38.250 - 61.8on its own is of no valueto you unlessyou cantie it into other important criteriathatwill meldthe geometry of the currentwavestogether.

CorrectiveWaveRelationships

Section2: Chapter-2



MarketGeometry is not as simpleas manyof the so-called Guru'swilltry and tell you,but! It is not difficulteitherif you knowthe approaches you haveto followto keepeverything perspective. aboutElliott'stheoryin I havea 4-waytestthatI applyto retracement levelsbeforeI tradeoff them, the testdetermines if theyshouldmeananything.Wewill getto thatlaterbut beforewe do we needto discuss all the possibilities. Whena marketis heading intoa retracement levelpricethat hasthe potential to reversethe currentmoveyou will needto seesomething elsethat agrees withthe geometry. Thesecouldbe: 1. Thecurrentlegis reaching a 1:1witha similardegreemovethatwent before. 2. Or maybeit's that the currentleg is approaching a previouslesser degreesuppottor resistance past price fromthe andthe will SQUARE a retracement levelwhenit testsit. 3. Then there could be an old top or bottomthat lines up with the retracement levelyouarefocusingon. Let'stakethesepossibilities andI will explainwhatI mean.

MARKETRETRACES38.2 - 50 - 61.8 on a 1:1 with a prior correction and retests an old low or high:

Youcanapplythe sameprinciple to a 44.7,57.7,or evena 70,7and78.6 retracement at times. CorrectiveWave Relationships

L2

Section2: Chapter-2

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t

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t t I I I I I I

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to Thepointreallyis thatyoushouldalwayshaveat minimum2 goodreasons tradeagainstthe currentmovefor a reversalif you want to remainin this business for the restof yourlife. Tradestakenusingtheseprinciples havethe abilityto be tradedwithverylow you proficient risk.When at settingup yourcharGthe rightwayyou become willseethe opportunities in advance. Anothergoodplacefor a reversalin a correctivemoveis whenyou get dual retracement levelsfallingon the sameprice.

thatyou need Thenthereis anothercomplexsituationthat ariseson occasion to be awareof. Multiple combinationsat a level.

A situationlike this would mark a reversalat point D 95o/oof the time. If it didn'tthen you would reverselongimmediately.D then becomessupport. CorrectiveWaveRelationships

l3




Thesesituations areset up wellin advance if youlookcarefully because there areprogressions in the ongoingtrend. t* of all XBwasa 50o/oretracement of AX. 2ndYCwasa 38.2o/o retracement of AYanda 61.8of BY 3'dYc = XB youshouldnevermissoppoftunities If youdo yourworkcarefully likethese. Theycouldfall on a differentcombination of ratiossuchas 66.6- 50 - 33.3 or 70.7 50 35.4. lust as long as they are in a similargeometric progression theyareimportant. THE50o/oPRICERETRACEMENT LEVEL: The 50o/olevelof any previousrangeis an impoftantgeometricpointto be obserued for a reversal of trend.The50o/o levelis normally testedin the early stagesof anynewtrend. Here'sa recent*ample fromthe S&P500.

t I I

5O-"i!Retrocemeni

llain

I I

WAVES OF SIMILAR bEGREE

Egclefrailer

lo date

t I t

t

s&P5BA

ilete 83661? hi 1815.flB

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?8?.58 030312

t

S3BZ1S

Ona day-to-day levelof the intra-dayrange,the last3-dayor basisthe 50o/o 2-dayswingor lastminuteswingis an impoftantlevelto monitorfor trading oppoftunities. Tradershavebeeneducated to buyor selloff 50o/o levelsandtheywill place ordersat themin advance. Youmayonlyget a bounceat themsometimes so if the marketthen breaksthe 50o/o levelit is tellingyou it is goingfurtherin the samedirection andgivesyouthe opportunity to rejointhe ongoingtrend. CorrectiveWave Relationships

I4


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Trading to WIN Course- One day at a time Qcharts CSU 859. AB


ES63H-5

866.84

ABSOLUTELYPOETR.Y IN MOTION

853.6B 86-6.AB 85?.BA 854.84 851.8S 848.64 845.8A s,42.W

Look ot this!

839.08 aI.ll/?w H ai n

61/31

gT/37

gt/3t

Here'san exampleof what I am sayingand it happensvery regularlywhen you start workingwith the intra-daymarket.The first 50o/odrr€stedthe advancingcorrectionto the prior 2-day rangeand the second50o/owas supporton the samedaystrading.Noticehowthe marketkeptcomingback to test the 50 levelafter it brokethroughit. On the 4h attemptit brokeback throughandcouldntfind suppoftuntilit arrivedat the 50 of the total range for the day.It wasonlya S-pointbreakoutbut still5 pointson 10contracts is 50 points($2500)with no risk whatsoever. The second50 was alsoa buy pointas it coincided as a 1:1 equalto the morningcorrection, definitelynot a placeto holdyourshortto seeif the 50 wouldbreak. Qcharts f,SU 858. A8 Signs of STRENATH Srcqk of 1:1 Folsc Brreokof 50lc

856. AB

s54.80 852.66 858. BB 848. 88

This high wos 507"

in thc SAND E'15Y

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Enfries I seewhichhovesufficient reoson

848.AB

r Buy rrBuy StopReverse r 5ell re 5ellStopReverse r Close

838.8B ffi6.48 lla in

Doqblc

6IT38

BLTST

aL/31

BI/37

aIr3l

aI/31

Wearegettingjust a littleaheadof ourselves withthe sellat the 1-1in green but this was a chartI had preparedfor my S&PDiary in fact manyof the chartsI will useareonesI havebeengathering togetherfor somemonths. CorrectiveWaveRelationships

l5

Section2: Chapter-2

Trading to WIN Course- One day at atime


Hereis anotherwayyoucanusethe smallerdegree50'sto get intoa lowrisk position.You haveto makesure it coincides with a priorsuppoftof some you significance would not risk more and than 1 pointon a tradeentrylike this one.Thetriggerto takethe tradein the first placeis the 7 pointsdown hasoverbalanced the prior6 pointscorrection.

FRIOR,SUPPOR,T

-7^?, Intro-doy 5 minutahors

TAR6ET 1.7

$ign of Weqkness

Youmustalwayshaveseveralreasons for takinga tradeif you wantto be a youcanfindthe better. winner.Themorereasons

THE61.80loRETRACEMENT LEVEL: The sameprinciples levelas trading applyfor tradingthe 61.8 retracement the 50 retracement. Youcanusethe 61.8retracement on movesdownto as smallas4 pointsbut it becomes socloseto a 50 it doesnot mattermuch. The 61.8 will commonlyoccurin the earlystagesof a new move,say for instance the firstcorrection aftera doubletop or doublebottom. CorrectiveWaveRelationships

Section2: Chapter-2


I I I I I I I I

Tradingto WIN Cowse - One day at a time


It can also occurin the middleof a wave seriesand is a very common retracement levelin the S&P500 futures.

t

THE38.2oloRETRACEMENT LEVEL:

I

The 38.2 is suited more to larger rangesthan the 50 or the 61.8 retracements.

t t

The38.2nearlyalwaysprecedes a continuation of trendafterthe markethas hadoneor moreoriorcorrections in the currentseriesor the initialthrustis a very strongand expansive move.The dailyor 2 daytrendwill haveclearly changed directionbeforeyoucanrelyon the 38.2asa solidlevelto anticipate a reversal andcontinuation movetakingplace.

I I I I I I I I

Qcharts CSU 936.BB 933.AE

DOUI'NbAY AFTER,INITIAL STRU6SLETO 38.E t3t^4

I|3A.BB lsuindc rl lhc $t.2 lcvd

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NEWS: Bush670bln stimulusplanfo fake o longfime to ba pussedfhroughCongrass. 6L/47


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3B.e& 6LB

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I am puttingthischaftin here,asthiswasthe waythe markettradedintothe page.I willexplainthe implications 38.2& 61.8shownon the previous of the 1:1'sgoingintothe highfor the dayas we moveon. Butfor the momentyou cantakeit frommethatthisgeometry wasa signalthatthe chances the 38.2 wouldstopthe marketin its trackswasa 100/1ONbet. Here'sanotherinstance of a 38.2retracement in the bearmarketfrom2000. The highin January2002wasan exact38.2on the SPX(CashInde<).The priorwavesof similardegreehad madea 50 retracement at the May2001 high. The correction from the October2002low retraced23.6whichis 0.618of 38.2 llaue Trad.er 1839.BE

i{SEHtT

S&PsEB

This 23.6% retracemanthos bearishtechnical implications:

1559.68 14?9.BB 1399.aa 1313.BB 1239.BB 1159.BB 1879.E0 sgs.BE gls. EB 83S.BB

rareek ending6th Dee Opan936.31 High 954.28 Low 895.96 Close 9L2.23

?5S.BB l-laitl

tZHsu99

lEJunBB

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0?SepBl

l9flprEZ

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At the timethe 23.6hadbearish implications andthe marketdid decline167 pointsdownintothe March2003low.


18


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1:1 PRICEMOVESWITHIN CORRECTIONS:

1:1 movesare very commonin the S&P500.I have beenteachingthis phenomenon to studentsfor manyyears. Theycan comein two's or three'smostof the time and offer a possible confirmation that the trendwill reverseif the end pricefallson a geometric levelof the waveof similardegreethatthe marketis correcting to. Thisdiagram shouldexplain whatI mean. li igh r

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Knowingwhat is possible,will give you the EDGEto work out wherethe marketcango to andwhereit cant go to, this will oftentell you what it is mostlikelyto do next. Whenyoubreaklevelsthat historically havea historyof workingthe marketis telling you the currenttrend is strong.If the marketreverseson the predictable levelsit is tellingyou that the priortrend couldstill be strong. Whichever waythe marketgoesit is tellingyou a storyandif you listenyou willseethe nexttradesetup easily. ThefirstthingI do whenI realisethe marketis in a correction is to calculate the retracement levelsof the currentrangesandthen applythe 1:1 rulesto seeif theywill comeout at anyof the importantretracement levels. If the levelsbreakI staywith the movein progress,if the marketreversesI go withthe newdirectionfollowingthe sameprinciples. By doingthis I can remainflexibleand am alwayspreparedfor a situation whereI cantakeadvantage of anyfastmovesthe marketmaymake. CorrectiveWave Relationships




t

GOINGINTO DOUBTETOPS:

Whenyou are headinginto a Doubletop it is impoftantthat you havesome waveequalityas the smallerwaveshaveto "Squareout" at the top to give youa clearindication to SELL.

Therearequitea numberof otherpossibilities buttheseareyourbestbets. Bearin mindthe doubletopsI am referringto couldoccuroverseveraldays or evenseveralweeK. For the doubletop to attract sellingpressurethe News shouldbe in agreement andthe wavestructureheadingintoit shouldmakesense. If the wavestructureand the Newsis not in agreement then the prudent thingto do is to waitto seewhathappens or buya breakoutif it comes. Anytimeyou get a significant reversal on a doubletop youwill haveplentyof timeto evaluate gathers the situationandestablish a positionasthe evidence itself. If the top turnsout to be impoftantyou will get the signalsas the future marketunravelsand you can use all the other techniques we havebeen discussing to establish a shortposition. Shott-termdoubletopsare morereliableover a 2 or 3 day tradingperiod. The longerapaftthey arethe lessreliablethey becomeand are likelyto be brokenor the marketwill neverreachthemandcanjust fall short. CorrectiveWave Relationships

I



t I I I I I I




GOING INTO DOUBLEBOTTOMS:

Theonlypractical ruleI havefor knowingthat a doublebottomwill holdis if thereis an obvious 1:1goingintoit. Knowing for howlongis alwaysa problemin a fallingmarket. BeforeI wouldfeelsafethat a bottomis in for anyreasonable amountof time the current2 or 3 dayswingwouldhaveto retracemorethan38.2olo. Majormarketlowsseldomoccuron doublebottoms,theyareeitherexceeded by a little(falsebreaks)or theyjust don'tgetthere. Nevertheless doublebottomsoccurall the time in the intra-daypicturebut theyarenormally onlygoodfor intra-day trading.

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Theonlypractical adviceI cangiveyou otherthanthis is to waitandconfirm thereis a bottomin beforeyoutradeit. If the originalbottomyouaregoingto doublewith is an existingcardinalratio retracement of a largerrangethen it hasthe potentialto hold.Youwill have to evaluate thatsituation asyoufindit. Whenyou seehowstructures canrelateoverallin bullandbeartrendsit may add somelight to your overallanalysisdependingon the currentmarket position.





POSSIBLE EXCEPTIONS TOTHE1:1 OVERBALANCING RULE: When the current correction overbalances a prior correction of similar degree, i.e., the market correction exceeds the 1:1 measurementof the prior correction. The nerG geometry where the market correction may terminate couldbe on a L;L.272or a 1:1.618alternatewave relationship. A correction in a bearmarketcouldtakeon the followingform.

Regarding the overbalancing rule: If a correctionin a trend (CD) overbalances a prior correctionof similar degree(AB)the normalconclusion is that the trendhaschangedto a higher you shouldstill be awarethat the correctioncan in degree.Nevertheless some circumstances extendand finish as a ratio of the alternatewave correction, i.€., CD:ABin Ratiosuch as L.272and 1.618are the main possibilities. The chances thiswill happenare moreceftainif for instance CD werea ratioof XCor BCor both.A ratioof 38.2or 50 of CDto XCwouldbe a betterreversal signalat D in mostinstances. Whenyou havea situationwherethe marketreverses in circumstances such as this, on a greaterratiothan 1:1 of the Alternatewaveof similardegree, dont treatit as a guaranteed continuation signuntilthe markethasretraced morethan61.8of the CDleg. I haveseenmanyinstances wheremarketsdo continueon down,but I have alsoseenmanyinstances wherethe marketwill retraceonly 50o/o of the CD leg and then reversebackon up and continueon up. The bestthingto do whenthe currentcorrectionhas overbalanced its Alternateis to take each geometric signalas it comesandseehowthe marketreactsto it.

CorrectiveWave Relationships



t I I I I I

I I

t



COMPLEXWAVE STRUCTURES:

that canoccurwithinmarket Hereis an exampleof someratiocombinations relyon appearto be unclear. wheneverything structures elseotheranalysts

I I I I


I am not goingto explainwhatit all means,I just wantyouto be awarethat to explainwavestructure throughthe useof sacredgeometryit is possible justify WAVE THEORY. enoughto the ELLIOTT adequately This is an actualexampleof how a seriesof wavesof largerdegreein an in the uptrendin the S&Pmarketcameout. The smallestwave-amplitude serieswasCD at 34 points. In this casethe correctionthat terminatedat D was what I wouldcall a RUNNING CORRECNON. of the PointD coincidedwith a retracement of BC at 0.707 (reciprocal of the square squarerootof 2) anda retracement of XC at 0.447(reciprocal rootof 5). Theseratioscameout withinan accuracy of 0.002overrangesof XC= 76.4 prices. andBC= 47.9on the S&P1stmonthfuturescontinuous Asyou pursueyourstudiesin the intricacies of the marketgeometryI would it is adviseyouto keepthingssimplewhenit comesto trading.Neveftheless you imperative for to understand thatthesethingsactuallydo exist.


23





BearMarketTrends: Weareveryluckynowto havea completedbearmarketin the S&Pto study. Duringthe bear marketfrom 2000to 2002I was neverwrongaboutthe marketdirectionfor morethan a day,I wasableto identiff everymajorturn alongthe way usingsacredgeometryof time and price.As otherswere predictingthe bottom time and time again I remainedfocusedon the we downtrenduntilthe markethaddeclined50o/oin value.Notwithstanding tradedallthe ralliesup fromprogressive lowswhentheywerein progress. EgcleTrailer

S+P 506 CffSH

IIARXERS tsl

6BE3Z4 1552.87 TO

azl

f,,zt01B ?68.63

AAoy2OOl 5O%Retracement Jqn ?OO2 38.2f" Rstrocement

TI}IE ItCLE ilags S3E degree 913 ueeks 132.9 nths 38.6 gears 2.536 RRTIGE it0uE 7fr4.24 B 50.5 Sqr9d Zl:Bj

t

Thetwo majorcorrections in this bearmarketwerepredictable in as muchas theywerepefectexamples of ratioin wavesof similardegree. TheMarch- May2001bearmarketrallyterminated of the totalmove at 50o/o downfromMarch2000to March2001.Pointsin thisrallywere235. - January2002bearmarketrallyterminated TheSeptember at 38.2o/o of the 2001.Pointsin the rally total movedownfrom March2000to September were233. Thetwo consecutive bearmarketrallieswereequalin amplitude. Thefirstthingto remindyou of is that corrections shouldneverget largeras If theydo then it is reasonable to assumethe bear a beartrendprogresses. (June trendhasterminated. The currenthigh 2003)is now up 246fromthe October2002lowandwouldindicatehigherlevelsto comein the future. BearMarket Trends



I I I I I I I I




TheMay2001highwasa no-brainer at 50o/o of the existingbearmarketand impliedfufther downsideto come.The economicrepoftswere becoming increasingly negative at thistop. TheJanuary2002highwasalsoa no-brainer at 38.2%of the thenexisting bearmarket. Therewas very little doubtthat the 38.2 and the 1:1 were goingto mounta formidable technical obstacle for the marketat the time.It wasbecoming moreandmoreobviousthatthe eventsof September 11,2001 werehavinga devastating effecton business was activity;the airlinebusiness in a disastrous state.The Fedhaddroppedratessignificantly by thistimebut unemployment wasrisingat a rapidpaceandwe werestaftingto hearnews of massivebankruptcies. As moreand more bad newscameto passthe just market continued to selloff. TheSeptember 2001lowsupportcamein 10 daysafterthe 911disaster and to be honestno onecouldhavepredicted But by takng this low in advance. thingsonedayat a timeit wasclearwhenit did. Ggclelrailer

it\arch 2OOO

S*P 568 GffSH

FRIf,ECYCLE TRl BBB3Z4 Pr 1552.B? TB] ALBSZZ Fr 1881.19

The leg down from the 5O?, rstrocemcnt raros78.6 of the /Ularch2OOO- Mqrch 2OOlnst declina.

Eng 4?1.68 H 3A.4?, FROJECTIT]H TCl EL&SZZ. Fr 1315.93 tT] B1BSZ1 Pr 344.?5

Whew: Grim Week Ends Shroudedin uncertainty, U,5, stockindexesFost historicweeklylosses, lrlarket Uodete

I

Efiillr*.no

Dow Jonas Indusl"iols Indcx The na*et ruas wcolc bcforc nowit k wcoker..,... Scptcnber 2001

Bear Market Trends

25




NEXT2 DAYS: S&PsBE date B1B5ZZ hi 1315.93

Markets Rise Investors werefinallyin a pushing buying moodtoday, theDowup367pointsandthe 78. Nasdeq Market Update > Ebr.tt About rt F

(il'l.cortr

s44;?5

rBushfreezesassetsof suspectedterrsrists

818S21

dat

*londay 24th Scptrember 2001

B1B8Z4

THE FOLLOWINGDAYS: l.lave Trader

fift ILf

Ilate BIBSZZ TffI 1BB1.19 Ilate BlBgZ1 tBI 944.?5 ilnge 138.44 Hoot 11.68 Sqr9it 386

,507c

61 doys Uf

]l[il'l']

PERCEHTfiGE -12.62g > < 14.449

WATERFALL}ATTERN

IIECBEE L77 uib a.772 uib

B. ?46

ueeks ZE.! Uears 8.4S1 l{ain

;ht['\r

ZZFebBl

(

B9HprBl

Srings U?

Six Alonths 180q

Z5}lag8l

L3JuI61

Z$ffugEl

ZZOctBl

Thetimingwaspeffectfor a technical 21 low. reversal at the September Gann'sEquinoxdate for a reversalcombinedwith a DynamicTime ratio between the previous up swingat a 2:1 to the day. Sixmonthsfromthe prior majorlow.Allthe thingswe havelearntto monitorovertheyears! It wasallthere... Bear Market Trends

26



I I I I I I I I I




January2AOZand March2002 DOUBLE TOP: l,laue Trader

BftII,T

/Ulorch?OO2High

Ilate B1BEZ1 tHI S44.?5 Ilate EZB313 rBl 11?3.34 I Fnge ZZ:t.19 r Boot 15.14 Sqr9il

Jon 7th Tolol Beor Rclroccncnl

33.e

835

DoublcTop

PER[EI-{TflGS

> (

zL.zB* -19.5Utr

NEGNEf, ffiB uib 1.272 nffYS Uib

1?S 1. ZBB

r,teeks 25,6 gears B.5BB llaiu

t80o-

68HarB1

B1Jun01

??ffug61

ZZFebBZ

Zlt{agBZ

March2002 high: This was anotherno-brainerin the progressive bear market.Therewas alsoanotherimpoftanttimingelementthat cameout at the doubletop that is wofthmentioning for posterity.

l.lave Trader

Ilegrees

157 EZEZZA tzl BzB319

Jon.Tth

rlA.ini Triple Top

II].|E... . f,alendar 27 Ilegrees

z 7 .E

Ilisplag

z7

}IEEHS 3.S YEfiFS B. B?5

44 Doys

?7 boys

1.OOO' 0.618

P n I C E. . HRI{GE 98.58 IHRHGE

s.zw{

H ai n

B65epB1

Z6tlctEl

15llecE1

BZFebBZ

Z4llarEZ

l5l,lagEZ

Thereis reallyno excusefor missingSIGNSlike theseif you understand marketgeometry andthe classic teachings of Elliott& Gann. BearMarket Trends

27




SOMEMARKETLOGIC:

Whenyou arriveat a decisionpointthat seemsto be of a majordegreeyou possibilities. shouldinvestigate all the technical The moreimpoftantthe signs you canseeat workthe better.Somebottomsor topsin the marketwill not beasclearasthe onesI amshowingyounowbuttherewillceftainlybesigns for youto follow. As my policyis onlyto tradeintra-daynowthe majorturnsneverhaveme holdinga positionfor very long,but it is handyto knowwhat the general marketdirection will mostlikelybe.As I go fromdayto dayI seethe smaller wavesworkingthemselves into completion and and I can trade backwards fonruards takingadvantage of the ebbandflowof the market. I havebeenstudyingthe otherplayersin the marketfor well over20 years andit neverceases to amazeme howpredictable theycanbe at times. Whetherthesetechnical thingshappening in the marketare because of some preordained just naturallaw or becauseof the actionsof tradersactingon pre-taught technical is education not very importantto me.Thefact is these thingshappen andthatis allI careaboutasit givesmean EDGE. I alsoknowonethingfor surethat marketscanonlygo up or downbecause morepeopleare buyingratherthansellingor vice-versa. If theystaftbuying going or sellingin forceaftera majortechnical signalI am to followthe flow. Whatevertheir reasonsfor buying or selling there is always some fundamental reasonbehindtheiractionsthatwill makesomesenseaswell. It maywellbe that whena marketis fundamentally readyto makea reversal practiced it takestechnical percentage signals by a large of tradersto come into syncto tip the balance. Thiswouldbe the onlylogicalexplanation if the marketswerenotworkingto somepreordained naturallaw. Thiscouldexplainwhyat timesit is nearlyimpossible to explainsomemarket highsandlowsthat nevermakeexactgeometrical sense. Nowsomepeoplereadingthis pagemightwantto callmea hereticfor saying this nowafterall the booksI havepublished subjectin the on the geometric past.But I will haveto livewith that if it is youropinion/because I am only you telling howI feelrightnow,that'sall I everdid in the pastanyway. The thing is I startedout lookingfor waysto forecastthe future and as the yearspassedI decidedit wasa fool'serrand.Forecasting wasfun but it never reallyhelpedme makeany moneytrading.To makemoneytradingall I had to do was readthe marketone day at a time andthat is how I havebeen doingit all my life.At timesmaybeI thoughtI wasdoingsomething elsebut now I realiseit was only my constantdailywork ethicthat hascontinually mademea successful trader. BearMarket Trends




Tradins to WIN Course- Onedav at a time


THEJULY246,2OO2LOW: A flashback whenI waswritingthe 1* Tradingto Win to August22nd,2OO2 manual. Thisis whatI saidat thetime. As it turnsout my ideaon how wavesof similardegreeshouldrelatehaskept my mindin the right directionthroughoutthis bearmarket.

Ggclefradu

ilRnrcns tsl

Ef,03u4 1552.8?

m tzt

En?24 7?5.68

III{E EYCLE dags 852 degree B:l? ueeks IZt.? lrths Z.fj.tr Uears 2.fr6 NRNGE

S+P 5BB GASH

2000 HISH

AuErst 22nd,2DO2: SeP5m hasrnadea significonttechnical Lorru ct this tine horing relracad tO years of goinsby 6LB and follen 5O%in fronr tha all tirnc yeor 2OOOhigh. 50% FALLIN VALUE

f*ffi' sqrsd\!QS,/

Rightnow a solidtechnial bottomhasbeenregisteredand it is onlya matter of time to see whatthe endresultwill be. From my point of uiew I have been trading the upside more than the downsidesincethe Juty 24 low - but then as you read more chaptersyou will seethe reasonswhy. Situationright now is that the S&P500is tradingat 950 up 175 points from the July low. Thepreuiousralliesin similardegreewere235 and 233 poinB so it remainsto be seenif this rally can exceedand overbalancethe CYCLE DEGREE andstaft a newseriesof wavesof similardegree. As far as I am concernedthe trCLE bear marketis still intad until we take out the 38.2 of the total declinefrom 1552to 775. Thatwouldmeana level of 1075has to be exceeded.Timewill tell, in the meantime it is businessas usual. 775wasthe July24frLowandthe rallyup fromit failedthe dayafterI had writtenthis, the thing was that the August22ndhigh of 966 basisfutures didn'tmakea hellof a lot of sensegeometrically thanthe percentage OTHER increasefrom the July 2001low to August2001highwas identicalto the percentage increase fromthe September 2001lowto the January2002high. BearMarket Trends




August 22ndr2OO2Bear Market Rally High:

l.laue Trader IZBE.8E

sfl Itt

lst Month ConiinuousFulures

1ffi8.94

11zs.0a 1888.BB 1848.09 1008.08

+134.8

968.BB

sz8.oB 888.88

Augusl22nd High didn't quile moka the l:1 or the 5O of thc prior ronge

848. AE 8S8.A8 ?68.64 I'lain

05Feb0Z

l5llar8Z

ZSftprBZ

B4JunBZ

lSJulBZ

57.7 retroce Z3AugBZ

Nowthesearethe situations that createa dilemmafor you.The marketjust failedto makea 1:1 with the priorwaveof similardegreeand it alsojust failedto makeit to the 48.6or the 50 retracement. The48.6wouldhavebeenat 969andwouldhavefittedwiththe 1:1- the 50 wouldhavebeenat 975. The highwas966 on the futuresand965 on the cash.Neveftheless the marketreversedand went on to makea new low whichjust brokebelowthe July low by a minornumberof pointsand that didn'tmakemuchsenseeither,I am nowtreatingit as a biggerpicturefalse breakbecause of the wayit reversed so quicklyat the time.

S&F5gB ilate 9,ZBBZZ. hi s66.08

2l Trcdingbays

Ggclefrader

ln date f{ain

34 TradingDoys

767.50 &ZIALE WZSTZZ

Bear Market Trends

159.4 421915

30

Section 2: Chapter - 3


I I I I I I I




The thing I have learntover the yearswhen the ratiosdon't comeout perfectly is to go withthe patternandmyotherrules. 1. Corrections shouldnotlastlongerthan2 days. 2. The3-Dayswingis the fastestindicator for the currenttrend. 3. Corrective wavesof similardegreeshouldnot overbalance. Following theseruleshasalwayskeptmeaimedin the rightdirection. THECOMPLETED BEARMARKET: CgcleTrader

BEARM/4RKET 2OOO-aOOZ

S*P 500 CASH

G a r t I e U

HRRHERS tSI

BBA324 1552.8?

ro IZt

: \4339 1

EZIAilA 764.63

S t!

232.2

11

I

n

c ^ u s 2 k

-40E.3

Keepo record of cverything

OnethingI wantto remindyouof againis to alwayskeepa recordof events. If you do this thenyou will not overlookanything.It is easyto forgetsome got pastyou. thingsandthenrealiselateron thatan oppoftunity As I saidwhenI startedwritingthis chapterthe S&Phascurrentlymadea highof 1015two weeksago,that is 247pointsup fromthe October2002low and226up fromthe Marcht2, z}O3low.Thewaveup fromOctober10h to December 2ndran 187anddid notoverbalance but nowit is a differentstory. s&P500 rtate 83661? hi tBI4.Ag

This wos not enoughto OVER. BALI4NEE thc bcor trend

+1E73

.

Cgclefrader

lr d n 1e

?6?.5S az7ai8

llain

BearMarket Trends

3l




Thisis howI potentially seethe currentElliottWavepositionof the S&P,I am presenting this as a guidefor my studentswhoarecurrentlytakingrealtime trainingwithme rightnow. tlEEl;L'l

l.lave Trader 1682.A0

s&P5as sPX llty ELLIOTT WAVE inlerpreiotion right nouris this:

tSzB.aa 1438.0S

It moy not help me mokeony money but it is o focus T con concenlrote on.

1356.BB tz?4.89

D+th

1192.0B Lt1'A.sg 1BZ8.0A 946.08 864. BA

Somcmay dispute the olb counl but it is coveredin Elliolt's work:

78Z.gg ?EA.A8 I'ln i tl

B3l,farBB

TTBgfBE

Z9Jun61

ZZEebEZ

2

F 250ct0Z

BlJulB3

PointE was the July 24tr'2OO2low. Officiallythat is whereI seethe bear marketended.The up and downmovebetweenJulyand Octoberalthough still withinthe confinesof a bearmarketdid not extend.We couldcallthis periodan adjustment period.The interesting thingaboutthe low on October 10th2002wasthe waythe marketjust tookout the Julylow on a panicsell off dayandthenreversed VIOLENTLY. Within3 daysthe markethadregained points. over116

I I I I I I I I I I

t I I I I

t AZ1A1B ??6.88

88?.38

?E?.58

BBZ.58

The conceptof the A-B base at the end of a bear marketwas twice mentioned writtenby in "NaturesLaw"according to the ElliottWavePrinciple FrostandPrechter [C] 1978. BearMarket Trends


I I I I



Section


2l chapter+:

Bull MarketTrends: Bull movesexpandin orderlyways,i.e., they movein stagesof minute degree,medium-term degreeandlonger-term degree. Eachdegreeof movement withinitself. shouldnormallyrelategeometrically Whena moveof similardegreeis in progressany corrections withinthat moveshouldneverexceedthe amplitude of the same of any priorcorrection degree.If theydo thenthe wavestructureis saidto be movingup a degree. Waves of similardegree:

Thecommonwavesetsyouwill getarethese: Wave1

Wave2

1o Resistance50 of Wl 57.7of Wt 61.8of Wl 66.7of W1 70.7of Wl 78.6of Wl

From orior Downtrend Couldbea 38.2or 50 retracement

Wave3

Wave4

1 : 1o f W 1

1 : 1o f W 1 1:1of W3 38.2of W3 38.2of W0-3 1:1.618W0-3 44.7of W3 38.2of W0-5 44.7of W0-3 50 of W0-5 61.8of W0-5 50 of W3

t,272of W1 t.4L4 of Wl 1.618of Wl

2ofW2 2.618of W2

Wave5

1:1of W2

Thesearejust a guide,asthe marketunfoldsyouwillseewhatI mean. Bull Market Trends




BullTrendCompletions: is by Oneof the waysyou can tell if a bull trend has reachedcompletion lookingat the wavedivisions of the completed move. Forinstance the totalmovecouldbe 100pointsandthe amplitude of Wave5 is 38.2it canalsobe 50 of the totalmove,in somecasesit willbe61.8of the totalmove.

j I

I

I

i

t , t

I

I

i ,

;

i I

I

t - -

,

,

TERMINATTONPOSSIBILITTE 5 -+ r

;

L ! \ a t t 4 t

i

r a r

l - l

r 4 v t r

I

r

v g g * v + L r . r L g

I

J - r

:

I

i

i

] i

o '

Oftenyou will find that becauseof the internalstructureof a wave seriesit will terminatein a way where the last leg into the conclusionbecomesa Cardinalratioof the entiremove. Froma trading point of view it is betterto keep it simpleand only deal with wavesetsin similardegree.

l

its 1.272

yourfirstexpectation Whenbuyingbreakouts targetis the 1:1

Bull MarketTrends


I I I I I I I T I I I I I I I I I I I

t

I I I I I I I I I


Tradingto WIN Course- One day at a time ,ot jffi Price Date

j 839,56 o3,/31,i03

,n,otu, p--3

|

Hrr^_.urc :

u : E H s j ts A ' i E B i e * t f f i i A F i e

This is vuhothoppencdover the first two doys of the weak.Ii is worfh renremboringhow technicol buy ord scll poinis con be if you do thc cElcs.

ALL WAVESCOLOR C O D E DA R E 1 : 1 ' s

Hereis an S&Pchart I savedfor the two daysof March3l and April 1 when we resumedthe establisheduptrend.We reversedbackinto the uptrendoff a 50o/oretracementon March31, 2003. Sincethen this has beenthe progress.


Price 961.74 Date 06/S,iO3 open 97612 High 9ffi.61 Low 973.60 cl@ 974-50 Csr % 5.0 # Bars 1

Morkei Trcnd in lAojor Degree

-36.6 30th June 2OO3: Thc morket is o{J 41.7 fron its high this is 5 points mot'ethon the prior corection of simifor de4reoso l'he rrcxl decisionpoint is fha 52 ? dovn ot the end of lAoreh.If ihe trand up is lo renroinintoci we hovoto stoy obove963-96O olhervlisewc ovcrbolonce

betweenthe March31 lowandtoday'slow is the patternover Thedifference havebeenat it againbut it is hard the pastfew days.The"windowdressers" to saywho waswinning.Whenthe Junefuturesrolledovera weekagothe or most majorityof the short positionsthat expiredwere Non Commercial were funds hedge the likelyHedgeFundsshoft positions.It meansthat in the to applypressure thismarketallthe wayup andmaycontinue shorting daysahead. Bull MarketTrends

35

Section 2: Chapter- 4

you will territory,basistechnicalindicators, As marketsmoveinto overbought professional the findthatthe publicarebuyingin casetheymissout,whereas traderis lookingfor a placeto sell.


Professional tradersarewellversedin markethabitsandthat is whytheyare alwaysthe big winnersovertime.Theyare alsomarketsawy so they know whena moveis runningand will buy with the trend if they don'tsee any in the way. barriers

t t



fairvalue. Interesting timesasthe feelingnowis thatstockshavereached we go In anycaseyou shouldhavethe ideaby nowthatfor tradingpurposes it wantsto go uF,go down,or withthe flow.The marketis eitherindicating restalongthe way. As a traderit is not terriblyimpoftantwhetherthe marketis goingup or down.Whatis impoftantto knowis whereit will find technicalsuppoftand andcorrect. resumethe up trendif it is bullishor whereit will hit resistance dailytrend. On a day-to-day basiswe haverulesto followin anyestablished Thetrendwill alwaysbe clearto you if youfollowthe rules. trendit will havemorebuyersthan If the marketis goingup in an established in an sellers.It is normalthat marketswill havemorepublicparticipation just public The not educatedin tradingbear are uptrendthan a downtrend. movesandmostlytheyhavethe mentalityinstilledin themfrombirththatthe onlywayto makea profitis to buy- hopeit goesup- andsit with it. The publichavea habit of holdingpositionsway pastthe top of market Whena bulltrend advances andget themselfwashedout on the corrections. reverses mostwill hangon untiltheirworstfearsare realisedandthenthey willcapitulate.

or the 1:2.000 or 1:1.618 In advancing markets theylikethe 1:1or L:L.272 levels.

I I

thesepricelevelsyou haveto be watchingthe market So as you approach activityto seeif theyarelookingat a reversalto go backthe otherway.

t

Neveftheless on anygivendaythe hardcorewill followrulesandbuyandsell the levelsthattheythinkofferoppoftunity.

for theiractions,afterthe Tradershavean abundance of reasons or excuses eventtheywill tell the mediabut then it is to latefor the averagepersonto the levelsat the timeto pafticipate. actupon.Youhaveto recognise Tradinga bullor beartrendis no different- it'sjust that in a bulltrendthe publicwill havea greaterpafticipation, evenif it is onlyviathe mutualfunds. Bull Market Trends


I I I I




Tuesday1* July 2003: Todaywe bouncedoff the 1:1 levelwith the Marchcorrectionafter a gap downopening. Themarketclosedon its highsfor the day. S&P5BB date BSBEl? hi 1815.86

1:l Corrcction* in similordagrec Cgclefrader

ls date

?88.58 8383tZ

l{ain

AfAfZq

Nowin the shorttermthe 3 dayswingonlyhasto turn backup to changethe currentmoodof the market.We havethe 4mJulyholidayon Fridaywith half daytradingThursday. Thereis likelyto be a Iot of booksquaringgoinginto the endof the week. Echarts ESU

sse.BB

SEg.BE

ESB3U-5

:

3 Doy High- 988

sCI6.08 s83.68

-aPgttliglt: ?-E?-.9

98B.BB S??.BB g?4.98 s71. BB

Linein the $snd - 971^4

s58.BB 965.89

s6z.BB

This low is o lcrge degrec 1:1-->>>

EE,/3B,/ZAE3 l,lain

Timewilltell butthe lowtodayhasallthe earmarks of a majorreversal. Bull Market Trends




Sohowdoesthe ElliottWaveinterpretation fit togetherrightnow? S&F5BB date ffi4617 hi 1815.33

W 3 : 1 . 6 1t8i m e sW l W4 is 1:1rnrith W2

EgcleTrader

The conclusionright now is lhot the trend is up os longos tha lorar of W4 ramoinsintoct. la itnte

?fifi. Sfi B3'&313

l{ain

B3B1Z4

83833?

Eachday you just movealongand readthe signs.That is why it hasto be onedayat a time.In ElliottWavetermswhilethe W4 low holdsup the bull marketis still intact.If it failsthenthe wholestructureup to the highwould countasanA B C conclusion. l.lave Trader

ilegrees

tsl 838331 tzI B3B?81 T I I { E . ...

f,alendar 9Z Ilegrees 88.9 Ilisplag 8g

Somaconventienollechnicol things sean betvJeanthe lov.rs

l,tEEl(5 1 3 .1 YERRS E.?.47

9O begreesTima :

tdain

Z?SepE?

lEHovBZ

lBJanB3

B?l{arB3

03Ha9BI

BlJul83

Justfor the recordrightnowtherewerea coupleof thingsI sawthat might be in playat this low.Theyareon Gannrelatedteachings that you canread aboutin my DT&PAnalysis book. Bull Market Trends

38


I I I I I I I I I I

t I I I I I I I I I

I I I I T



Wednesday 2ndJug 2003: I

tntavatliF--=

I- Alsessions

5 P 0 3U

ir lrov,lUP


Todaythe marketopenedandat first met resistance at the 50o/oretracement but laterworkedit's way slowlybackwards andforwardsto the 61.8. The 3 day swinghigh was at 9BBso that is now up again.Nowthis has to be countedas the secondday up so we do not knowfor sure if it is just a correction in a downtrend or a newwaveup that will keepgoingandtakeout that it the 1015high.If it is the beginning of a newwaveup we canassume has everychanceof goingup a minimumof the amplitudeof W1 (108 points).Sofromthe lowof 960.5thatwouldtakeus up to 1068.5.Nowthisis onlyhypothetical at this stagebut I am just givingyou an ideahowwe can useour knowledge to mapout an ideaof whatto expectin the futureif the confirmation comes. The 1:1 targetwith W1 wouldmakea 0.618:1with W3 so that would definitelybe a logicalresistance in any furthermarketadvance.The 1068 of the total bearmarket areaalsocoincides closelywith a 38.2retracement rangefromMarch2000to October2002. I am not makinga forecastherebecause I will be takingit onedayat a time. Someweeksago Nevertheless it is handyto havean ideaof whatis possible. andRobeft ElliottWaveexpefts(BobPrechter a coupleof the selfproclaimed of the bear Miner)were still callingfor a markethigh and a resumption marketto newlows.Theyhavebeenthe wrongwayaroundall the wayfrom the Marchlow.Youknowtheybothpreachthe powerof contrarythinkingso I won'tturn bearishuntiltheyarefinallyforcedto admittheyarebullish.

Bull Market Trends

39




Solongasthe recent960lowholdsI amgoingwiththe trendwhichis up. Just for the exerciselet's havea look at the big pictureand see how the markethasdeveloped sincethe Octoberlow. Cgclelrader t574.ffi HIGfl

I I I I

t

Morch ?OO0

I I

t

Oetober'2O02 L0l.l ?6?.56

zf,aaa3z{ - Z9,BSETBZ

= new Therecenthighhasexceeded the two previous highs- old resistance suppoft.Thosetwo highsare 966 and 955 respectively. Whilethe market tradesabovethesehighsit hasto betreatedas bullish. The 50o/olevelbetweenthe 2002JanuaryhighandOctober2002low liesat 973.Whilethe marketremainsabovethe 50o/o bullish. it hasto be considered Anotherthing is that the marketbrokethe simpledowntrend channelline sometimebackandhasremained aboveit for sometimenow. Theseare just simplethingsbut they are thingsthat the investment funds haveto take into account.Manyfundshaveremainedsidelinedin the early stagesof this rallyfrom March2003and mustbe gettingneruousthat they havenowmissedthe bottom.The mediais nowpersistently that broadcasting the USeconomicreportsreleasedrecentlyindicatethat the USeconomyis rebounding.The factsareencouraging for higherprices. fundamentally With fundamentalconditionsthat encouragepeopleto invest in stocks aboundI wouldn'texpectthe marketto go intoa tailspinlikewe sawin 2002. Repoftsalsoshowthat there hasbeenrecordinflowsof moneyinto fundsin recentweeks,this indicatespublicparticipation. That indicatesthis current moveis a bull market,maybenot in the samesenseas the bull marketfrom 1990to 2000but a bullmarketneveftheless. Nowyou can haveyourchoice.Do you fight it or do you go with it? I think you knowthe answerto thatquestion. Bull Market Trends


I I I I I I I

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PREPARINGYOURANALYSIS:

Just in caseyou are not 100o/osure how to go about it - here is the procedure: 1. You look at a LONGTERMchartand establishwherethe marketis basisthe past3 yearsor so. 2. Nowyou go to the dailychaftandworkout wherethe marketis basis the pastfew monthsto a year. 3. Havingestablished the likelypositionrightnow,i.€.,if the marketis goingup or down,yougo to the mostrecentmovesandlookat where the supportandresistance zonesare. 4. Onceyou have done this muchyou are staftingto tune into the market. Nowyou canworkto the 60 minute,15 minuteandthenthe 5 minutetime frames. Thesewill giveyouthe placeswhereyou needto watchif youwantto initiate trades. Thursday3d July 2003: u @--fJ

t"t"'a lE6-*l

Price s7155 Ode 07fi}3io3 Time 89:30:00 Open 98625 Hsh 99425 LOW s85.50 Cle 989.00 Csr % -0.7 # Ear$ Vol 144,1S

r. snsessiom Thursdoy3rd July 2OO3 Holf doy closed1:1OET

,rllI

<--- This spike di

Somev.rildswingstodoy: l didn't renlly expect the 61.Eio comooui todoy.

Holf doy iroding todoy

The rallythat beganat 960two daysbackhasyet to confirmit is a W1 of a new expansion. Still it couldprovidegroundsfor a 1-2 with the deepspike downto 974.5today,asthe Linein the Sandat 971.5is stillintact Whenhalfthe regulartradersare awayon holidayit's not unusualto get a suddenreaction levellikewe didtoday. off a cardinalretracement Bull Market Trends

41



[c] Bryce Giknore2004

Let'stakethe holidayweekend about to summarize whatwe knowtechnically this marketrightnow.I am writingthesechaptersin realtimesoyoucanget the ideaof howI go aboutthings,I don'tknowwhatwill happenin thefuture but if I followmy rulesI amalwaysprepared. Wecanstaftwiththe bigpicture: TherecenthighJune17 qualifies with asa W3as it wasa 1.618:1expansion the W1 from MarchL2. In Elliotttermsit wouldbe eithera W3 of a bull marketor a WaveC of an ABCbearmarketrallyfromMarch12. This week'slow at 960.5(Big pit Contractlow) qualifiesas a W4 in a bull marketor a W1of a newbeartrend. Today'shigh994wasa 61.8retracement of the Junet7 (1015)highandthe July1 (960.5)low range.Thisqualifiesit as eithera W2 in a beartrendthat beganon June17or a Wl of a newexpansion thatbeganon July1. Qcharts GSU 1B16.BB

W3orC

ELLIOTT W/4VEPOSITION

1616.06 1S84.BB 99B.OB

!xtz.g0 !I85. A0 :t8B.gB s74.BE gbt-BB

s6z.Ba !F6.ES

ES83U-58 r r g6,/13

a6,/1?rZAWl |{a in

j

W4 or wr

: r | BE/Lz

|

| | g6,/2A

r

r i AWZS

l

i

l i ffi/3n

l

l l g7/63

l

l

l

If you applythe ElliottRulesto the currentmarketpositionthe WaveCount possibilities areveryclear. 960as a W4 lowimplieswe go higherand994as a W2implieswe go lower. Soour largerdegreealternatives areto buyit on a breakof 994or sellit on a breakof 960. The short-termtrend (3 day swing)is currentlyup, yet the current61.8 resistance doesn'thelpthe Bullcaserightnow. Positives for the Bullcasearethatthe marketis stillabove973,966and955, the levelsI mentioned a coupleof pagesback. Rightnowthe caseis strongerfor a bulltrendthana beartrend,i.€., unless the 960lowcomesout andconfirmsa downtrend in progress. Bull Market Trends

42

Section2: Ctnpter - 4


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t I

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t I

t I I I I I I I

t



Monday7u July 2003: Whenyou see what has happened this morningyou will knowwhy I am marriedto thisbusiness. The Globexsessionfrom Sundaynight traded up towardsthe 994 level indicating the marketwouldmostlytestthe 61.8resistance. The marketday sessionopenedandwithin5 minutesthe breakof 994was completed. It wasa no-brainer tradebuyingthe breakof 994. 0charts GSU

tw?.w u&.08

ffi81.48 st6.80 61.8broken: Trad UP

s95.BB s9.08 s{1.80 s6.48 9&t.08 SB.E8 s??.48 E?/6?/zg]A3 Laus

g?/BZ

1E:15

LEhZ.AB

1AE4.ZS

m81.68

1B83.Zs

W./A?

It's a [email protected] breakoutfroman established suchaswe saw resistance todayis likehavinga licenceto printmoney. Qcharts ESU tgz4.ffi 18ffi.04 leLZ.W 1Bffi.SO IEBB. E9 994.m

s88.m s8z.@ s?E.m

sm.w gFt.06 g7/97/m3 Rat ios

tPlrice

ab=

54.50 cd=

.14.?5 cil/ab= 0.8e1

The retracement hasextendedto 82.1now,78.6wouldhavebeena levelto watchso nowwe shouldexpectit to go higher.Thedoubletop at 1015is the nextresistance. arenow1000andin the worstcase994. SupporG Bull Market Trends




I hopeyou guys are learningfrom my day-to-dayanalysisof the current situation. I justfocuseachdayon whathashappened on andformanopinion what levelsother serioustraderswill see as impoftant.Oncethey have analysed the importantlevelstheywill placeorderseitherunderor overthem to sellor buy. This is how the market flow works. The more buyers that are present and the price goes up, more sellers the price goes down, nothing else matters, it is a fact of life. All that is important each day is to identify the levels the buyersor sellersdeemto be critical to their current opinion. S&P5BB date S3861? hi 1814.80

Just o lcminder - or vuokeup colll

PRICf, ln riate

RB=

S4.ZA

f,l=

fl-38

t,'ttfu

=

I-BEZ

?S8.sfi 83E3tZ

Scroll

*

rrr,

The bull trendfrom the March12 low is still well and truly intact;the only thingthatwillchangemyopinionnowis a two-day break below960. Tuesday8h July 2003: Todayafter a lot of backingand fillingthe marketfinallybroketo a new Futureshighof 1008.5fromthe 960 low.Youcanseethis marketis coming underpressure asit getscloserto a doubletopat 1015. 1818.BE 1BB6.OB 1AAZ.BB gg8. BB 994. BB

Bull Market Trends


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T



wednesday9u' July 2OO3: lffi--]

r'u"a ff---l

F Arsissions

Prbe 1000.43 Date 07r@O3 Iine 12m(x} Open 999.50 High 999.75 Low g96IXl Close 99l"fl) Csr% 0.3 t Eers-120 Vol 17,42

t I I I


<-Vohenespikc on low bor

Thedaystartedoff in a choppyfashionand hadthe lookof a countertrend dayafter 10:30amET.I loston the 1s two tradesbefore10:30amandwas to with the chop.I managed 1.5 points,I was not comfoftable underwater my shortafterthe highof 1010at 1007^4and as soonas I had recouped losses closedout andquittradingfor the day. Openinteresthasbeenbuildingup the pastfew daysso it seemsthereare plentyof traderswho don'tthinkthis marketwill takeout the June17hhigh of 1014^6.

Personally I thinkit canbut it needssomegoodnewsto helpit along.Weare The into Q2 profitrepoftingso someextragoodnewsmaytip the balance. if linein the sandis stillat 994andthe 3 daylow is at 995.5so technically thismarketbreaksbackthrough994it is in a weakposition. Any moveup to the old highat 1014^6is surelygoingto attractextreme sellingpressure thingtodaywasthe volumespikeon the but the encouraging low bar of the day. It showsthat there are plentyof buyersdownat the support zone. Bull MarketTrends

45



Qcharts CSU 16z4.W ffi18.m


E:iE3U-3O

tA14.75

Rasisionce

1612.04

Whilethis markettrades above994 the doubletop 1014.75or breokouttradeis a reol possibility.The something marketis becomingcrompedright novrr

needsto aive. Retrocement is now 91.3?.

1O1O

1086.gB 13]gA.W sg4-m SB8.EB

t

s8z.m s76.ffi

t

s?a.m s54.AA g7/wrzh0.3 nat ios

lPlrice

ab=

54.58 cd=

49.?5

cdlab=

8.913

Let me explaina few morethoughtsI am havingat this time as they may comein usefulto youin the future. We toppedout on the 17h Junewhenthe W3 went 1.618of W1 and the progressive wavesin W3 went 1:1. Now everyoneworth their salt as an analystmusthaveworkedthis out by now. Nextwe reversedbackup from whatI am callingW4on a 1:1withW2.Theentirewaveformin majordegree is"square" to theW4label.(SeeS2:C4:P38) Nowby my rulesthe onlywaythiscurrentmovecanreversebackdownis for it to makea doubletop with W3 (1014.75)or go on to 1068to keepthe integrityof the wavestructurein the samegeometric form.Oncewe passed (994) move from 1014.5 to the down 960.25we exceeded abovethe 61.8 of the maximumgeometricpossibility that wouldhavesignedand sealedthe fromthe March12hlow. fateof the W3asa conclusion In anycaseanytestof t0t4.75 is goingto be metwithstrongsellingandany breakaboveit is goingto attractstrongbuying.This is very clearto me, I hopeit is clearto you. picturewe couldstaybelow1015andabove Neveftheless in the shofter-term 960 and still maintainthe integrityof the wavecount.WhatI am sayingis that while the markettradesin this rangeit is a tradersmarket.I was explainingratiosas we went alongjust so we havea "road map"of the biggerpicture.Nowwe are in a "no man'sland"so to speakso it is very impoftantto watchthe dailypatternsand usethemas a tradingtool.As we have beengettingcloserto the old high (1015)the markethas become Thisis because we havetraderswho believeit cango choppierandchoppier. high. higherandon the othersidetraderswhobelieve1015is the seasonal The marketstillhasto tell uswhichsideis correct,thereis no needfor usto decidein advance allwe haveto do isjust followthe signsto makemoney.

Bull Market Trends

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46


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ADDENDUM- 1* December2003:

Theprocess thismanualhadbeendelayedfor overtwo months of completing sinceI completedthe originaldraft so I am addinga little extra to this chapteras the S&P500todayhas finallyachievedthe target I havebeen talkingaboutfor so long. Here'sthe up to datelong-term swingchaftsoyoucanseewhatI mean. EgcleTrader

S+P 5BB CftSH

1 I l e c Z 0 B 3. . . . .

166S.95

FRICECYf,Lg ifft BaB3z4 Pr 1552.8? tB] B21618 Pr ?6fi.83 Fng 744.24 2 5B.5:r, PRI]JECTIOH ICI EZtAtB Fr ?6ft.53 tnt B3L?8t Pr 1868.E5 R BB.32 '4 n g 335. L:4 RRTIOS Pr E-38e pr S.383 '1 9.774 't fr.774

of the total points The high this morningrepresents a 38.2 retracement declinein the 2000-2002bear market.Alsotodaywe havea time factor present. highas well.The ls major Thismorning's highis in linewith an anniversary highafterthe bearmarketlow.Willit holdthat is the questionrightnow? Egclefrailer I'IARHEBS T5]

BZ1B1B ?68.E3 TO

121

1 Ilec 2963

S+P 500 CffSH

, This is as close os it gcts so if i ii is not o high iodoy v.reshould , go muehhigher: i

lst 2002 tll becember

sSLZEt 1B6E.9s

TI},IEf,Yf,tE dags 4I'l degree 412 uleeks 5t1.6 mths 13.? gears I.144 RAIIGT it0uE 3BB.3Z B 39.1 Sqr9d 8S5

Bull Market Trends

?

Vcry close to exocf 4-5=t 4-i = 3xO.618

$\arch 12th 2003

47




Whicheverway you look at it there is plentyof evidencetechnicallythat this

marketcouldhavea setbackat anytime. But as the day wore on the tradersdidn'tseemedto be phasedaboutmy targetand plentyof themknewit wasthere.I evenwitnessed a floortrader interuiewed on Bloombergearlierin the day sayingthat the markethad arrivedat a KEYRESISTANCE LEVEL andwastestingit. liEEf+

- nc @r @s @oo @oaih @r* i J E q r i u e s 'L f o f p r t n b r v a l s@

I I I I I I I I

t 09:00 10:00

U:oO

t2/ou03

13:00 !4:00 1e;00 O: {08225 H: loatso L:10815{, P{ilbtf,d

by esgEl

(m,esiJnd.@J

I I

t CSU Ilata Current 82.75

ES-I}RY Range

prior ranges f,I-BC 1.618 [i]"frE 1. 825 f,D-XR 1.465 Reuerse Cross fiD_EC Z. TSE Insiile Cross f,I]*Rn A.737 r iil 0utsirle Gross B D _ R I ] 8 , 7 . 4 1 ' ' ,, , i ' Iloub le Crtrss ll,.,r"' Hn-xc 4.15? Retrace Z cil- xc 3. 8fi5 ffI}_Xff Z.ABg

tz/81/83 Lnus

LB/Zg

Bull MarketTrends

It's not out of thc woodsyetl By ony meonsbut of leost our torget v.rosochievedtodoyl 1869.BA

1B7B.58

48

1455.75

1868.?5


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It hasbeena roughrideup to today'slevelsoverthe pasttwo monthsbut we got hereafterallthis. haveeventually in April is thatthroughout the pastmonthsbeginning WhatI can'tunderstand "Guru's" year of of this Bob Prechterand Bob Miner,both self-proclaimed of the 2000ElliottWavehavebeencallingfor a finaltop and a resumption kept their 2002 bear market.Effectivelytheir forecastinghas successfully footed way up. newsletter followerswrong all the andthe marketwill do everythingin its alwaysa forecaster, Oncea forecaster power to prove you wrong. Now that the market is way above the psychological it wouldtrade in a 5b Wave,the chances 1000levelandclea.rly in the remote backbelowthe levelsof the 4* Waveof lower degreeare area. future.Therangeof the 4h Waveis the 1015-960 As I havesaidin the lastchapterof this boolgthe marketshouldeventually keepgrindingits way up overtime.It will havesetbacKalongthe way,but if yougo backovermyworkthisyearyouwill seethat I amwellawareof that. of all the toolsused Whatwill be will be, but it helpsto havethe knowledge game. going you their own to beatthemat by othertradersif are CSUllata Current lange 48.25

ES-IIflf

Sfightly exeeedso mqjor dagree 1:1

prior ranges 34.25 1.1?5 48.25 4.ffi4 39.58 1.A1s 58.96 B.5SZ 51.25 S.?85 sB.?5 8.4S8 45.?5 B.8Sg 3A.58 1.328 4t.E A.g?E 54.54 0.?3S 55-58 8.725

+E?15

-5L.25 Corractionshovenol overbolonced.

IZ/SL/E3 f{ain

g7lzL

the Trend is still UP. I will leaveyouwiththisobseruation: Whilstthe nextmajorcorrection downdoesnot exceedthe largestcorrection sincethe March12m2003low, minus56.5points,the majoruptrendhasto be viewedas still intact.The hightodaywas 1070.5so the marketnowhas plentyof roomto remainabovethe 1000level. ElliottWaveis a great tool for trading;it helpsyou preparefor what is possible. morethana one-dayaheadis for fools. Butforecasting Bull Market Trends

Section2: Chaptnr- 4



Section

I

t

2= chapter5:

Alternate Waves& RetracementLevels: Levelscoincide LevelswhereAlternateWavesand Retracement Combination in trend continuations are extremelyimpoftantto lookfor as they cansignal mostof the time. Alternotc / Reiroca ment R,otioRevarsol

I I I I I I

t CO,IABINATTONs 1: Uptrendin Progress. Example The marketis going up and is currentlyin a correction- the correction on a retricementlevelof the previousimpulsewave(Green)and terminates on an equallengthto the previous terminates at the sametimethe correction correctionin the series(Red). Ideal situationsare (38.2 or 50) direct anda 1:1withthe 1* alternate. retracement WhenI havea situationlikethisgoingI almostalwaysbuyintothe weakness belowthe 1:1level. in thevicinityof the 1:1witha stopandreverse Buy@4vrhen3-4=t-2 of 2-3 &3-4: retrocament

/;'n,

4

Sell

Sell below4 af 3-4 exceeds1''2

Alternate Waves & RetracementLevels

50






Thesesituationsare commonplace on a S-minutechart and offer you a precise entrylevel. Example in progress. 2: Downtrend Thesamesituationappliesin reverse to example1. This is a strategyfor buying or sellingat the extremepoint of the retracement. The beautyof thesesignalsis that you havean alternative to you not tradeif the continuation of the originaltrenddoes eventuate because pointturns yourtradeif the wave3 termination canSAR(stopand Reverse) outto bea reversal of largerdegree.

Reversolof largar degrce ai 3

The longeryou studythe geometrythat unfoldswithinthe marketstructures youwill seethe obviouspointsof forcethatthe marketnormally to. adheres

An idaqlsituotionto SELLinto STREFIETH 2

1:1on at the 5O ratroca

AlternateWaves& RetracementLevels




Section 2: cnapter6:

The ReverseCrosst': The Reverse is a term I havecoinedfor a ratioanalysis Crosstm techniqueI useto helpclearupthe picturesometimes. Thisconcepthasbeenmentioned in my earlierworkandinvolves measuring the relationship to a completed 3 wavemovement. of the 2ndwavemovement

t

l:l'19

-,-----:*-/'.

0

;"J--il;;il[;rffi,;;;j;;

By checking the internalmathematics of a structureyou will oftenfind the geometry binding necessary to alertyouto a trendtermination. This diagramillustrates the approachin an upwardtrend and the same approach wavesin a beartrend. applies to measuring internal Whena 3 wavemovement extendsthe ratiocanneverbe lessthan 1.000so in caseslikethisI wouldreferto the ratioasan Outside Reverse Cross. It's a funnything but I haveneverseenmentionof this conceptanywhere beforeI first broughtit up so I am claimingit as an originalconceptof my own. I now expectanyoneteachingthis techniqueto referto it as Bryce's Reverse Crossin future. Findinga future pricelevelwherethe marketmight meet resistance or price You suppoftcan be locatedin advance measuring using3 techniques. wantto usethe Cardinal Whentwo or more Ratiosfromthe Sacred Cannon. ratiosfromthe samefamilyof progressions hit on the samelevelthenthatis wherethe priceis saidto "Square up".

ReverseCrossTechnique

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)z


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l


t I I

Tradins to WIN Course- One dav at a time


geometric Whenyou areworkingout possible I usein targetsthe procedures orderare: 1. PriceRetracement levels 2. Alternate WaveExtension levels 3. Bryce'sReverse Crosslevels

Usethissametemplatein reversefor targetsin a beartrend. Onepieceof adviceI cangiveyou is this: 1. If you find a levelwhereThe ALTERNATE WAVErelates1:1 and the RETMCEMENT is goingto be 38.2,50, 61.8then the chances of a reversal at that levelareabout90o/o. 2. If the ALTERNATE WAVErelates1:1 andthe REVERSE comes CROSS out at 1.618,2.000or 3.000thereis alsoalmosta 90o/o chanceof a point. reversal at that Therearemanyothercombinations that offera highprobability for a reversal in trendbuttheyareso numerous I cannotlistthemhere.Myadviceto you is youtrade. to exploreallthe possibilities withinthe markets I havea routinethat I havedeveloped in my WaveTradersoftwarethat allowsmeto testimpoftantlevelseitherin advance or at the timetheyoccur. priceseriesI findit easierto checkthem WhenI amworkingwitha 5-minute asI go usingmyX-ABCD routinewhichwillbeexplained in a futuresection of purpose get you thismanual. My rightnowis to readyfor thisexplanation. ReverseCrossTechnique




INSIDE REVERSECROSSES:

patternit is not a The insidecrossis morelikelyto occurin a continuation majorreversalsituation.The insidecrosshasa ratioof 1.000and lessthan 1.000

Lessthan 1.000 ratiosare more likely in a watefall type patternin a downtrendbut they can occurin an ascending diagonaltrianglein an uptrend. Whenyou are havingtroublejustifyingthe existinggeometrywithina wave serieslike this it is one way to turn. The 0.786 ratio and the 0.707are probably If the ratio the mostlikelyratiosto "squareout" in thesesituations. comesout at 0.786thenthe targetfor the movedownfrom D will be L.272 of BC. In an uptrendyou just reversethe diagramdemonstrated for the downtrend example. In an uptrendI wouldn'ttreatthisasa buysignalbut I wouldtreatit as a sell geometryis present.In a downtrend signalin a downtrend if othersuppofting you havethe lower highsand lowerlows in your favourand the market strengthwouldlookweakto mostplayers. The mainbenefitof understanding this geometricformationis that whenit you occursit will set movethatcomesout of it. upfor the continuation Justremember thereis no needto tradeeverything that comesalong,just your you good tradewhen tradehasa aresure chanceof success.


54



t I I T I I I I

I


t

The 1.000 : 1.OOOREVERSECROSS:

I I I I I

Whenyou get a 1.000to 1.000ReverseCrossit is most likely it will be associated with a patternthat containsfalse breaksas the CD leg is overbalancing the amplitude of theABleg. Here'san example recently: that occurred

6O lUlinutaChort

Cross= 1S.25

l"-]ffi,'-d ,,,,rhlhtr: 1S.25 biogono.l

t I I I T I I I I I I I I


ill I Ul

Thc 5&Pfirst modao FALSEBREAKto the upsideondtheno FALSEBREAKto thedouln

sidercsultingin o Revcrse Crossof 1:1

The signto buy was not confirmeduntilthe marketmadethat 1$ little 1-2 pattern. outsidethe Rectangle andthenbrokeout of the consolidation

If youarehavingtroubleunderstanding whatthe geometryis tellingyouthen you had betterrememberto checkthe Reverse CrossFormation as it may holdthe answer.




Section


t t

2! chapterz:

Inside, Outside and Double CrossLevels: Thesemeasurements are just anotherway for you to see if the unfolding geometryis workingto somepreordained plan. geometric

If CDterminatedon ratiosof 1.000,1.618or 2.000with ACor BDterminated at ratiosof 0.618,1.000or 1.618with ABthey wouldbe verystrongsignals.

l#;:;

*'

Double cnoas

Occursin on arpcrdingTRIANGLE

Current Rarrge lti.'/5 prior

I

,{D cs ratio XC

I

t I I I I

A

rdnges

clt-Bc 1.z8s cn-Rn 1.675 f,n-xfi 1.554 ffe"uerse Cross

lfrG =

13.?5

OtherGeometricMeasures

to BLUE'

13.'15

56

PflICE ltatio

.

I

l.gUO



t




Boththe INSIDE& OUTSIDE ratiorelationships oftencomebackintoplayas a retracement levelof somefuturesignificance sostayaleftto them.

INSIDE RATIO

J*t1r

If th is markefpatternrollied backto the 61.8youwnuldSELL it agoinstthe priortop:

1.618 Cb is Shortar thon ,48 D

If you examineall the optionsas the marketmovesalongyou will seewhere the geometry comesbackintosync. The moregeometrythat comesout at priorhighand lowswingsthe greater the significance is, thentheywill act as a supportor resistance if the market comesbackto testthem.

SUTSIbE R,ATIO

t,r*Ft

In this coseyouwould s e l l t h e3 8 . 2

Thereis no excusefor not knowingthe internalpricegeometrythat the marketis workingto.

OtherGeometricMeasures

Section2: Chapter-7

Tradingto WIN Course - One day at a time

Section


2: ctrapter8:

Bryce'sX-ABCDGeometricPriceApproach: Nowthat I haveexplained that are possiblein the the geometricstructures of where unfoldingmarketpatternsyou shouldhavea basicunderstanding we aregoingwithallthis. The first thing to rememberwith my approachis that wavegeometrywill Ratiosthat bind form in small,mediumand largerdegreewavestructures. the smallerdegreeto the mediumdegreeand the mediumdegreeto the largerdegreearethe criticalmarketpoints.Thatis, at theselevelsthe market cansignala reversal of trendor it canconfirma continuance. As traderswe need to considerthe way the wave structuresdevelop. Potentially thereare 100'sof waysa bullor a beartrendcandevelopandplay itselfout. Butalongthe waytherewill be verycleargeometric signsthat we willwitnesswhichwill allowusto taketradesat criticalpointsandcontrolour risk. you needto be clearon Beforeyou embarkon this expedition of discovery determining whichwavesareof similardegree. rule.This is where I haveone rulefor determining this - the overbalancing whenany set backto a trendexceeds a priorset backin the currentwave series.If this happensI assumethe wavestructureis then workingto the nextlevelandI will recalculate all mytargetobjectives.

I I I I T I I I I I I I

t I I

t It is irrportontyou understondthis to uEefha XABCDcffectively

Bryce'X-ABCD

s8


I I I I




RATIOTESTSREQUIRED: PRIMARIES: /

/

/

B

t

i

B

t

/ r

/ , J , ' /

c

r

'

c

{

A

A AD no XA DIRECT

CD no AB

CD to BC

lsr TTLTERNATE

lD no EC

DIRECT

RE!'ERSECROSS

c

#2

c

A ,t t

\

B

I

/

X

X Cb no BC Rclrrocencnt1

Cb ro )(C Rclrrccncnt 2

CD no AB 1st llnernoie

r

CD no tD INSIDE CRO9g

BDr'o lD

ouTsIbEcRoss

tD no )(C DOUBI,ECROgS

Theseareexamples of the waveformsyouwill be measuring.

Bryce'X-ABCD


Tradineto WIN Course - Onedavat a time


BUTIT IS IMPORTANT HOWTHEWAVESFITTOGETHER: Somecombinations will be important and othersjust won'tmeananything. The best thing I can do is to go throughthe possibilities of the wave formations combinations. andtry to pointoutwhatI thinkarethe impoftant Straightout bullor beartrendsin development arethe easyonesto read.

I I I I

t thelX,a

t"

i-"j

Nowif you get intosituations likethesebelowit mightcausesomeconfusion to otheroperators whenthe usinggeometryso theywill not be as committed ratiosbetweenthe wavescometogether.Standasideor go on holidayis my bestadvice. Tha mor:lr

et dilGSn

... ,'l

5'€,1

hovr on) dir'ricti

. , . , -, ,- ]

II

I

I

t \ \

I

I

t\ I ,l 1l I

ll'

\;

J

\,

I

\

{

t

I

, I knov of rothing,-tF m ' . - . i* v [u ct 'uld lEe;+r Et t : i/'

Wh,n m (r:kes str

Bryce'X-ABCD

'his

YF€o f t

I

dici vE.

ring sto"d,."j



t I

I I I I




FROMA TRADING POINT OF VIEW:

As the marketmovesalong it encountersgeometricsituationsthat will influence traderswhouseELLIorrWAVEtechniques to buyandsell. The majorityof informedtradersare awareof the retracement rulesthat applyto the ELLIOTT WAVEtheoryandElliott'stheoryof expansion. 1. 2. 3. 4. 5.

wave2'swill normallyretrace50o/o or moreof the prioradvance. Wave4'swill normally findsuppofton a 38.2o/o retracement. Wave4'scannotexceedthe priceamplitude of wave2's. Wave3'swill begreaterin amplitude to wave1's. Wave5'scanextendor theycanfail.

Thesearegeneralrulesthat applyto ALL wavedegreesandit paysto know themsoyouwill be ableto understand whyothertechnical tradersareacting the way they do. The big point to rememberis that traderswho have suruived in the marketandlearntto makemoneyfromit are habltualpeople. The betteronesare basically mindreaderslike myselfbut theyall knowthe rules. The best opportunities for a profit are to buy into weaknessor sell into strengthwhenthe marketis correcting againstan established trendand is readyto reversebackintothe largerdegreetrend.

This examplewouldbe the perfectset up but as long as pointD did not overlapthe priorresistance or supportat pointA the ratioswouldbe enough on thereownto signala reversal.If two of the ratiosare present,i.e.,a 1:1 Alternate with the priorcorrection, or a 38.2of XCor a 50 of BCa reversal is almostceftain.If CDto XCis 38.2andCDto BCis 61.8thatwouldbe odds onaswell. Bryce'X-ABCD




The ratiocombinations of CD- XCand CD- BCthat are impoftant:-

1. 38.2/ s0

2. 3. 4. s. 6. 7.

38.2/ 61.8 4.7 170.7 48.6I 78.6 33.3| 66.7 35.4170.7 33.3| 57.7

I needto mentionthat whena strongtrendis in forcethe impulsewaveswill normally takeon a steeperappearance Thismeansthat to the priorimpulses. whena correctionis overand donewith the marketshouldtake off like a it rocketas it stepsbackinto trend.If it doesn'tyou shouldbewarebecause maybeout of steam. Nowif thereis othergeometryin the lesserdegreewavessuchas a 1:1 or a reversecrossas the largerdegreecorrectioncomesinto a retracement ratioit get you will alsosignala reversal. levelof a retracement Sometimes will not patternandgeometryin the BCor XCat pointD but therewill be convincing smallerdegreewavestructure.

Thesesamesituations alsoapplyto a bearpatternas well.In a bearpattern the CDto BCratiowill mostlikelynotexceed38.2if the trendis strong. Beforeyou applytheserulesto buyingor sellingintoweakness andstrength prior the trendmustbe clearlyvisible.If the markethadnot beenin a strong trendpriorto its currentcorrection it wouldbe muchmoreprudentto waitfor tradeor a correction a breakout to the nextadvance. Bryce'X-ABCD




t I I I I I I



When the trend is not obviously strong and the retracement exceeds 38.2 of XA: You need to be careful when the trend in progressbeforethe current correctivewaveswas obviouslynot a strongthrustingmove.The market couldreverseon a retracementlevelof )(A only to go backand retestthe breakoutpoint at B. It could also break back insidethe BC rangeand terminate on a 1:1withBC. R,ulesfor buyingo RETRACEiAENIT of XA L Thereshouldbe evidence thot the smqller degree hossomegeornetry. 2. Bc coreful of the 1:1 with BCos o resisionce levafto ov€r'com€" 3. The trend chongeis not confirmeduniil the 1:1 qnd BC is overbalonced pricesexcaadlavelC.

It paysto be carefulin situations likethls because a 50, 61.8or 70.7on its ownwouldattractElliottWavetraders.Whatyoudont knowto startwith is if the supportat D wasjust because of profittakingor not.If the S-minutebar that terminated at D contained a veryhighvolumethenthe reversalis more likelyto succeed in the biggerpicture. My first instinctif the reversalat D wason low volumewouldbe to sellthe retestof B, evenif the pricebrokebackaboveB andvolumedid not increase I wouldsellthe 1:1 with BCfrom D. If that didn'twork I wouldbecomea buyer. Justrelyingon geometryon its own is not goodenoughas any reversalof substance shouldbeobviousby attractingmoretraderparticipation. Whenit is all saidand doneany reversal to trendshouldshowhighvolume on a S-minute barto bevalid. Forthat matterwhenthe marketis headingin a constantdirectionfor more thantwo S-minutebarsandthe volumeis increasing, you cannearlybet the movewill continuefor a whileafterthat. Whichever directionis fuellingthe volumeis the directionyou wantto be goingin. As soonas the volumedries up it is timeto takeyourprofits. Bryce'X-ABCD




XABCDratio situationsthat are not valid signals: will meannothingat all andif In certainsituations somewaveconfigurations youthinktheydo youwill be usingfalseinformation. directis Theonesthat meansomething I haveoutlinedon the right.A CD-BC CD-AB. alwaysimportant andso is the 1sAlternate


t that Depending on the wavestructuretherecan be up to 9 wavestructures important. 4 are onlyabout3 or canrelateon ratio,but normally What I am lookingfor mostof the time is situationswhereanyoneusing the obviousgeometry.The signalsneedto be ElliottWavecan recognise strongenoughfor themto puttheirmoneyon the line. in the knowandstillthe market to everyone Whenthe signalsarenotobvious justify you shouldalwaysbe ableto whyafterthe event.Thenif the reverses you patterns will be able to trade the new confirma reversal unfolding Thisbusiness is alwaysaboutprobabilities. with moreconfidence. direction Bryce'X-ABCD


I I I I I I I

I I I I I I I I I I I I I I I I I I I

t



Thischaptermayappearto be a littledisjointed fromthe flowof this manual period for a just before becauseI haverewrittenthis chapteron the XABCD publication in May2004.The reasonI havedonethis is to introducea new aid to tradingI havehad in development for sometime sincethe original draftwasconceived. we havedeveloped the Bryce'sxABcDprogramas an add-onto the Esignal advanced intra-daychartingplatform.It is a visualprogramthat you canuse to applyall the thingsI havebeenteachingyou in this manualin realtime tradingconditions. I havebeendrawingmoreandmoreillustrations for my TTWgrouplatelyto clarifythe impoftanceof the systemand havedecidedthey needto be included in thischapter. A

Thcscore priority AD-

x

Eqnd tc E lr. bchw

b

Equclte.B Abcvc

A Thcsa situ.rtions abova muld be rrre importorf if they conrbinedwith a 1:1 Alierncie or ord qrfsidc Rz.ter* Cr.ossdf point D

4D.BC 1.516 4.000 2.286 2.6t4 9.000

AD-X4 0.38e 0.500 0.618 0.707 o.786 1.000 Tlrasa a
X

is a lout

If you wereto find the marketpatternin anyof thesesituations therewould be a verygoodchancethatyoucouldscalpit for a reversal firstandthenadd on moreconfirmation. or if it kept breakingout throughthe geometryyou couldtradeit for the nexttargetzone. Thesepointsof geometricforce act as our road map as we movealong throughthe day. Bryce'X-ABCD




Somethinga little simPler: Cb-XC

Pduity Strings

6D = 0.382 o.#7 0.500 o.3Tl 0.51t 0.707 o.786 1.000

IIIfiFONTINT

CD-BC=1.000I xc= nATro Cb-AC=1.000f XC=IATIO Spccial Siiuolien::

Oonbinaticrr 6D ic XS and BC

0 . 3 3 eI 0 . 5 L 0.E82./ 0.500 1.447 I 0.707 0.500 / o.8L3 0.500 I 0.707 0.486 I 0.746 ahc

o.$sg I 0.557 0.t54 / 0.707

A reversal at D will be at leasta scalpat the veryworstbut it couldturn into thattakesthe marketto newlowsor highs. a majorreversal to be in a steadyuptrendor SignsliketheseareGOLDif the marketappears you are lookingfor the termination steadydowntrendpriorto the correction of. The mainthing to keepin mind is that there shouldbe no extraoutside aboutto hit the market.If the newsis alreadyin the marketandit influences is beingabsorbedat a steadyrate the marketshouldcontinueto trade technically. in a priceseriesof wavesthat allowsfor the PHASE Whenyouget a RHYTHM the majorityof with multipleconjunctions futurecriticllpricelevelto coincide will pickup on it in advance. ratioanalysts that is wherethey will targettheir ordersfor profit If they feel comfortable it. of it if youcanrecognise of trend.Takeadvantage takingor a reversal Brvce'X-ABCD

66



t I I I




Prior Suppoft or Resistancelevels: when the marketretracesbackto a prior pivot pointand the CD leg hasa ratio of retracementto the XC portionthere is a strongerpossibilityof a reversal. Whenthe CDretracement of XCfallson a 38.2,50 or 61.8ratiothe reversal guaranteed. is almost SIilAPtE PATTERNCoililEINATIONS: FOR A REVER9AL OtD SU?PONT& OLD RESI9TAT.ICE

ANy CCXL$NATIONS oF eBOirtETRy WOUTD

rsstsT yout

DECI9ION TO TRY A REVERSAL TTADE: IN ADEN iAY PNIORITY WOULb BE: CD-XC= 0.ttE 0.500 0.61t

AC - eD.; 1.000 OF

CD - BC: 1.000

NETIERLOOK A EIFT HORSEIN THE iIICtr'T}I

Anytimeyou can combinean XABCDsignalin with a straightout pattern suppoftor resistance levelit will be important. Thethingyou shouldappreciate is that thereare plentyof traderswhojust tradeoff simplepatternrules.Everytimethe marketapproaches a priorhigh or lowof somesignificance theywill usethat levelto buyor selloff. Whenthe level is connectedto a wave seriesby ratio it becomesdoublyimportant because it willattractthe attentionof the tradersusingElliottwave. Youmustalwaysremember therearethousands of tradersout therewhoare usingElliottWave.It is not impoftantif ElliottWorksunderthe circumstances it is onlyimpoftantwhatactionsthe othertraderswilltake. Bryce'X-ABCD

67



[c] BryceGilnore 2004

SpecialSituations: It is wellworthyourtime to studythe situationswheregeometryformsin the Reverse Crossconfiguration. Sometimes in a progressive marketthe CDleg will be longeror shofterthan the AB leg as the marketis tryingto reacha levelthat may"squareup" a retracement levelto a prior )(A leg.The ABCDneedsto relatein someway andif the BCandthe AB legsdont relateby ratioto the CDleg it will most likelyrelatein the BC-ADReverse Crossconfiguration. IITIPORTANTWAVE FORl,lATIONS

- REVERSE CRO55 BCx BCx BCx BCx BCx

1.618 = L.732 = 2.000 = 2.236 = 3.000 =

A A A A A

b D D D D

B C x 1 . 0 0 0 =A D

H E1uc Gilnorc

Thelowerformationon this illustration more wassomething I havewitnessed than once.It can be confusingat the time becausein both instances the marketmadea false breakto the upsideand then a false breakto the downside.It sort of rules out the RECFANGLE formationbecauseCD is greaterthanAB. But if you were just using patternas your tradingguide the rules of engagement with falsebreaksis to immediately reversebackthe otherway whena breakout fails. Whenyou havegeometryto substantiate the priceat D it givesyou more confidence.

Bryce'X-ABCD

68


I I I I I I I

t I I I I I I

t I I I I I

I I I I I I



. IIUIPORTANT WAVEFORITTATIONS

Inride Crocs

CD asa Rntioof AD

: II'IPC'RTANTRATTO$AR.E 6t"g7. sOf. ond 98.d. This mkcs the lqst wqvaCD 0.618. O.5OO crd O.382of tufol ABCD Ollr;r CDIAD rafios arc'possible: 0.333, 0.447. 0.577. 0.667. O.n7. 0.746


INSIDE CROSS

INSIbE CRO55 I5 NOT TO A APPLICABLE PATTERNLIKE THI5 D

II,IPORTANTWAVEFORIIAATTONS

OUTSIDECRO55

OutsideCross BD qsa Rctioof AD IIUPORTANTRATIOS *R,E: 6Lt8% 50% od 38.2% This rnEkesthe distcrce of BD 0.618, O.5@ord O.3EZof totol ABCD Other Bb/dD rctios are possibla: 0.333. O.47. 0.577. 0.667

OUTSIDE CROSS]5 NOT APPLICABLE TO * PATTER,NLIKE THIS D

a Theseare internalmeasurements that couldbe fulfilledto demonstrate bindingrelationship withinanABCD conclusion. Bryce'X-ABCD

69


Someunusualthingscan occurin wavestructures andthey don'tappearto perspective beclearfroman analyst's at the time.

I I I

I don'tusethisconfiguration as a tradingsignalat all but it is handyto check the wavestructuresometimes to seeif theydid relatethisway.

t

In Elliotttermsthe marketwouldbe in an expanding or contracting diagonal triangle.

I I I I I I I I I



COMPLICATEDWAVESTRUCTURES:

Thistypeof patternwouldmostlikelyoccurin the smallerdegreewaveseries somewhere markethighanda significant alongthe waybetweena significant marketlow or viceversa.In whichcaseit will be eithera distribution or an accumulation typepattern. Yet it is possibleit couldoccurat a significant markethighas sometype of headandshoulders typepattern.In whichcaseit will be a formationbetween higherdegreewaves. If it is a markethigh or low terminationa new trend of majordegreewill beginfromlevelD. LIiPORTANTWAVEFORiTIATIONS

DoubleCrcss The mly importort Rqiio is a tl

I ruoul*r't gef to involvad with this ona but if it comcsout os o tt thon it corld be on exccllent sigrul.

[C] BryceGilmore

Ab=XC osal:l

srpprtirg Therccouldberroinne geometryirwolvedsuchas :CD/BC= t"272or C6|AS: 1.618or Ab/XA = L.27?

Bryce'X-ABCD

70


t I I I I I I

I I I


Hereis a reversalday that really got them going: BE+

JEquitjss- JDfrsrirEr";b.€.'eS.Xt'r

gtDC (}r

&OO goaiil 61,.t

tr,.fl,23

Ha.k€t Evess

6

on bili 6l.8 and lesr

degree 66.7

1flr00

1lre ):t I ola_rEa tclualty

douhle toDped irr earller-

: :

soFF Tor i Gann

I

llidr

{s-At <<

>>

I

r.t500

d tt:lt3) 66,r *

6t,E XC

td00n

lhi: bvtar tatpfned rqdsy Tlcdat April A0 Thb wB a daythrt GteeBpatr annoumed dBllalior w6 ndv not an lsu€

I

@

April20h 2004:The marketopenedat 9:30ETat 1136on a breakout - the overnightGlobexhad alreadybeento 1138.5in earlytrading,the 61.8 retracement of XC.Greenspan was goingto talk to Congress regardinghis currentopinionof the economic situationin the USA,sothe dayniO an iir of indecision aboutit to beginwith.As the dayworeon the 61.8andthe break backthrough1136becamethe technicalconcerns.Buyersfled the market whentheythoughtthe FEDwouldsoonraiseinterestratesfromthe 1olothat everyone hadbeenenjoyingfor manymonthsnow. J E q u i t i s r - J O r h s r j n t s i , r a 6 .G E $ , : O H g r X Ed+ @r OS SeO €Oair Sri:r {ESt!!-2 - StP 500E-tr o_i.1@9. H:11H.0 !,1!U?9 c:J.L!!!-Q B{yce} x{Bfo Y1.6j5 ,148,25 A

lll ?5

to.st,l

1.000nrfltrpl

0.iB[t11,{3]b) r73tJ0 c l1]t-5 613 Y:0 o.orolrtori;

.1tsJ.25

tt.so

05m

B - 1119.00 f,125 A - l14BJ5 15.25 X - 113300 l/,00

t I I

SS

: s e : F s r - "r t € D + t l X 6snt=z sarsootrinir,irurs-Gi;;roijttoinoriifriurar,rn ij,iiibri i,ii6Ei i.iri{;i"e,iruitia Brycel:tr\BCltfi.oej ,tf0.0{ ,



i3500 t$00

F ArR

t2500

F-8tr-1 F-aoI

S.OFF TOFF .

GAP OUTSIDEREVERSALDAY

sr5 a5 t; rtt3.2t l:t - t1075

Volume

r,r

0t.it5 otitc

l8:lt0

I

I

Bryce'X-ABCD

71




Now the next day ChairmanGreenspan appearedagainbeforethe Joint Economic committee in Congress He toned his remarKdownsomewhat. and inferredthat the rateincreases wouldnot be neededimmediately butwarned thattheywereinevitable. Themarketrallied.Whena congressman askedhim why the stock marketwent down so sharplyafter the televisedsession yesterday?He replied,"I read in the newspapers today sayingthat I was (andwitha smile)but I don'tknowwhatthe marketwilldo." responsible, LatestUpdates @aOd&_rvv:e!g!l Clce Dor +2117at LO3L7Zl. S&? +5.9?al I,l21.L2,Iasdaq +17.(D at 1,995-63:Today's session couldbe separated into two parts,withthefirst beingduringChairnanGreenspan's testimonyin frontof theJoiatEcouomic Committee andlhesecondbeingafterlhesaidevml... Notethalthis wastheseconddaythatthe FedCbairnanmanaged to ruffletaders'feathers... In yesterday's regardingtheaboence session,Dr. Oreenspan's ratherinnocuouscomments of deflationandbanksbeingreadyfor higherintereslntes ledto a 122.1% sell-offin themajoraverages... Today,theftst partof thesessionnasspentwiththemaix averageo tradingin a choppyfashionasparticipants continued to weighthebenefitsof thegeneralltbetterthanexpected eamingsreports,highlightedby Motorola's(trlOf 1930 +3.08) stellarresults,withtheprcpectsof risinginlerestratesandaccelentinginflation...TheChairman, for hispart,appeared Iess periodof hawkish,sayiry thatthefedfundsnte will haveto riseat somepoiut,butindicatingthatasof yet,theprotracted monetaryaccommodation hasnotfosteredanenvironment in whichbroad$asedinflationpressures appearto be building... Asa result,themarketbreathed a sighof reliefwhenDr. Greenspan's testimonywasoverandspenttherestof theaftemoon driftingwitha slightupwardbias...Themajoraverages closedwelloff theirsessiouIowsandin positivetenitory,rryiththe Nasdaqatfreshsessionhighs...Accordingly,thebulk of lhe sectorsclooedin lhe green,withleadersto theupaideincludiae theinlernet,networking,semiconductor, telecom,biotech,healthcare, hotel,airline,andindusrialsectors...Amongthe laggardsof nolewerethegold,metalmining,coal,iron & steel,aluminum,andpaperproduclsgroups... Likethestockmarket,thebondmarketalsohada volatilesession,withthe l0-yearnoleclosingwithina shortreachof its hiehs,up 682, bringineits yielddownto 4.43%...NYSE AdvrDec1560/1?7f, NasdaqAdv/DecLffill%z

Two days later: + J Equitis. - J tLJ

ra-c

,.Jg

4q.r{l

Bryceix.{acovlJEl

Dlherlntrvab- @Es-€c'il omc Sr Os e60 Sroai;.1@ti:t, DyEmic0:002{t00 .!; !-!-t$g .9j-1|lq!,1" _q-j-1-E-0n..-l;,.r$q4.o.-.

GANNS}AflNGCHARTOVERLAY Tr6d ncnecio. '

trr,rzr;Jt3l'fi 0ti224d: tx',?t,,04: 0rr0,o{: 2515 \bi 0,tJt9'o,l: t-m rat i or;rg,olt t0-15 4lns*i urlsor, 1{.50 11-25 ^ -. r uilto{: -'ot'Y i u,tit3,t)
tf33,5t

tulrl fltn

Ioddtdals

-14.50

2 and 3 Day Balance Points For nqt|

t

As seen in Sl:Cl:P26

61.8betorr de€liD€ 0,61t

-t1.25

14.60

A trrc,0o_0.mq

: ll11326l _

hcru

Gr6s6p.n [as FerE

ddy

VolumE

l i l , r

0{o6

0{.o7

Asthe bandplayson thereis a craziness sends to the musicandit continually you. you signals to out Youeitherrecognise themor don't. Bryce'X-ABCD



I I I

t I I I I



Section 2! chaptere:

Someexamplesof X-ABCDGeometry: geometry Overthe pastfew yearsI havebeensavingchartsof the X-ABCD thatwaspresentat impoftantreversals they are as clear trend. Sometimes of asa bellothertimestheyhavebeenobscurely esoteric. I.IEfiP.L'J

l.lave Trailer 15gB.gB

SAPsBB sPX

A

1s36.BB t4?8.88

h

ft/"'\

I

ltlil. ,,I ItH il.| 'tt[lt,

1418. Bs 13so.B6 lzsa.00

AB BC: O.5OO C Cb:0.618

AB:1.ggg

123S.BB

I'tirr

11?0-BB

t

IIIB.BE

B

1858.BA SSB.BB g3B.BB lta i rr

l

tember2O01Lsv,r 14JanB0

BZJUnBB

ZB0ctBB

161{ar81

B3ffugB1

This was how the pricegeometryin the big picturecameout when the S&P500 madea majorlowin September 2001.Thislowcamein 10daysafter the 911 disasters whenthe terroristscrashedtwo planesinto the NewYork TwinTowers.Thetimingwasperfectfor a lowwhenit camein. IIEE]4LY

Haue Trader 1598.64

S&PsBAsPX

TIA,tINIg C b : 2 . 0 0 0B d Bb : O.5OO AB

153S.00 L47B.W 1410.BB ffi54.68

us8.m 1z3a.a0

AB: 363 doys

Lt?a.ea

Cb = 7?? dovs

EQUII.IOXES

tltg.Ea 1B5B.OB g9B.0B S3B.BB l4a i ir

14JanB0

ExamplesofX-ABCD

BZJun90

260ct0E




Therallythat beganfromthe September 7h, 2001lowterminated on January 2002on a 38.2retracement of the entirebearmarket. In Elliotttermsthis was pefect as 4m wavesoften terminateon a 38.2 retracement. It wasn'tuntil the doubletop on March19u',2002,6 months fromthe September lowthat the bullsweretotallywornout andthe market pace. setoff downhillat an amazing IIRILT

Have frader 1598.90

x

1538.66

S&PsBBSPX

6r'owfh pFogtlBsdon

1478.gA 1418.00

CD=AB

135S.08

C D =0.618BC C D =0.382XC

tzsa.50 tz38.gE

D

11?8.BB 1118.0A ffisB.BB s98.60

CONTINUATTON PATTERN

938.86 llain

D : Jon 7th

ZBJUIBB

Whenyou go backoverthe geometryat the majorswingsin the bearmarket to this pointyoucanconclude that thereis a definiteElliottWaveinfluence in this market.Whetherit is preordained or simplya sideeffectfrom people actingon massusingtechnicaltoolsthey havelearntfrom all the published methodologies is not impoftantto me.Theonlythingthat is importantto me is that it happens. Thepointis you needto keeptrackof the geometrysoyouwill knowwhenit all comestogetheragain.If you dont you will be left in the darkwhenthe oppoftunity to profitcomesalong. You must never forget how impoftant the 6l.80/o, 50o/oand 38.2o/o retracement canbe in the mindsof technicians. 1 . PointB on the chaftabovewasa retracement of 50o/o of the )(Arange.


It is well knownthat I told all my peopleaboutthe potentiala day beforethe marketreversed at that pointin May2001.

I

2 . PointD on the chaft abovewas a retracementof 38.2o/o of the XC rangeanda 61.80lo retracement of the BCrange.I am alsoon record as tellingmy students wellin advance the importance of this levelwell beforewe got to it.

I I I

Examplesof X-ABCD

74


t I I I I


S&PsBBsPX

date gZgLgT hi 11?6.97

TOPS LON6-TERA4 DOUBLE

Ggclefrader

The $IfiNS of a sariously waak markat were obviousto any chartist.

Sapt



lo date llain

?75.68 EZI?Z4

After /lltay LT the Corrcctions to thc doumirand naver lasted longer thon 3 days - most werc Zdays.

0

Oncethe ballstartedrollingthe declinebeganto feedon itselt newsof fresh It was clearto me at the time bankruptcies and companyfraudabounded. thatthe marketwasin a freefall.

ACCURACY IN RATIOS: to work for you then you I am convinced if you want thesemethodologies I meanyou needto workto the mustadopta policyof accuracy. Byaccuracy place, you you If will only be .foolingyourself.My third decimal don't is not thisexactI haveto justify benchmark is 2 tradingticks.If the accuracy otherreasons why. It does not matterwhat the marketpatternlooK like as long as you can differentiate thewavesof similardegree. between and seewhatyou A goodstartingpointis to workwith a 3-wavesequence of it. If you canmakeof it. Afterthat addthe 4h waveandseewhat becomes alreadyknowwhatwentbeforeit shouldbecomeas clearas a bellif the next reversalfits intoa ratioprogression. you will find that marketsunfoldin geometric If you followmy procedures progressions, if they aren'tdoingthat you do not havea pricesignal,You a shouldonly tradeagainstthe prevailing trendwhenyou haverecognized valid signal. This is a disciplineyou mustfollowto removethe errorsof judgement thatcreepintoanytradingplan. with By reducingthe marketto the previous4 wavesyou are still complying will similar degree waves of the ElliottWavetheoryof markets that is, all relatemathematically in a sacredpropoftion. Examplesof X-ABCD




I can'tstressthe simplicity of this approach enoughbecause as soonas you add extra wavesinto the systemyou leavethe systemopen to personal interpretation andthatcanbedangerous. If youcanfind geometricwavesetsin two or moredegreesof wavestructure youwill be in chargeof the situation 9 timesout of 10. Allthisworkis worththe effoftandit hasa definitereward. Whatyoumustremember is thateachwavein a seriesshouldbeworkingout price timeand in relationship to whatwent before.Identiffingthe degreeof the seriescansometimes be difficultbut it is MORE THANpossible usingthe X-ABCD approach the wayI haveperfectedit for myself. Whenyour mindis preparedto believethat this systemmustgiveyou the answersyou can throw awayall the falsetruthsyou havebeentaughtby othersandmoveontoa higherlevelof consciousness andunderstanding. The approachis DYNAMIC and can be appliedto all free tradingmarketsif theytradewithsufficient volumeandarenot manipulated by insiders. Wavesetsshouldbe obviousin all degreesof marketmovement for you to adoptan opinionthat the trendwill change.Whenyoufind onewavesetthat fits yourcriteriago furthera fieldand lookin the largerdegreeto seehow yourtargetpointis in the largerschemeof things. significant Knowledge is power neverforget it. Overthe yearsI havecalled100'sof marketreversals eitherin advance the dayafterif or on the day,sometimes the marketpatternneededto confirmmy signals.Butnevermorethana day out.Thestrongest tradescomewhenyougetthe confirmation in anycase. DualRatiocombinations in wavesof similardegreeoftensignalreversals of trendor the beginningof a correction in similardegree.If the marketdoes not correctandcontinues throughthe *SIGNAL LEVEL" the signalbecomes a non-confirmation and confirmsa continuation. Whicheveris the casethe signalbecomes a tradeentrypoint. Thisis the mostvaluableinformation I canpasson to you,trust it forgetall the otherthingspeoplehavetaughtyou unlessthe marketfits a geometric citeria. I promiseyou it will saveyou a lot of heaftbreakand makeyour process tradingselection far easierto dealwith. Thisstuff is like magicif you canunderstand it - you will onlyunderstand it whenyou loseyour impatience andlearnto openyoureyesandtakea little in at a time. Following is a geometric situationI recorded in the JulySoybean contractat a corrective highin April2002. Examplesof X-ABCD




t



The ABCDfell togetherlike this:

S0YBEftNS-Julg

Have Trader 4A4.86 4?S.00

I

'iil't,t

4?Z.Bg 466. BB 468.68 454.89 44S. E0

lJrt

44Z.Ag 436. BB

It'

438. BB 4Z4.gA Rat ios

l{ave Trader 484. BB 4?8.08

BC : 38.75

BiilLY

f,lr : 49.75

f,$rr$f,: 1.618

S0YBERHS-JuIg

bIAGOFIALOF A 6OLbEl.lRECTANGLE

472.89

[|tr

486. BA 468. A0 454. A6 448. BB 44Z.Bg

1.9O2: 1.OOO

436.00 43S. B0 4Z4.EE Rat ios

lP Irice

formation. Thesignificance is geometrically a GoldenRectangle

t.Aofu/ '

i r.are

Examplesof X-ABCD

, 1.ooo i

i

Section2: Clnpter - 9


[c] Bryce Gilrnore2004

ATTERNATEWAVESIN A SERIES: The recentJuly 14thdoubletop with June17u'2003. sPB3U-38

Qcharts DSU Lgz4.E8 u18.AB

bouble Top

1014.8

+32.8

\EIZ.EE

t

Altarnaies

1SBE.68 1886.AB

+33.7

ss4.0B 988.66 9fJ2.88 s?6.48 s?B.0B

boy only PfT COFITRACT

s64.AB E6/17/mg3 t{a i r-r

gE/L?

86/23

EE/27

g?/E?

g7/L1

E7/17

The 1:1 AlternateWavelevelsare the bestto targetin the intra-daymarket patterns,if theyareexceeded you lookfor a continuation. If the marketstops on themyoucanstafttradingthe reversal asthe marketconfirms. Youcanseeby the waythe marketadvances on the way to the doubletop wereforming1:1 patternsin the Alternate Wavesof similardegree. Evenif this top hadexceeded the priortop of 1014.8whichit didn'tit would haverun into resistance 1 pointaboveandmostlylikelyreversed in anycase. Thetradewasto sellthe doubletop andplacea stopand reversebuyorder 1.5pointsabovethe priorhigh. Allyou haveto do is readthe signsfromeachswingpointto the next. you will find someodd-ballgeometryintermingling Sometimes with some geometryin a differentdegree.I havea goodexampleto morerecognisable showyou in the nextchapterbut for now learnto pickup on the easyones first. Followingis an excerptfrom my diary I was keepingon the S&P: This excerptis taken way back in February2003 when we were in a downtrendbefore the decisionto go to war with Iraq was actually consummated. Thecoalitionwerebuildingup forcesas a signof authorityat the time but the moodof the marketwas negativeat this time because the UNwereobjectingto any attackon Iraq untilall the negotiations underway hadbeenexhausted.Eachdaythe uncertainty wasgrowing. ExamplesofX-ABCD

I I I I


I I I I

t t I I I I I I I I I




The mainfocusthis weekwason the geopolitical eventsandthe rhetoricof the mountingthreatof war with GeorgeBushand ColinPowellconcerning Iraq. Nevertheless continuedto unfoldin their normalfashion.In the technical's fact someamazingsignalscamealongthroughoutthis weekand I had to document themfor my records. u @,--fJ

r't"'"ali6'-l

r Atsessidrsu g E s l 5 De

432.48

} t , 1 l f BI l r n l f f i l A l # i d

4:07pmE5 spiketo 921bustedby C[{E

mlwlo3 l5:{Xl:0O EZefil

I

@?ro &25-25

liore WARTALK

re m6.5O qr -{L4 Brs -7 t 1,4?a

pf

On Tuesdaythe 4h lust after the 4:00pmbell someoneattackedthe'ES session with somelargebuyordersandset off a chainreactionthat cleaned it was"busting" announced all the stopsfrom 850 up to 920.The exchange all tradesabove860.The pit hadonlytradedto 854 so a lot of peoplegot burnt. Therewas a doublebottomthat occurredon Thursdayafternoonand set up was to be REPORT anothertrade the next day when the EMPLOYMENT released ratiosfor the doublebottomarebelow. at 8:30am.TheX-ABCD Current [ange 1 1 .S E

ESO3H-18

A^ U^B.I .

C = ?8.2RETRACEIAENT

prior ranges clt-Bc 1. gBg cll-ffB g.3az cn-xfi fl.484 fleuerse Eross ffIl-BE 2.618

rqtios All Fibonocci

i \ r'1''J f e+r 11

t RII-Xff

L.Z?Z

t

Lnurs

I

Examplesof X-ABCD

EZ/ES

DOUBLE BOTTOAAXABCD 15:34

ffi?.?s

838.68

79

832.60

832.?5

EZlffi




Overnight the Globexsession tradedup againstthe prior843higha coupleof timeswhileit waswaitingfor the morningreport. Whenthe EMPLOYMENT figurecamein at5.7o/o down0.3%fromthe forecast 60lo.Firstindications werethe marketwasaccepting it as a signthe economy wasimproving, i.e.,whenit sparked a rapidrally.Butthisdidn'tlastlongas economists beganto arguethat the figurehadbeenseasonally adjustedand wasnotcorrect.Thisinformation wasbroadcast overBloomberg at the time. 861.0A ffi8.m

ESB3H-18

Eochleg up lL^6

ffis.@ ffiz.m 84S.m 846.m 843.@ 840.Bs 8B?.BB 884. AA

6lobex 0vcrnight

boublc Bollom

BZ/g,6,/?giB3 EZ/87

llain

The highon the spikerallywas 849^4 - The fir$ leg up from the double bottomwas 11^6 followedby a 6 pointcorrection(50%)and then another 11^6up.The61.8levelwasat 849^6. Bythetimethe daysession openedthe printwasbackto 845. Qcharts CSU

ESA3H-18

EVER.YONE His TO sEETHIS BE6/{USE I CALLED IT E'RLIER, TODIY BEFORE H/4ND.

Current Range 17.?5 prior ranges cll-Bc 1.618 cn-RB 1.618 ctl*xR 8.61S Reverse Cross RD-BC 1.618 Insitle Cross CD-AD 1.AA6 0utside Cross BD-AII 8.382 Ilouble Cross RD-)(c B.618 Xetrace Z cll-xc 0.618 RII-XR 8.618

LiDTUSTEb THIS HI6H l TICK 849'6 843 \

J\B

I

Notice how the ronges are oll LUCASvolues

gz/95/z;68'3 Lotls

03:35

843.50

844.58

843.A6

844.25

82/67

This MBCD relationshipwas totally predictableafter the double bottom at 832.lust lookat the ratiosin the X-ABCDprint out they are perfect. Examples of X-ABCD

80



I I I I I I I I




in a low of Ffiday was a down day from the openingbell.Terminating 825^2at 3:00pmET. It was prettyobviousthat therewouldbe someshoft coveringbeforethe closeastherewasa heavysnowstorm in NewYorkthat hadmanyWallStreet tradersleavingearlyfor the weekend.

851. BA

7th Februsrv 2OO3

848.SS 845.84 B4Z.W ffig.94 836.88 833. B0 838.00 BZ7.gg BZ/97/Z:9i83 lat ios

ES03H-14 tPlrice

ab=

ZE.B0 cil=

18.60 cd/ab= 4.500

I wasexpecting the marketto go slightlylowerbasedon a 1:1withthe 861832 849^4but nowthat I haveinspected the dailypicturethe 825^2 low fits fine as a 1:0.500downon the day.You mustadmittherewas a great tradeon the shortsidestaringthe smarttradersin the faceat the beginning to do! of the dayandtheyjust didwhattheywereexpected BASIS: LEARNTO OBSERVE THEMARKETON A DAY.TO.DAY If you analysethe unfoldingpatternseachday you will find that set-ups veryobviousto the trainedeye. become I get phonecallsall the time from peoplewhojust wantto learnall this as fastastheycan.It is impossible to learnovernightandwhenI tell themthey don'twantto hearit. WhatcanI do,I canonlywarnthemthat'sall. Theaverageguytradingthe marketsis a moronwhenit comesto combining technical fundamentals andmood,mostcant do it. analysis, Mostgoodtradersare "StreetSmart"and they havelearnthow the wrong to sideof the marketthinksandtheyjust lookfor placesto do the opposite for intra-day trading. the"wrongside"mostof the time.It is a goodapproach yourselfto do the samewhenthe timeis appropriate. Youshouldeducate

ExamplesofX-ABCD



Section


2: ctrapter1o:

Odd Ball RetracementLevels& Targets: Undernormalcircumstances we are alwaysexpectinga standardratio in retracements, e.9.,38.2,50,61.8,70.7andsofofth. Manytimesthe markettrendmaycorrectto a levelthat doesnot conformto yet the patternwill reverseanda newmovement ourexpectations begins. Thegeometrymaybe ableto be explained by crossrelationships but at other timesit seemsa mysteryuntil the next changein trendwherethe picture becomes clear.

58.6 & 41.4 Levels Whenyou get levelsof 58.6or 4L.4thesecan be easilyexplained because theyarethe means(internals) of the squarerootof 2. In geometry thesecanbe explained as:

The marketmakesa 58.6retracement andeveryoneis expecting it to go to 61.8- so theywait.I alwayswait too, i.e.,untilI seea higherlow or the patternindicating a reversal. Whensomethinglikethis happensit foolseveryonebut it is legitimateand you cancalculate out a futuretargetwherethe geometrywill "square"up in the futurein thatsimilardegreeof movement.

Odd Ball Ratios



I I I I

Tradineto WIN Course- Onedavat a time


Don't mistakea 58.6 levelfor a 57.7 becauseit is a 58.6 and indicatesthe Ratios. marketis workingto the "square"in HARMONIC

i

t I I I I I I I I I

t

I

I

L000r l I I

The UP Examole: CD = L.4L4of BC CD = 2.000of AC

;;.j--

1

i

i

i i i 1 ' . _ --,1-

fi.

l

i i l1 _l

i

The DOWNExample: CD = 2.828of BC CD = 2.000of AC

Here'sone that markeda major bear marketrally high in the S&P500on the 7thJanuary2OOZwith a minor doubletop. The high day was even more impressiveon a long-termratioof 38.2 (see52 C9 page74).

Qclrnrts |jfiU ll_88. Htt

5&P500- Jonuary20SZ High

1l?it. BB

cb = I 4t,t Bc riE : 1 707 E4 ac=0414J.8 CD=0tt|i6

11lfi. BS

116e.EU 1156.BB

I

t 15fi-ffff

t t

1138_Bn

I I

, : , i l

1

i

ll,t,l . Bd

1 1 3 I .A B T126,BE 1 1 Z Bg_8 lll{. tsu l{ain

OddBall Ratios

ESBZT{-15 ,,

tzl18

tt|H ,

f ,414 0-i07 t

t

].2t13

i

IZ,IZE

83

t

0.58$ 1.000 t

BI/EZ

l

l

El/E?




Square Root of 3

It paysto knowall thesethingsso you will saveyourselfsomeconfusion. I bet everyonewho hasstudiedratioanalysisseesretracements that just go pastthe 0.618levelbutstopon 0.634or 0.636. Thisis a commonoccurrence; the difficultywith 0.634is decidingwhetherit appliesto the geometryof Root3 or to Phias 0.636is halfthe Squarerootof 1.618whichis t.272.Sometimes in the smallermoves1 tickwouldmakethe differbnce. Betterto stickwith the 0.618projections for ballparktargets- but keepit in mindthat the geometrymay be workingon the CUBE.If it is the next leg mightbe L.732timesthe lengthof the 0.634leg.

t

Square Root of 5 C IUO 'eiF I

,

of 5

-:--:'i l

36 rfli

0;3l9-. .l{.{

qt

'fi'F:0t s

Sameprincipleappliesto the squarerootof 5 the mean0.691is so closeto the 0.707ratiowe useas a cardinalratio.The ratiosare to closein many instances unlesstheyarecalculated on largeranges. It is reallynecessary to understand whenyou get the preceding STRUCTURE downto this levelof analysis. I onlyworryaboutthesetypesof thingswhenI geometry can'texplainthe anyotherway. Odd Ball Ratios


84

Section2: Chapter- l0

l I I I I I I I



Section


2l ctrapter11:

Bread& Butter TradingSet Ups: in priorchaptersI am goingto AlthoughI havecoveredall thesesituations lookingfor. giveyoua summary of the marketsetupsI amcontinually

THE 1:1 ATTERNATE WAVE COMBINED WITH A CAN RECOGNISE: TEVELTHAT EVERYONE RETRACEMENT

SOLID

r.f-.:

'A

s E ( ;otti 1 - O I

rtai o

38 IrirFl:oll

m l .1.,:...

I r

I

:,j,t

tl

T \

I

T

'1

I

/ f,

{,",

nt.'

Ettt

:I::.;l

/

\

.,1 {

I

\ 5 t:i

I

p,.$[tv

LL. P...5J

v-::

waythe marketgoes whichever Thisone is a moneyin the bankprobability in an uptrendandif you havethe oppoftunity to buyintoweakness because and prOfit the 1:1 doesnot holdyou can reverseshortalmostimmediately fromthe continuation. The probability of a reversalbackup in a situationlikethis is in my opinion is readinganywherenearoversold closeto 90o/oif the 5 minutestochastic andthe 3 dayswingis up. evenstronger. levelof BCthenthe signalbecomes If CDis alsoa retracement Alsoif CDunfoldsasa smaller degree1:1youcannearlyputthe houseon it. to standingon a cliff edge Everyone of thesethat you missis tantamount andthrowingyourmoneyaway. I see thesesituationscomealongvery regularlyin the intra-daymarket patterns.

Bread& Butter SetUps




THE 38.2 RETRACEMENT WAVE: ON A 1:1 WITH THE 1STALTERNATE x\ \

t

', gB ? R.etr.acetner rl on o 1 : Altilrnoie , ,

I\ i

,*rtnl",otn

Ir t l \

/

I

i :

i i

i l

t j

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t

f

l i \/ t

/

BU 5E

'l

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t

-.--j-

'

i \

l

3 8 ?ri"

i

11

t

' , l]: , \I t

Neverlook a gift horselike this one in the mouthif the dailytrend is down. The onlytime it is not likelyto work is if the low at C was somethingmajorin the biggerpicture.

A 38.2 or 50o/oRetracementmay even form like this examplebelowwhere the wavesup from the low are holdinga form of equality.

oistl

If you are planingto sell the retracement levelyou needto havesome evidencethat the move upwardsis workinginto a geometricform that providessomeevidencethat it will exhaustitself at the suggestedprice retracement level.


I I


I




TRADINGSET.UPSon 1:1's:

: 5

I

I

r.'f;

I

f

f,rA

I

{

j

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/\

f't,,

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50

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l r " rl '

V l;8ri , 5 0 i R I TR;

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tqi; iEr-rl

EQ'IAL w/1 ts: UP:

. e . : ; */

ot',I)out la 1:

Bu' Bt:t ak, > {

I\ :'t

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l

, B r B n'Loko ti >> /

J\ , t

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/,, \ .\

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iffiENr '

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-,ff, t . , . ii .. : . . :

L( W ; IT5K.EN]i Rv [EVl L5



DOUBLETOPSon 1:1's:

signalsI know Tradingset-upson 1:1 alternatewaveratiosarethe strongest of. in the market TOPSkeeprepeating It's a strangephenomenon that DOUBLE placeso often,but theydo, andyou haveto learnto takeadvantage of them whenthey line up with something elsethat seemsto be impoftantin the geometry. unfolding

I I I I I I I I

t I I I

t I I I Doubletops that form without any obviousgeometryshouldbe taken cautiously.

t

The bestwayto handlethemis to wait andseewhatthe marketdoesandif the top doesnot breakthe marketgenerallytries for a retest.The market mightbreakthroughon a secondor thirdattemptbut if it doesn'tthenyou just sellthe basebelowthedoubletop.

I I I

Bread& ButterSetUps

Section2: Chapter- 1I

T I I I I I I I I I I I I I I I I I I I



DOUBLEBOTTOMS:

of geometric Normally for a doublebottomto holdit hasto havea foundation larger suchas a pricelevelfroma previous strengthin its favour.Something degreewaveseries.If it doesn'tthenit will mostlikelyfail andit is betterto tradeto the downside. besoldasa breakout won'trunawayfromthe lowin If a doublebottomis goingto holdit normally wait and see if the marketregains in my to a hurryso it is better opinion somestrengthbeforeyou buyit. then you can beginbuyingso Oncesomepatternof rejectionis recognised longasyoucanjustiffan unfolding strength onthe chaft. allthe smat traders ThereasonI don'tlikebuyingdoublebottomsis because preferto sellwhenthe marketis showinginherentweakness, as it is more than recovery. susceptible to failure Thereis no bettertradearoundin my bookthanwhena markettakesout a doubleor triplebottom.

Betterto tradethe breakof a doublebottomthan buy it. I havegenerally foundin the pastthat impoftantbottomsform quickly,they are normallya singlebar low ratherthana consolidation, i.e., unlesstheyformwithinthe middleof an upwards trendingmarketandthat is anothermatteraltogether.

Bread& ButterSetUps

Section2: Chapter- l l



HOOKTRADINGA RUNNER:

Somedaysthe marketwillget intoa runningmoodandyouwillslowlyrealise that it is not goingto stoprunning.It maystartoff unexpectedly but onceit getsmovingyouwillseeit happening. Youwill knowbecause the corrections will be verysmallandnot lastfor very long.The ES/ S&Pseldomcorrectmorethan2-3 points,maybe4 maximum whena runneris in progress. you Theeasiestwayto tradeit is to BUYthe hookbreakoubbut sometimes couldtry andbuythe smallcorrections whiletheyremainlessor equalto the previous onesin the series.

I I I I I I I I

t

All you haveto rememberis that whilethe corrections do not over balance with eachotherthe trendis stillintactandyoucankeepbuyingthe breakouts verylimitedrisk. Runners constant will normallyhappenon dayswherethe marketis receiving positivenewsfrom economicrepoftsor is beingbuoyedby the mediaand speculation from the pit. Youhaveto be tunedinto the newsto seewhatI mean.Thisis whyI amalways watching Bloomberg duringthetradingday. Runnerscan be very severereactions been in a marketthat has previously extremelyoversoldand everyoneis coveringshortpositionson the day. If youare not prepared Runners earlyenoughyoucanmissthe ridecompletely. canlastfor the entiremorningor afternoonsessionandon somedaysgo all day.


90




t I

t



RECTANGLE BREAKOUTS:

----fi -,-:

-r----:--

i ' i i i

i\' mayform as a On occasions strongrun UPthe rectangle afteran extremely seriesof tops.A bullishrectangle seldomhasmorethanonedoublebottom is that it will scenario so if the movelookslikeit is exhausting the best-case reverse directionbackdown.

aseachattempt Youshouldbe ableto recognise thissituationwellin advance traders at a breakoutto the upsideis metwith heavysellingby professional whodon'tthinkit cango higher. In thesesituations will flushall the longpositions the breakto the downside andthe movedownshouldbeverydramatic. The conclusion bar as the shottsstaft shouldend with a SPIKEVOLUME profits takingtheir all togetherastheyrun intoa nestof buyordersproviding underlying support. Bread& ButterSetUps




RE-ENTERING A DOWNHILLRUNNER:

Sometimes whenyou get a messybreakoutand it is followedby a steep declineto confirmthe marketweakness, you maynot be on the move.If you seea haltto the declineandthe trendlooksclearlydownyou canplana reentrywiththe trendbasedon the amplitude in the series. of the 1ocorrection The next correctionafter a move showstrend shouldnot exceedthe 1$ correction by morethan 1 tick.Youcanalwayssellat the 1:1 backup with a tight stoploss or sellthe hookon a furtherbreakdown. I preferto sellthe 1:1 as it givesyousomelatitudeif the nextbreakout is down a messyaffair. In all the yearsI havebeentradingI havenoticedthatthe problemwith most novicetradersis that they deliberate for so longoverwhereto takea trade theygiveno consideration to the factthat it is possible to stepin andout of the marketat will. If your risk is smallyou can practically enter a trend anywhere. Whenyou combinehighprobability with smallriskthenyou are tradingto WIN. If youtakethe timeto studyeverything I am sayingandwatchthe marketin you S-minute you. timeframes will beginto understand whatI amteaching Aftera coupleof yearsit will becomesecondnatureto you and you won't thinktwiceaboutit whenallthe patternsignals lineup. Thetradeentrytechniques I haveoutlinedin this chapterare yourguideto professional becominga trader,if you havefaith and manageyour trades properly youmustWIN.Onlythefearof losingwillstopyoufromwinning. "Theonlythingeasierthanmakingmoneyin the marketis losingit." Anon. Bread& Butter SetUps


I I I I I I I I


I I I



LINESIN THESAND:

t I I I I I I I I I I I I I I I I

Linesin the sandbecomeobviousfrom time to time when an old market resistance turnsintoa supportzoneor viceversa. it tendsto becomea decision It becomes a reliabletechnicallevelbecause pointwheretraderswill definethe trendas eitherstrongor weak.Although the criteriafits the doubletop or doublebottompatternit is even more importantin a way as a tradingsignalbecausethe LINEIN THE SAND viftuallybecomes POINT for the market. the currentBALANCE Thebesttradesusuallycomewhenthe marketreverses backthroughthe LIS at the beginning of the dayon a GAPopening. of an LISif it It usuallymakesa big difference to the suppoftcharacteristics has a price levelof 38.2, 50 or 61.8 attachedto it. For instancein this diagramif the marketreturnsto the LISand it is now a 50o/oretracement thenthe oddsaremuchmorein its favourto attractbuying.It couldevenact assuppoftfor a secondtimeas it becomes a doublebottomon the 50. BREAK OUTTMDE The abovescenario then setsup the LISfor a SELLING in myopinion. that hasd 90o/o chanceof success pattern In somecirclesthistypeof couldbe viewedas a HEAD& breakdown TheLISis basically the NECKLINE. SHOULDERS in progress. analysis. ThetradablepatternsI havedemonstrated herearefor short-term between Mostof the timeyouwouldonlyneedto takeintoaccountanywhere the opportunity. 2 daysto 5 daysdataon a S-minute frame to see time Bread& Butter SetUps

Section2:Chapter-11



ONEMOREOPPORTUNTTY THATARISESSOMETIMES: Thisis an exampleof whatcanhappenwhenthe marketis tryingto breakto newhighsand becomes boggeddownas it is shedding itselfof the sellersin the way.

Thesamethingis possible in reverseon the downside but in the casewhere the marketis struggling to makenew highsit is far morelikelyto taketime breaking out intoclearground. Whenthe new breakis achievedafter a coupleof attemptsthe bearswill relentandlet it go.Thisnormallyresultsin a goodtradefor the day. Situationslike this tend to occurwhen the marketis travellinginto new groundwherethereis littleto no technicallevelsthat seemimpoftantin the biggerpicture.Thetrendcouldbe clearlyoverbought shorttermandthat will attractthe sellers,but when they try and sell the marketdown buyers reappear andtakeit backup. Generally this sort of situationoccurson low volumedayswherethereis no significant newsto swaythe previous trendin force. The key to buyingthe runningcorrectionis that the secondcorrectionleg mustnot overbalance the flrst leg.The marketshouldhavea confluence of higherlowsfrom the outsetof the new moveupwards.The only negative thingsthat appearto be therewill be the overlapping wavesinfringingon the old highs.Eachtime they do this and recoverthey sendan arrowinto the heaftsof the bears. Eventually as the daywearson the bearswill runfor the hillsor reverselong gainpace. andhelpthe upwardmomentum

Bread& ButterSetUps

94


I I I I I I I I T I I

t I I I I I I I I

I I I I I I I I




THE KAMAHL:

Nowthe reasonI callthisthe Kamahlis because it is so obvious.Kamahlis a famoussingerandoneof his popularsongshada verselikethis,"I hearthe hasthe soundsof soundof knockingit's comingdownthe hall... goodbye....." The otherreasonis that Kamahlwassucha sook,he usedto get on stageandthenaskthe audience why they hatedhimso much!I met himonceon the beachin Fiji. The basedoesnot needto be exactlypreciseas a triple bottomit could containa falsebreakon the 1ddoublebottom.Thestructuremayevenbreak downon the 3'd bottomattempt.But if the 3'd holdsthe 4tr breakwill be cuftains. In the oddcasewherethereis no breakdownfromthe baseor the market doesbreakit but gets backabovethe basequickly- it is showingnew strengthandbecomes a buy.Thisis very rarebut you still needto be aware possible. it is The longera markettradesin a confinedrangethen the ensuingmove comingfrom a breakoutshouldbe largeenoughto offera profitabletrade. Thereasonis logicalas the longerthe marketremainsstaticthe stopshavea chanceto buildupjust outsidethe congestion area. Markets onlymovefor onereason!Therearemorebuyersthansellersor vice versa.Whenyoucanlogically workout wheretheyareplacingtheirstopsyou will havemastered thisbusiness. Alwaysrememberit doesnot matterwhatthe marketdoesoverthe longer period,just think of yourselfas a JOCKEY lookingfor the pefect ridewhen present. the oppoftunity is


Section2: Chapter- 1l

Technicians wrotemanyof the booksI first readon profitingin the market yearsagoandnoneeverwentontoexplainwhatwasgoingon in the market whenthetimecameto takethe trade.

I I I I I I I

Butwhatthey all had in commonwasthey saidto be profitableyou should alwaystry andtradewiththe currenttrendin progress.

t

Let the trend be your friendwas the commondenominator I havereadin mosttradingbooK overthe years.

I

Wellit is true,75o/o of the timethe trendwill beyourfriend.Notso muchthe 1 monthtrendbutthe 3 daytrend.

t

Whenthe marketis reactingto pressuresfrom the most recentnewsit is trendingor feedingon the currentnewsavailable to it.

I



Section 2: cnapter12:

MarketLogic: Marketlogicplaysan impoftantpartin whetheryou will becomea successful traderor just anotherfoolfloundering aroundin the fray. Knowing whenthe signssetyou up for the mechanical is probably application impoftant as , asthe execution of the tradeitselfat the time.

As a daytraderthis is all I needto know.It doesnot matterwhatthe news will be in a monthfrom now,what is in the newstoday,yesterday andthe daybeforewill be enoughto judgewhatthe marketbiasis likelyto be on any givenday. To be a successful traderyou haveto continually keepyourmindcurrentwith the eventsof the day and forgetwhat happened lastwee( as that is over anddonewith. Eachday is a new day and the technicallevelsare clearbeforethe market begins trading. Whatis importantto the traderis how the marketreactsor confirmsas it teststhe predetermined levelsof supportor resistance. Themarketactivities will eitheragreewithyourthoughtsor theywon't.I take the viewthat whenI havean opinionon the daythe marketwill alwayskeep tellingme if I am on the righttrackor not.If I find I am out of stepwithwhat is happening I figureI bettertakea breakor reversemy opinion.Believeme it onlytakes3 smalllossesin a rowto havemeadoptthisstance. Market Logic

Section2:Chapter- 12

t I I I I I I I I

I I I I I I I

t I I I I I I



I'm goingto tell you a few thingsthat can happento you on anygivenday and you will alsofind they will happento you in the future sometimeor anotherandyouhaveto learnwhatto do whenit happens. 1.

ceftainis goingto happen. You startthe day believingsomething you do?Answeris - you stepbackand Thenit doesn'tso whatdo the situation. reassess

2.

comesalong Somedaysyouthinkthe trendis intactbut something to wreckall yourplans,sowhatdo youdo?Answeris yougetout ' the situation. of the marketandreassess

3.

What ever happensthat falls out of line with your thinking you fall back on the technical signals before you do anything else.

If you want to win over the longer-term picture you have to have a plan that stops you from getting involvedwhen things are not doing what is logicalwith your current knowledgeof the market position. Let's face it you could be totally off base with the market for some reasonand the only clue that you are out of whack is when you staft losingmoney! So when you staft taking losses forget your pride and get out immediately. If you don't you are heading for the scrap heap where all unsuccessfultraders end up. I don'tsaythis lightlyeither,I haveseenall sottsof genius'scomealongto meandsay,"Whyareyousittingout of the marketrightnow? rightnow". withwhatis happening Normally I just say,"I am uncomfoftable

t

Howmanyof themoverthe yearshavesaid,"I am stayingin the marketit mustgo to hereevenif it is choppyrightnow".

I I I I I

FAMOUS I.ASTWORDS! I've heardit all before.Sometimes they get awaywith it but sooneror later thatapproach themout. catches I am still hereafter 20+ years,so are manyothers,but I havewitnessed the smaftestpeopleI know. 100'sof bomboutsoverthe yearsevenamongst at a time. Theplanis 3 stepsforwardandonlyonebackwards Market Logic




Everyloser I have ever seen in the futures industry has one thing in common! Theytook a positionand heldit whenit was goingagainstthem.To make thingsworsetheycontinued to believethat the positionwouldcomebackso they toppedup the marginto fund morelosses.Eventually they couldnot fund the positionany longerso they hadto closeout or the brokerclosed themout. Thentherewereotherswhowentandgot somemoremoneyopeneda new positionand repeatedthe process. It was likethey had losttheir mindandwantedto provetheywererightandthe marketwaswrong. Themarketis neverwrong! Onlypeoplearewrong. It is reallyenlightening to seewhatsomepeoplewill do whenthey havean openpositionin the market.Onthe wholetheyaresayingto themselves and everyoneelse that they havea winnergoing,evenwhenthey are so far underwater thattheycan'tbreath. Thisis the reasonyou mustneverholda losingpositionno matterwhatyou think the marketmay do in the future. Because,as soon as you are your brain cannot think objectivelyanymore.You become undennrater paralysed further. to actsensibly andonlyexacerbate the situation I knowbecause I haveexperienced it manyyearsbac( morethanonceI can you. tell Eventually I learntfromit. Frommy experience in thisindustryI haveseenmanyothersdo it as wellit is a faulteveryone willfall intoonceor twiceandmaybe ableto sulvivebut if you keepdoingit youarea deadmaneventually. It is impossible to tradeout of a losingpositionmostof the time,whichis whythe losingtradesmustbecut at the firstsignthattheyarenotworking. It is far easierto waitfor a betteroppoftunity andtry againthanflog a dead horse. The marketwill alwaysbe herefor you,to be a winneryou haveto decideif youarealwaysgoingto be herefor it. Thereis no otherway! If you wantto be a consistent winnerremember whatI am sayingbecause if youdont you mightaswellforgetthisbusiness you. beforeit destroys This business requiresmoreself-discipline than the averageman is capable provided of. I have it is up to you now. thetoolsto shapeyourdiscipline; Market Logic




t I I


Section


3: ctrapter1:

Daily CheckListr S&PE-Mini Justin caseyou havenot got it yet I amgoingto outlinethe dailyprocedures youneedto followbeforethe marketopensandafterit beginstrading. to giveyourselfthe Eachdayyou are goingto haveto followthis procedure 2 bestopportunity of Tradingto WIN. If you don'tthen you are lazyandyou will nevermakeit as a professional trader.I don'twantto tell you anymorewhy you can be a loser(thatwould takeanotherbook)- I just wantto showyou howto be a winner. DAILYTRENDAPPEARANCE: 1* youmusthavea clueof the currentdailytrendandyou mustknowwhere the ne>Gtechnical MOBlevelsare at. If you knowonlythis muchbeforethe marketstaftstradingyouwill havean ideaof the currentmarketMOODandwhereto switchyouropinionaboutthe priceactivityasit unfolds. daysprobable NEWSBEFORE THEMARKET OPENS: for the Neverapproach the marketfor the daywithoutwatchingBloomberg asa daytrader. latestNEWS, to yoursuccess asthisis paramount GLOBEXPREMARKET: Reviewthe GLOBEX sessionand see how the overseasmarketshavebeen influencing the USpriceactivity. If you do your analysiseachday beforethe marketopen you will place yourselfin a positionof Tradingto WIN. If youdo notthenyouaregoingto placeyourselfin a positionof tryingto "catchup"all day. It is importantto be preparedbeforeyou even considertrading.Markets sometimes movevery quicklyand if you haven'tgivenany thoughtto the currenttechnicalpositionbeforethe openyou will becomea casualtyor you will nevermakethe cut. without any preparation. BEPREPARED or suffer the consequences Day to Day Checks

Section3:Chapter-1



ADVICE:

Eachday beforethe marketopensyou haveto get yourselfin the ZONE.If youdont youwill nevermakeit asa trader. TheZONEto me is whereI seethe currentsupportor resistance thatis likely to halta currenttrendor confirmit is stillin force. patternsastheymovealong. OnceI am in the ZONEI canreadthe unfolding If I couldn'tdo that then I wouldnot havea cluewhat I am doingand L wouldhaveto givethe gameaway. Sometimes I haveto sit backandwaitfor moreinformation oncethe market beginstradingfor the day but other timesthe marketjust unfoldsas I originally expected. The realissueis that you eitherhavethe VIBESandyou haveCOMMITMENT or you haveDOUBTS! If you havedoubtsjust sit andwatchfor a while. Thereis no realneedto takeanytradeon anydayunlessyou havethe right SIGNS. Whenthe signsare not therejust staypatient.Eventually the market willshowits handandthenyoucanjumpalloverit. Asthe marketmovesalongkeepyoureyeon the NEWS as it will giveyouthe MOODand as the day unfoldsyou will eventually seethe BIASas you see points you howthe markethandles the MOB havecalculated in advance. Eachstepof the tradingday you will re-adjustyour MOBpointsand learn moreaboutthe strengthor weakness on the day.Whenthingsappearclear youcanhit it. Youwill be rightor wrongveryquicklybutthat is trading. Readthe patternsas the day unfoldsandyouwill alwaysknowwhichsideof the marketto beon. There are always 3 or more STANDOUT trading oppoftunities per day, Learnto recognisethem and you must WIN. Be patientif you makeseveralentriesyou haveto closeout andtheywould havebeenprofitableafterthe event- just put themdownto lostopportunity. I neverworryabouttradesI closeout for a smalllossthat wouldhavebeen profitable laterbecause I knowtheycouldhavegonethe opposite anyway. Only worry aboutthe WINNERS whenyou get them goingand dont quit themuntilthe marketgivesyoua reasonwhy. Do thesethingsand it will all turn out the wayyou want.If you don'tthen don'tblameme because I haveno ideaof yourabilityto thinkandact. Day to Day Checks

Section3:Chapter- 1


t I I I I I I

I I I I I I I I



MOB,S- MAKEOR BREAKLEVELS:

The traditionalMOB'sare levelsthat standout as prior levelswherethe marketfoundsupportor resistance duringthe past3 days. levelsaregoingto If the marketis generally trendingup the lowercorrection are goingto act of prioradvances be MOB'sof suppoft.The 1:1 projections astargetMOB'sif the marketmovesup into newterritory.

A BULLTRENDMOBDGMPLE: BULLISHIII\OB,s

A doubletop possibility

nAoB2.

tl,IOB1.


,TIOB3.

BEARISHCONTIFIUATION mob's

For the continuolion down to seem real lhe markat shouldnot exceed the 1:1 level.

Basisthis currentpatternexampleoncethe marketopensit hasto do two thingsto confirma bullishcontinuation. 1. Takeout the Linein the sand(LIS)whichis MOB1. in the movedownfrom 2. Breakabovethe 1:1 levelof the 1* correction the high. If neitherof the abovelevelsare takenout andthe chaftbreaksthe recent largerdegree61.8it becomes a SELL. Day to Day Checks

Section3:Chapter- I



READIFI6THE 5IgN5'->>>

A breokabovcthe 1:l wouldsignal o BUYin progrcssos oll tha moin tachuicalresistoncecomosoul.

If you go throughthis exercisedaily using the currentmarketpatterni availabbto you,on anygivendayyouwill seethe obviousMOBlevels.These levelsactasconfirmation or non-confirmation of the marketdirection. Youonlybuywhenthe directionis up andyou onlysellwhenthe directionis down.If youfollowtheserulesyouwillWIN.

in cosa you or€ vlondering vuhathoppenedl

2 doys dov.rnio 61.8rctroce

THE TWO.DAYCORRECTION : Alwaysbe awarethat a correction of majordegreein a volatilemarketcanbe expected to expireafter2 tradingdaysor at leastby the 3'dday. If you lookfor the signs,i.e.,watchthe toneof the news.Thenlookfor the logicalgeometriclevelsthat couldsignalresistance or supportyou will be prepared quickly. to changedirection It shouldbecomeobviousto youthatthe overalltrendhasnot expiredby the newsand the opinionsof the "experts".Sometimes the marketwill correct whilstit is awaitingsomeveryimpoftanteconomic datato be released. Once the newsis released it will be business as usual. Day to Day Chec}s

Section3:Chapter- 1

I I I

t I I I I I I I I I I I I I I I I



[c] BryceGiLnore2004

you will be ableto placetradeswith a limited If you followtheseguidelines risk and a high probability outcome.If you ignorethe signsand tradeon opinionyouwill remainin the 90o/o bracketof losers. SOMETHING TOTHINKABOUT: If you Thefirstobjective for anygoodtradingteacheris to stopthe bleeding. present as they followmy examples the oppoftgnities and learnto recognise you will stop your accountgoing down. Onceyou become themselves comfortable thenyoucanbecomemoreaggressive. withyournewsituation Thefirst requirement of a goodtraderis to be ableto executewithoutFEAR. Youcanonlydo this whenyou canenterthe marketas closeto the SIGNAL PRICEas possible.If you take the view that when the marketdoesnot confirmyour choiceof tradeyou betterget out - only then canyou WIN consistently. Smalllosseson bad entriesset you free to start againfrom fresh,this way you do not missthe nextoppoftunity. hoping Loserswho holdontopositions they will come good becomeso confusedmentallythey are ineffective traders. Goodtradingis aboutplayingthe"hands"astheyaredealtto you. Thatis just tradersapproach. Thereis no roomfor HOPEin the professional liketryingto draw1 cardto fill an insidestraightin Poker. Nowthat I havetold you all thesethingsyou needto be awareof to trade it is up to you to do it - not me. Youmustthrowawayall the successfully crutches brokersand advisoryletters- just watchthe newsand do your Thatis whatI callTradingto WIN. ownanalysis.

Someoneasked me recently to explain my attitude to trading and this was my reply: 3 thingsmotivate the marketpriceaction! Traderc,Tradercand Traders,... Learnto recognise whattheseguysaredoingandyoucanmakemoney. is doingjust by the price Youshouldbe ableto tell whateverytrendindicator activityin the time frameyou are watching.But it paysto watcha normal indications. Stochastic for Overbought andOversold

Day to Day Checks

Section3:Chapter- 1



You shouldknowfrom the normallyacceptedresistance and supportlevels howthe marketis flowing.Wellyoushouldknow70+o/o of the timewhenthe trendis clear.Theflowis eitherup,downor congested. Whenyouseea clear-cut trendjust tradeit andtradeit andtradeit. Whatyou don'tknowis how manyordersarestandingin yourwayto cause pluckedandyou just the reactions, but you cantell whenthe feathers^are haveto jumpbackin afteryouseethemflying. Youneedto tradeby feelandnot by mechanical signalsto bea pro. I changemy mind10 timesa day sometimes untilI get the feelfor whatis goingon. OnceI see the signsfallingtogetherI am seldomwrongabout whatis goingto happennext. Always try and get a clear view of your objective and then you can trade with a free mind. lust oneotherthingto remember: Veryimpoftant. Thereis no priceto high to buy and there is no priceto low to sell. Yournusttradewhatyou seeandjust go with the moneyflow. Do not refuse to take a trade just becauseyou have an opinionit is overpricedor underualued. Thestrangest thingshappenandyou haveto be guidedby the you SIGNS arewitnessing notyouropinionof whatshouldhappen!

THE3 DAYSWING& AVERAGE DAILYMNGE: Alwaysmonitorthe 3-dayswingchart (and alsothe 2-dayswing)so you knowwhatit willtaketo makethe swingchartchangedirection. ln 70o/o it will not reverse of caseswhena medium-term trendis in progress untilthe medium-term trend(say5 to 10daysat least)is exhausted. Whenthe currentdaysrangefalls well belowthe averagedaily rangethe marketis stagnating. Whenthe daysrangeexceeds the averagedailyrange by a largemarginyoushouldstaftthinkingabouta countertrendtradewhen you can identiffan exhaustion pointin the patternas this is wheretraders willtakeprofitsandreverse the intra-day trend,it'sonlycommonlogic. I am continuing thischapterwith somemoredayby dayanalysis examples to illustrate whatI amdoingto workout wheremy nexttradewill comefrom.

Day to Day Checks

Section3:Chapter- I

I I I I T I I I I I I I

I I I

t I I I I

t


I

Monday4h August 2003:

t I I I I I



Todaywas anothergoodexampleof what I am havebeenteachingyou. Alwaysbe alertto the possibilities. The highThursdaywas 1004andtoday's low was 964.75a rangeof 39.25pointsDOWNin 2 days and then the levelin 1 day. reversal rallyretraced allthe waybackto the 50o/o Qcharts GSU

Thursday l1:lOsm

Ilisplag Bars 154

4:15

r; Each day thc semeprocadura

PRIEE... NANGE 39.25 r CHAHGE 3.91S SQNg ilegrees 113

ItllOB

r

ESA3U-5

2 Doy Corraction ??? 3 bay S.u'ringbOWN g?/3g

10:36

966. EB

966.50

964. ?5

966.25

g9,/44

Thedaylookedlikethison the l-minutechaft: ES03U-1

0charts GSU s86.66

REVER,SAL DAY

s84.49 982.68 980.40

Elose 979 2

oB e7e

g78.BB 9?6. AB 9?4.44 g7z.ta s?9. ga 968.94 965.68 gg/a4/zgffi EA/EL

A8,/84

E8/84

EE/94

a8/g4

go throughthe sameprocedures so you are Eachday you mustreligiously fully preparedfor the nextdaystrading.This is the onlyway you will know what is in the mindsof the technicaltraders.The low todaycamewithin4 pointsof the criticalWave4 lowmentioned in 52:C4:P38.

Day to Day Checlcs

Section3:Chapter- I



Onanynewtradingday: It paysto remember that the technical signalsbeingusedby the daytraders couldrelateto only what has happened duringthe currentsessionor they couldbe usingrangesout for upto 3 or 4 days. Forinstance the 50o/olevelof the currentday sessioncouldseemimpoftant to them,gapson the openmayseemto be importanton the day andthey willtry andfill themearlyin the session. The openingpriceis impoftantin respectto the initialpositions that traders staftthe daywith.It is a wellknownfactthatthe openingpriceprintsetsthe benchmarkmostdays,historically the openingpricerangewill markthe high or lowfor the dayapproximately 50o/o of the time. As the day progresses and everyonegets into stepwith the latestnewsand the developments a lot more comingfromthe cashmarketthingscanbecome predictable. Theveryactiveperiodsare normally the morningandthe afternoonsessions witha lullperiodmostdaysbetween12:00-2:00pm ET. On Monday's tradersbeginthe weekwith a freshmindso anythingis likelyto happenif institutional tradersare caughtthe wrongway aroundfrom what previous hashappened to the week.Tuesday's the tradeis normallyadjusting relevantmoodof the marketand so it goesthroughto Friday.Fridayis an unknorrun dayunlessthe trendis quiteclearas manytradersquitearlyfor the weekend.Weatherin NEWYORKcan be an importantissueon Friday's, especially if it is snowingastraderswill leaveWallStreetearlyto get home. Daysprior to holidaysand days prior to optionexpiryare battlefieldsin themselves as buyersand sellersfight it out with their view of the current marketpositionand it dependson who is prepared to holdpositionoverthe optionscloseout or holidayperiodto seewhowill rulethe roost. Thenthereare daysliketodayas we go into the open,it is now9:10amET and we havehad newstodayof a terroristbombingin lakarta Indonesia where a car bomb was explodedoutsidethe MarriottHotel and caused massivedamage,killed13 and injured200.Yet with all this the European markethasbeenrallyingin the earlysession. How the US marketwill open is yet to be decided,it is beingcalledup marginally but that meansvery littlerightnow.Thereis goingto be a huge $60 billion bond auctiontoday which is likely to influenceproceedings somewhatastradersdecideif moremoneyis destinedfor the stockmarketor not.

Day to Day Checks

Section3:Chapter- I





in the morningsession If anythingI wouldbe lookingfor a downmovement in mindandwill so we will seeif I am rightor not.ButI havemy parameters workwith them so it mattersnot. 9:25amETandthe GlobexS&Pfutures aretrading979.5down.5 fromyesterday's close. 9:3OAM ET. TheBELLHASRUNG: The futuresopeningrangehas penetrated the 979 MOBto 978.5and is sittingon979,theopening 5 minuterangewas979.75-977.5. In the first 20 minutesand the markethastradeddownto 977 and up to 981.25andis currently at979.25. 985to 977= 8 points. Thereis an ISMSeruices repoftat 10:00am so I will waitfor it beforeI takea trade.If the 977 levelbreaksit is the wayto go basedon my lowerMOBat 979. \ 10:00amISM camein at 65.5 muchhigherthan expected- estimatewas 58.5froma prior60.6so that is something newto consider.Theseweremy thoughtsaswe progressed throughthe earlystagesof today. 10:05am the highso far hasbeen982andthe low 977we areat the high endrightnowandreallyin a no man'slandacceptfor the 61.8retracement. 10:07am marketbreaks977hasonly3 pointsdownto makea 1:1 10:09am at thislevel. low973.5a priorswinglowfromyesterday 10:23am 977.25marketcomesbackto testthe 977breakout. - it'sa sell. 10:26am977.25- 3 topsherenow- retesthelddowntrend 10:37am 972 Nowwe arethroughthe 973.5priorlowtrendis down. 10:39am97I.5- priorswinglowyesterday at thislevel 10:40am the shoft resell 972.75 Close and on a breakof 97L 10:51am974 rallyingbacknowthe higher1:1 is at 976.5let'sseewhat happens.

IltroB 979

Siqn of weokness

ralast break

985 to 9II = I

ffi/U

Day to Day Checks

6A/94

AA/A4

ffi/94

BB/WL

gE/Ss

Section3:Chapter- I



Whenthe marketralliedbackabovethe 976.5I did not stayaroundas I had beenworkingall dayandnightfrom 3:00pmETthe day before.Butthe day progressed untilafter andthe reallygoodtradeof the daydid not materialise 3:00pmwhenthe lateafternoon session brokeallthe existingsupport.

Tuesday5th August2OO3

98?.46 !184.AB 981.OB

I Tickfrom61.8

9?8. AB 9?5.80 97Z.gg 965.CIo s66. ga

RETRACE Breoksthe 50 WEAKNESS

NoSupporton l:l

t

963.80 sEB.B8 g8/95/zgg3

s?2.96

s?2.25

969.?5

'J79.ffi

9E/ES

of the rallyrange InitiaffywhatI sawat the 97L.5lowwasa 66.7retracement of yesterday.The clue for the breakouttradewas the fact that the market The minimumtarget was sinkingafter havingmadea 61.8 retracement. wouldhavebeena 1:1 with the earlierrangeof 985-971.5andthis gavea target of 966 and then there was the doublebottom with yesterdayat 964.75.Now with the marketbelow both of these levelsthe next logical objective is a 1:1 off 985measuring the declinefrom 1004to 964.75whichis 39.25downfrom985at945.75. Anyrallyat thisstageshouldnot exceedthe 8 pointerfrom971.5to 979.5so we shouldbe prepared for tomorrownow. the MOBon the Evenshouldthe marketrallyovernightin the Globexsession upsideis the 964.75low but we also haveto considerthat the low today brokethe 960.5low backon July 1s so the marketis in a very vulnerable positiongoingintoWednesday. Justthe wayI likeit. youcanreferto S4:C1:P10 Formy biggerpictureanalysis as 54: is wherewe havebeentrackingthe marketactionfor about2 weeksnow. Youmustlearnto go throughthesestepseachdayevenif youdon'ttradeon the day,as it will keepyou in tunewiththe market. Alsolistento the Bloomberg reportsandinteruiews of the tradingdayas most of them will be rebroadcast overthe next 18 hoursor so as they try and explainwhythe marketdidwhatit didon the day.

Day to Day Checks

I I I I I I I

10

Section3:Chapter- I





OPENINTEREST: Eachdayjust beforethe marketopenthe OpenInterestfiguresfor the day become available. Youshouldkeepa trackof theseas it can shedsomelightontomattersat hand. morningthe astradingbeganon Wednesday Thesewerethe figuresavailable Phillips. member Carl TTW to usby our 6h August2003:Assupplied Contract

I tAug Volume

3I-Jul

Jfll-JuI

Ol ES lVolume 5ffi871145119: Sep-tB t 0l Dec-B

ilolume

Ol

t/olume

sml

ilolume

162

x)91

I taw Ol

1667

ud

tlolume

Ol

y'olume

Ol

3A2l

54uq dolume

571tFE 3gffi 153: E1 21t

Total

Delta

ol

ozororlsorrtr ro+mol s2w't2 zrarral48689t

31.JuI

Contrac

| &Aus

4-Auq Ol

J/t17rl0l-5[E|{Fl]'t@ll -217391 174sil 413131 27t

5/8661 6113f 1

-198701 44131 -5n71

-1721

1741

ol 555,ftr 42trt1 154! 281 11t

6283i /tgFFl

-ln

had had a The interestinginformationhere is that the OPENINTEREST dramaticdeclineon the day that the marketwashedout into the 960 low area. Thiscanonlymeanonething: SHORTCOVERING earlieropeninterestcanonlyriseas newsellersenterthe AsI haveexplained market. of existingsellersboughtbackbookingprofitson OnTuesdayan abundance new sellersdid not replacethem.Thismeans the decline;mostimportantly by existinglongsliquidating the othersideof their tradeswere consumed losingpositions. If you go backa few daysyou will seethat the selloff from the 1004high in openinterestandthenon Tuesdaytheybegan attracteda heavyincrease covering.Thismayhavebeenpartof the reasonthe marketheldup today (Wednesday) and didn'tfall off the cliff like I thoughtit might.Everylittle forgetit. pieceof information andwe shouldn't is important Dayto Day Checks

1l

Section3:Chapter- I



Continued from:S4:C1 :P35: Thesearethe preparations I am doingfor Monday25d'August 2003: Fridaythe marketmadea convincing highandthe daysrangeresultedin an OUTSIDE GAPREVERSAL DAY.Thatis the marketopenedup abovethe prior daysrangeand reversed trendand by the endof the day havegoneall the waybackto Monday's low. "r lffi--ll

t*ervatp6---ll

s.11 @D2n3 15:3000 9S475 s5 25 991.75 9S275 Btrs 35

6s,967

F Alsessirrs

,f*il*-d+r4L'T[{r*

lurr,

tee4^?

3 doy SWIlrlE - DOWN PREPARATIOI'IS for Mondoy25th August?OO3:

Friday's lowtestedthe 38.2retracement of the entiremovefromthe August 5m- 958.25low.Technically youcouldexpecta reactionbackup at this level but it occurredrighttowardsthe closeand hadno chanceto tell us if there wereany buyersthere.A breakbelowthe 38.2andthe nexttargetis the 50 andif thatbreaKthe61.8. Eventhoughthe 3-dayswinghasturneddownthere is alwaysthe chance thatthisdownmovecouldonlybe a onedaycorrection at thistime.Untilwe havebeengoingdownfor morethan2 daysI will bearthisin mind.Oncethe marketbeginstradingI canseewhatit is doingas I nowhavemy downside guidelines. If the marketfindssupporthereI haveto alsodetermine whatwill constitute a buy situationfor me. In this caseit is quitesimplebecause the current rangewe areworkingwithis onlyFriday's range. The largestcorrection in the movedownon Fridaywas3.25pointsso that is the startingpoint. Dayto Day Checks

t2

Section3:Chapter- I

I I I I I I I



Tradingto WIN Course- One day at a tirne


Friday'sESlow was991.75 so a movebackabove995from hereconstitutes an overbalance andwe wouldhaveto consider a changein relativedegree. tnervat lE--l

,u lffil

|- rutsessirns

s7.01 @tz2@ 15:55:@ 99250 9S2.75 s1.75 992.00 % {3

Bars-l 5

Evcnif we makeo lowcr low crd rolly trtOB 1& 2 will rernainimportcrt:

Mythinkingat this pointin time is this: 1 . Thetrendis nowdownanda breakof Friday'slowconstitutes a SELL. 2. A breakbackthrough997will be the 1* indication we cango higher

but I wouldstillSELLa retestof 997if it comes. 3. A breakbackthrough999.75wouldstartme thinkingthat thisdecline is only a one-daywonderbut I would still sell at the 38.2 for a continuation backdown. 4. A sellat997onlyrequires a ^6 (3/4 pointstoploss). 5. A sellat 999.5onlyrequiresa 1 pointstoplossandyou couldreverse longat 1000.5for a testof the 50 andgetyourmoneyback. 6. If the 50 (1002)breaksthe marketis backabovethe psychological 1000levelconvincingly, I wouldthen expecta retestof Friday'shigh andperhaps the 1014area,so I wouldbecome a buyer.

t

So you can see that basedon my preparation oncewe begintradingon planof actionto follow. Monday I havea clear-cut

I I I I

Followsimilarstepseachdayandyou will knowwhatis requiredto be done to makemoneyon an intra-daybasis.Youwill beTMDINGto WIN. Asthe marketmovesalongI will re-adjustmy planto takeintoconsideration any changesto retracement levelsand any 1:1 levelsthat mightcomeinto play. Dayto Day Checks

l3

Section3:Chapter- I



Section 3! chapterz:

Weekly Check List: No tradingmanualwouldbe completewithoutgivingyou a run downof all thethingsyou needto remaincurrentwithon a week-to-week basis. Besides the normalthingsthat influence the marketon a day-to-day basisthe underlying strengthof the marketwill be fairlyobviousby the week-to-week activityaswe continually moveforward. Someof the longer-termissuesthat will affect the market strengthor weakness arethe technical aspects, but underlying thesecalculations arethe political andeconomic considerations. It paysto keepan eyeon the LONGTERMINTEREST MTESas thesecannot be manipulated by the FED the FEDcantry andinfluence the marketwith its overnightratemanipulations but whenit comesto costof borrowings for government, companies or publichousing,the ratesare governedby an auctionsystem. Basically moneyfromthe economy will find its way intothe variousavenues of investmentbasedon rate of returnsand the perceivedsecurityof such investments. Theabilityof banksto makenewloansis limitedto the amount of fundsthey can attractfrom investorsor pensionfunds.If longratesrise thenthe borrowermustpaymoreandthe increases are passed on downthe line. llave Trader 155.00

t

US I-B0HI!S 6?. Coupon

IIEEHLY

1,l5.AA t5i0 = 4!,

Whotyouconread intothis charfrightnowisthat borrowingcostsore increosing onddemandis quite strong, iiy reod isthst the moneyis dryingup.

135.EE 125.E6 115.94 185.gS

1OO: PAR6%

95.48 g5.aB

The bond quoteswork os on index whero lOO : a couponrote of 6-o./" The index ulorks in reverse/inv€rs€for yield.

?5.09 65.68 55.88 45.8A Hairr

Weekto Week

5O = t*. I 31llec99

I

I lSSepBB

|

| BBJunBl

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I ZZFebE?


i

I

I

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Section3: Clnpter-2

I

t I I I I I




A goodavenueto monitoris the trendin the 10 yearT-Bondsas thesewill overall. tellyouif the costof moneyis increasing or decreasing withcompany Let'sfaceit unlessthe costof moneyis movingcommensurate fund expansions then the to business earnings changes opportunity andGDP at an is goingto be limited.Right now the cost of moneyis increasing = rate (the indexhasbeenheadingdown ratesrising).You unprecedented in a positionto take on haveto ask yourselfthe question? Are companies theirownprofits? moredebtfor expansion or cantheyexpandby reinvesting are Thenagaininvestment moneycouldbe in shortsupplyandrateincreases an obvioussignof it. Therecouldbe manyreasons for this rightnowas realestatehasboomedin years recent as the stockmarketdeclinedand the FEDdroppedshort-term growth.The realproblemfor the FEDis that ratesdramatically to encourage growth. theydon'tknowwherecheapmoneywillflowto stimulate I sawa similarinstance of thisway backin the earlyBO'swhenan economic recession and fall in stockpricesresultedin a massivedrop in shott-term ratesand a boomin real estateprices.Realestatecontinuedto boomfor someyears,up untilabout1989whenthe ratesbecameso highonceagain the sidessplit and cleanedthe clocksof those who couldn'thold their positions. The stockmarketdeclinedfor a whileuntil ratescamedownand thentook off in a wild ridethroughthe 90'sas techstocksofferedthe best gambleof the century. or The pointis that whenthe costof moneygoesfrom cheapto expensive abilityto repaywe can have expensive to cheaprelativeto the economies largeswingsin stockpricesandrealestateprices. goingto provideuswith trading Knowing whentheseinfluences are possibly we shouldreflecton oncea week. opportunity is an impor[antexercise few yearswatchingthe WhileI am on this subjectit hasbeenan interesting go into a boom.I real world stockmarketfall into disarrayand the estate themselves at the haveseenpeoplemakefortunesbecause they positioned "It's all overwhenthe righttime but the old sayingkeepsringingin my ears. fat ladysings"! it hasto bejust Whenthat is I haveno ideabut basedon pastexperiences aroundthecorneronceagain. As a traderit will neveraffectme so I don't care but for thosewho are hockedup to the eyeballswhenthe trend in long-termrateshascertainly soon turnedthe cornerI canonlyexpectto seebloodin the streetssometime in the realestatearena.The pointI needto concernmyselfwith thoughis will it benefitthe areaI makemy moneyin? Weekto Week



[c] Bryce Gilnore 2004

So eachweekit is a goodideato watchwhat is goingon andevaluate the progress of the marketsyoufollowwiththe currentcostof moneyavailable. Boomsof any kind havealwayshadtheir foundations basedin a poliryof creditexpansion and they alwaysend because the creditexpansion cannot pace. keepup the It is simpleeconomics really.

THELONG.TERM POSITION OFTHEMARKET: On a week-to-weekbasisyou shouldreviewthe long-termpositionof the market.

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r

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Whenyou lookat the marketin thiscontextthingsdon'tlookthat badvisually but the low last year was a drop in valueof 50o/ofrom the all time high. Whichmeansto recoverallthe lossesit hasto go up a 100o/o in value. Presently the marketappearsto be in a recoverymodeandat its recentbest hadgained32o/o in valuefromlastyearslowpoint. Economic figurescomingthroughthe pipelinewouldsuggestthat the US economyis on the mendas companies The are returningto profitability. biggestdrawbackright now appearsto be the unemployment figures.But that is not our majorworryas valuations of stocksrely on their underlying profitsandpaydividends. assetvalueandtheirabilityto produce Historically the establishment looksat PE's(Priceto earningsratios)and a benchmark PEvaluation of a solidcompany is 15timesearnings.

Weekto Week

l6






Often the marketover valuesa stock basedon the PE if it believesthe company will improveits earningsovertime.So purevaluations on PEratios guide- theyareonlya ballpark figureto go on. arenotan accurate In recenttimesthe overallPEratioof stocksin the S&P500 hasbeenas high as 2511,whichin my mindis the reasonholdingthe currentmoveupward back. Theredoesn'tseemto be any other strongreasonas there is plentyof investment moneysittingon the sidelines by all repofts. The main reasonthe marketfell over in the first placewas becauseof fraudulentaccountingpracticesand a weakeningeconomy. overualuation, Thento top it all off the USAbecamea targetfor terrorismthat hasviftually brought the airline and travel industryto its knees. Reducinghotel occupancies, retailsalesandthe ensuingunemployment all addedto the drop in consumerconfidence, whichthen found its way into the stockmarket sentiment.Investorsturnedto real estateand otherthingsas well known companies The majorworld droppedin marketvalueby as muchas 70o/o. sharemarketsfollowedsuit reducing the apparentwealthin the worldby an percentage. enormous Neveftheless life as we knowit hasgoneon relatively undisturbed andthereis no reasonto believethatthingswill change. The worldhas beengoingfrom one crisisto anotherfor as longas I can remember andthe stockmarkethasbeengoingup anddownwith it at the sametime. - the top 500USstocks.Onehasto realise My mainfocusis on the S&P500 thereare thousands in the USand as time goesby and new of companies grow they increasein wofth and becomebiggerthan existing companies S&P500 Whenthishappens theyarethenmovedintothe indexto companies. replacethe onesleaving.As a resultthe S&P500is hypothetically a growth index.Thisis wherethe indexfundsget theirnamesfromas theyswapand changetheirportfolios to reflectthe stocksin the index.Soyou canseewhy like ENRON a majorbankruptcy can affectthe indexfor a while but then whenit is replaced elsethe bleeding canstop. by something It is my view,if the worlddoesnot changemuch,the S&P500bearmarket thiscentury. bottomof 2002is the lowestwe will everseethe S&P500 Sohavingsaidthat I canmoveontowhatI wouldbe lookingat eachweekto keepconfirming myview. As I haveexplained in otherchaptersthe marketmovesalongin ups and downsthat relateby timeratio.SoeachweekI needto research the existing timecyclesso I canseeif the existingoneshaveanyrelevance to the current marketposition.

Weekto Week




Recentlythe S&P500futures marketmadea doubletop on the E-Miniat LOL4JS(July14b day session). This doubletop coincided with a 1:1 time so as we are approaching a re-testof this double rycleof majorimportance top it is becoming moreandmoreinteresting. Technically I nowneedto seeif thistimeryde lookslikeit hasanybearingon the immediate future. llave Trader LZg3.8E 1163.OO Itz3.g6 1083.6S 1843.BB 1683.66 s53.00 9u3.60 883.08

Evcntuallyit hos to breqk onewoyl

843.00 883.A6 ?63.A0 ftat ios

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To see the currentshort-termpositionof the marketyou shouldrefer to S4:C1:P21 on. We are at the crossroads technically becausethe currentrally high is up against a 61.8retracement. One thing on my mind this weekend(16h August2003) is the possible implications OUTMGEon the Eastern Seaboard of the USAthis of the POWER week.Therewerea lot of disruptions to the transportindustrynotto mention the lossesto the freshfoodindustryandthe retailbusinesses. Losses would haveto bein the 100'sof milliondollars. Neveftheless the situationwill becomeclearbeforelong.The purposeof my explanations is to showyou the detailI go throughto stayin tunewith the marketaction. I am a firm believer that you needto understand everylittlethingthat might be in the mindsof the tradersas it is the traderswho takepricesfrom one levelto anotherandnotanythingelse. You need to understand the technical, the fundamental and the psychological aspects surrounding the traders to be successful today. WeektoWeek

18



I



rradingto wIN course- one dayat a time

numbersintosomesystemandhopingit will Thereis no pointjust crunching with any work becauseit won't.Thereis no needeitherto get involved "Guru" market planetarybullshit promotedby some of the so-called as a ASTROLOGY Stayawayfrom thosewho promoteFINANCIAL forecasters. they say boilsdownto tradingtool if you want to makemoney.Everything absolutebullshit.Theylive in a worldof makebelieveand to saythe least people.I haveseenit all overthe yearsandI knownow theyaredelusionary anythingtheysayas impoftant. to neverevencontemplate and Heliocentric Justto provemy point here.arethe combinedGeocentric positions'for planetary the 14hJuly2003andaboutthe onlythingthat shows of the 13h. up is a fuli moonon the evening ANGIJS

GEOCD{IRIC Sfi

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Phase 1?4d Z4n

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139.33 156.33 14.93 145.s3

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Weekto Week

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MEDIUMTERMTRENDINDICATORS:

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Sll It /f ffi Il I tt2-8[$ 97t.5[

According to this repoftunlessyou knewanythingaboutmarketgeometry youwouldhaveto saythe trendis on the up. This is effectivelywhat the systemtradersare seeingso it paysto keep informed. s&P540 High Loru Rge

4 t{R1 sE8.Z? 1il t-tHZ s B 3 .8 5 59 lrff3 gB?.?4

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You shouldreferto your trendindicators eachtime you are approaching a beginto show stronggeometriclevelin the market.If the trend indicators signsof overbought or oversoldat impoftantlevelsthey becomeveryuseful indicators. if the 61.8comesout the marketwill be metwith In this instance rightnow. anotherfloodof buyingorders.Thetrendis in the balance Weekto Week

20






COMMITMENTOF TRADERSREPORT:

Finallythe commitment to your overallviewof of tradersrepoftis essential the marketposition.

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It's a littlehardto makea lot of senseout of thisotherthanto saythe middle of Juneperiodwherethe marketrandownfor a whilesawthe publicliquidate longswhilstthecommercials amountof shorts. boughtbacka substantial The activitysince has been relativelyflat exceptfor the odd days we witnessed recently. positions haveremainedquiteresoluteto the Nevertheless the unreportable net remaining longsidewiththe commercials basically andnon-commercials shoftwithoutapplying in recenttimes. anypressure positions wouldbe Eitheranotherswingup or downin the non-reportable significant for me on a commitment basisbut as we are at a crossroads situation technically rightnowthatis onlygoingto beseenwhenit happens.

In any caseif you followthe analysisprocedures I am showingyou each week.Youwill findthat everything will lookafteritselfandyouwill important neverbe the wrongway aroundin the marketfor morethan a day at the worst.

Weekto Week

2l




Week ending 22ndAugust 2OO3:

Fridaythe marketopenedon its high 1012.25and closedon its low 992 DAYpattern. REVERSAL forminga GAPOUTSIDE Anysignificant dailyreversalpatternsuchas this is a realsignfor technical analystsand as I have said so manytimes beforeit is impoftantto go haveanymeritbasis to seeif the TIMINGFACTORS throughall the exercises methodologies. the GANNor ELLIOTT ]lave Trader

Totcl timc 1.618

1eS3.gB 1153.66 ITz3.EA

ry

1083. Bg ffi43.49 1003.60 s63.86 9z3.BA 883.66 843.04 g03.BB ?ffi.48 f{aitr

Z1sep61

and The breakdownon the dailyactionhas beenexplainedin S4:C1:P34 present so T1meis situationin the dailystochastic. showsthe overbought reversal. is in favourof a significant everything llave

HSEXLY

frader

u3g.m ror*'w

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Weekto Week

-

22



I I I I I I I I I




peoplefromtaking I hadto laughon FridaysinceI havebeendiscouraging any noticeof planetarypositionsin this chapter.But I haveto admitthere wasa significant aspecton Fridaythatwouldhavebeenpsychologically active in the mindsof anyonewhopractices Financial Astrology. I am surethat if today'shighturnsout to be anythingof majorimportance I amgoingto copsomeflackin the yearsaheadas hashappened in the past. Neveftheless I will stillstickto my originalwordsin thischapteras evenif the planetscan be provento be importantI havebetterwaysto time the market andmywaysarefar moreaccurate asa tradingtool. Thesewerethe aspectsfor Fridaythe slqypilotswouldhavebeenfollowing and I mustadmitif enoughof them divedinto the marketit wouldhave helpedfuelthe selloff thatoccurred on the day. HETIOEENIRICSUHRHGTES

f,gcleTrader

Phase 61d {5r,r

ss

HENf,UBY

Ilag 3?854.11 GllT zz/ 8/Z-B,43 GHT 14:31 Neu.rYork 9:31om ffSPECTS 48.63 OppositionL 7 7 . 4 4 Conjunction z . B 4 OPPOS I TIOII 1?S.84 1Z;5.74

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pi

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Eorth / Sun - Venus,Mors,Jupiter & Uronusore oll linedup.

This is somethingyou wouldnot see happenvery often and it is hardto imaginewhat it reallymeansin an economic senseonly a psychological sense.ButI do remember backin 1987whenthe marketcrashedit did do it phase. duringan Eafth/Sunfupiter Opposition My mainpointin showingyou this is just to makeyou awarethat it paysto keepan eyeon whatothertradersmaybe usingevenif you don'tbelievein it. I am in the business of playingoff the otherplayersnothingmore. Weekto Week




ANOTHERCOMPOI{ENT OF THE S&P 5O0 is the DJIA - the top 30 Industrials. this earlierbut it wasnot relevantuntiltoday.This I shouldhavementioned obseruation mayhelpyouweighyouropinionof the S&Ppositionon a weekly basis.It paysto keepbotheyesopenif you havetwo.

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The DJIAbackedoff a 50o/oretracementleveland the word will be out by Monday, believeme. Whichever way you chooseto look at thingsthere will alwaysbe some for you to fall backon comingfromeitherthe suppofting technicalevidence performing stocksin the index. DJIAor the major lookslike "the FatLadyis aboutto sing". Certainly Nowwith all the informationwe haveextractedfrom the data we haveat handwe cango intonextweekfullyprepared. we shouldhave because Wedon'tneedanyoneelse'sopinionor newsletters, career. If you haven't every trading dayof our doneour ownworkeachand thendon'texpectto get the resultsI get. - I Preparation and marketanalysisis the only way you can be successful is losersall thinkmy approach noticetimeandtime againthat the invariable too muchworkandas a resulttheyfail. Youhavea choice!Dothe workor fail- thereis no otherway.

Weekto Week

24

Section3: Chapter-2




[c] Bryce Gibnore2004

Tuesday 2ndSeptember 2OO3: A WEEKMAKES. WHATA DIFFERENCE

Lastweek the marketdeclinedfor two daysand then found its feet once again. Thetwo daysdowndid not violatethe uptrendeventhoughthe 3-dayswing didturndown(seemy rulesin 51:C8). Todaythe S&Pbrokeout into new territoryand the DJIAbrokeabovethe page. levelshownon the previous retacement 50o/o of the marketrightnow. Thiscanonlyleaveuswith a bullishconclusion S&PsBB date 638582 hi rnz.sg

Cgclelrader

TuasdoyZnd Saptanber 2OO3 qfler o LongWeekendlhe morkei shruggadoff the consolidotionperiod railh a nice break lo a new high. la date

?Bfi.5B &3831?.

Lookingbackat the positionof the marketon the closebackat August22nd DAYyou can seewhy it paysto remainflexible REVERSAL andthe OUTSIDE in youropinionandnottry andbe a forecaster. callmeearlylastweekandaskme if I had FunnythingI hadan acquaintance positions on Fridaythe 22no.He saidhe was goingto seenthe PIANETARY in the DJIA take a long-termshort positionbasedon the 50o/oretracement planets. I wonderhowhe is feelingthisevening. and It doesn'tbothermethat the markethasmadea newhighafterthe signalsI wasworkingoff a weekor so backas I wasflexibleand revertedto the long DAYto turn backup on REVERSAL sideagainwhenwe madethe OUTSIDE Tuesday August26s. Follow Do the worK followthe rulesand thingswill lookafter themselves. will it do. what whatthe marketdoesanddont try andforecast Weekto Week

Section3: Chapter-2



SectiOn 3l chapterg:

ContractRollover: TheE-Minitradesthe followingdeliverymonths: 1. March- CodeH 2 . J u n e -M -U 3. September - Z 4. December The tickersfor the variouscontactmonthsthis year are ES03H,ES03M, ES03Uand ES03Z. ES is the symbol,03 denotesthe year and the code denotes the deliverymonth. (U) andtodaythe the current1* monthwas September Up untilyesterday (Z). activecontractis December The exchange rulesdeemthat the activetradingvolumeroll to the forward on a Thursday. month1 weekbeforethe deliverydate,it usuallyhappens The reasonfor this is to supposedly defusethe volatilityon the lasttrading anddeliverable daywhenyou havea triplewitchingwhereoptionscontracts futurescontractsreachsettlement.

Retrccementlevelsare ofthe recent decline sver 3 doy!

They SOLD the 5O on a lxl

retest Theyhought the retest

CONTRACTROLLOVERinto bacember

Thisis the December contractES03Zin 5 minuteinteruals. Youwill obserue from the chaftthereis negligible volumein the December contractthe day beforerolloverandthentodayit lightsup. ContractRollover



Trading to WIN Coune - One day at a time


Just so you c;;tnseethe differencehereis the expiringSeptember contract, the ES03U andit stillhas5 tradingdaysuntilexpiry.

l,lardly ony VOLUAIEtodoy but it is still troding

Theseare the total volumeand openinterestfiguresfor yesterdayand the weekaswe wentintothe rollover:

Therearetwo thingsto notein thesefigures: 1. 2.

Howthe OpenInterestin December is buildingup as we headinto the rollover. The volumein December is not all represented in the additional openinterestfigures.

ContractRollover


I saidto my studentgroupthe otherdaythat I hatethisrolloverperiod- the reasonis that whenwe comeinto the rolloverthe heavyplayerscomeup withall sortsof schemes thattheythinkcanmakethemmoney.


Theproblemis,youneverknowwhentheywill strikeandsendthe marketup or downseveralpointsunlessyouhaveeyesin the backof yourhead.

t



Let'stakethe buildup in the December openinterestfirstas it isjust a simple matter. Theseare the positionsbeing taken by either new trader'senteringthe marketthat knowthe rolloveris comingor theyaretradersmovingtheiropen positions intoDecember. fromSeptember Evenwith the rolloverapproaching increase therehasstill beena conslstent in overallopeninterest.Nowwe knowthat meansmorenewsellersentering the market,and buyershaveaccommodated them. But up until todaythe previous two daysweredowndays.(Seethe chartS4:C1:P39) "Whyis the volumegoingintoDecember Youcouldaskyourselfthe question, notfullyrepresented in the OpenInterestbuildup in December". Well the simple answeris that arbitrageis taking place betweenthe September contracts in thistimeframe. andDecember If you look at the low priceyesterdayin the Septembercontractit was 1009.25 contract 1007.75. andin the December Yes,a discount in December of 1.5points. Nowunderstand this: The reasonfor the discountin a forwardmonthfuturescontractagainstthe currentmonthis that SELLERS haveto OFFER LOWER sotheycanget buyers to transactbusiness. It reflectsthe factthat sellersarethinkingthe marketis heading for a downturnandwantto makesuretheyget intoposition. Thenthereare the guysBuyingDecember thinking and SellingSeptember that comethe day beforeSeptember contractwill fall expirythe December into linewith the September contractandtheycan pickup the 1.5 pointsin the spread. Youalsohavethe realheavyplayerstradingoff positions in the September contractagainstoptionspositions at thistime.

I will be muchhappiertradingwhenthe September contractgoesoff the boardandI knowtheseguysareout of the way.

ContractRollover

28


I I I

I I I I I

t I

t I I I

t I I I I I I I I



Here'sthe problemI haveduring rollover week. 0charts ESU 1835.66

Sepietnber Controcl:

ffi36.48 1033.60

Herc's tha problan I hoveduring rollover uueak:is the irend bock up or not???

1839.SE 1AZ7.Ag rgz4.86

13

r0zt.Ea

10^4

1618.69 ffi15.04 IALZ.BE uag.BB 69,/I?,/Z$g'3

Thecurrentrallyhasoverbalanced both lxl's but it is wedgedon the 50o/o retracement? Theoverbalance of the 1xl's wouldindicatestrengthyet the 50 possible retracement indicates resistance. ficharts f,SU 1838.SS

ESBSU_38

1032^6

1831- BB 1026.BS tgzt.g6 1816.BB 1811.06 1468.Ag 1841.AB ss6.BB

Is this o 5O% relrocanreni reversol?

9S1.00 986.48 gig/EE/ZBE3

(wellit brokeit The September contractis rallyingfrom a 50o/oretracement by 2 ticks). I knowin my mindthat the 982^4 low andthe 1032^6highweremadeon pointsof force. geometric highvolumetradingandwerelegitimate It's the December levelswhenyou go backthis far that becomea mental problem for meastheywerenot madeon highvolume. ContractRollover

29


Tradineto WIN Course- One dav at atime


u34.AB 1831.08

DECEMBER CONTRiCT

taza.sE

t

1025.BB Ig2Z..BB 1019.BE

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1S16.AB 1413.68

10u.Ea 168?.BB Bg/lz/zw3

All the rangesare identicaloverthe pastcoupleof days.It is whenyou go backa bit theyvaryslightlyandI am continually wondering whichcontractis leadingthe otherduringthe rolloverweek. 1831.AB L6Z6.W LEZL.gA 1S16_ sO 1811.48 1086.00 1901.09 ![|6.BB !t!t1.00 s86.BB

DECEJIABER CONTRACT

aS/ffir?$Tt

It maybe nothingto worryaboutbut the reasonI worryaboutit is because pointby over2 ticksis causefor in my bookany breakof a stronggeometric concern. At the lowtodaythe December E-Minicontractbrokeifs 50o/oretracement by over 1 full point.Nowwhenit happened it lookedto me like it couldkeep goinglower,but whenit brokebackabovethe low of yesterdayI calledit a buy.The problemfor me at the timewasthat I couldnot buythe 50o/o level "lost geometry. withanyconfidence dueto the motion"in the you reallyneedto referto the pit contract Whensomething likethis happens andseewhatit did. ContractRollover

I I I




t t I I I I I I I


Qcharts

[c] BryceGilnore 2004 sPfftz-68

CSU

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1885.AB lgw.gg gss. BE 9SS.AS 985.44

gs/Ea/zBBs

Youhaveto askyourselfwhy the Pit cantradeto a perfect50o/oretracement ESoverruns sometimes. andthe Electronic deviation of 2 ticksmaximum Nowif youwereusingmy accuraryparameters from perfectgeometryyou canhavecompletefaiththat we hadmadea 50o/o retracement andacton it. I haveseenrepeatedinstancesof deviationsin the ElectronicESto the PIT in a retracements in the past.The lasttime it happened tradedpriceat 50o/o bigwaywasbackat the March31st2003lowwhenthe EStradedat 840and hadcalculated to 841.5retracement the SPtradedonly841.5andthe 50o/o boughtit whenjust ScottManyalertedme to it on the dayandI immediately a minuteor so beforeI thoughtthe 50 hadcomeout.

ContractRollover




Another way to possiblyresolveany dilemma is to inspectthe CASH CHART:

5&P5OOCASHINbEX LO32.4t

ffi33.49 L0,2E.EE LBZ3.8g 1818.BB 1813.ES 1BBg.gB

ua3.ss 9glB. BS

s93.08 s88.08 a9/98/?ffi3

NowI havelookedat it underthe microscope saythat we I canconfidently havemadea 50o/oretracement at the lowtoday. The next issue becomesthe lx1 correctionsupwards.The ES has overbalanced but the SPhasn't.The SPhasjust brokenthe 50 backup yet the CASHandthe EShavenot. Pointis we are righton a criticalMOBat the endofthe day. Anotherissueis the discountin the December contract.The CASHlow today points was1007.71so the discount was2 full in the futures.Thisis a bearish signnota bullishsign. In anycasethe onlyconclusion I canarriveat is if it breaksupwardsI should pointI shouldbe a seller. bea buyerandif it staysbelowthe balance Thebiggerpictureis interesting whenyoustandbackandtakea goodlookat whathashappened in the past8 tradingdays.Themarkethasgonesideways to downwith a strongfinishon Fridayafternoon. The Bloomberginteruiewsare all decidedlybullish,the main comments comingthroughare blamingthe currentsluggishness on a marketthat has goneto far to fast.The majoritythink that as soonas the currentsetback resolves itselfthe buyerswill return. I'm not entirelyin agreement with theirviewsbut I don'thaveto worrywhat the marketdoesin the longtermI am onlya daytrader. The marketcango anddo anythingit likesfor all I care.I will knowhowto handleit. ContractRollover

32



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If the marketcomesbackdownand breaksthe largerdegree50 I should expectsupportat the major1xl level.If the lxl failsthenI canbe a happy that will happenare remotein bearandselllike crazy,althoughthe chances myeyesat the moment.

t

LikealwaysI haveto wait untilthe markettellsmewhatto do. I keepsaying on a onedayat a timebasis. hasto be handled thatthisbusiness

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Monday15s September2003: INSIDEDAY

t I I I I I I I

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Mondoy 15th Soptember2003 LEZ6.g8 1 0 1 82

1A18.58

I1'L51DEbAY

1gr?.06 1815.54 1914.60 1812.58 1611.OB 1BOS.5B 1688.BB 1086.58 Bg/15/ZBA3,

E5 Sep-03 Dec-03

ll

6g/a1

Eg/tg

BS,/LZ

gg/tz

Eg/15

Bg/15

ol Volume 6/17E 52[ffi1 1ffi

Total Deha

ES OI increosed lOOk

SP Sep-tl3 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-O5 Total

7142 2757

Delta

Todayturned into a lacklustreaffair with a downwardbias.The market openedbelowthe balancepointon our chartand beganto retreat.Overthe previoustwo tradingdaysthere has beena substantial build up in Open newsthe marketjust groundout the Interestandwithoutany encouraging day.The mainnewsstillaroundthe marketis the $140millionpaypackage H(CHANGE. STOCK awarded to the CEOof the NEWYORK ContractRollover

JJ




NOWWHATHAVEI NOTICEDOVERTHEPASTFEWDAYS? Outsideof the buyingFridayat the 50 levelof largerdegreethe playersare sellingintoany50o/o retracements. Theydidit onThursday andagaintoday. The S&Prallyfrom Fridaycouldnot sustainitselftodayandthe big 6 point correction wasoverbalanced slightlywith the marketfinishingthe daynearly on its low.I mentioned the significance in a reviewof of the 6 pointcorrection Friday's dailyrangein 51:C18:P112. The continuingbuildup in the OpenInterestis comingfrom the Fundsand the Commercials sellinginto the NonReportable sideof the market.If this trendcontinues something hasto giveone-wayor the other. Thereis ongoingtroublewith the occupation with of Iraq andthis combined the Israeland Palestinian conflictis not addingany confidence to the stock marketsituation.PresidentBush'spublicopinionpopularityhas dropped significantly as the costof the Iraq invasioncontinues to growand increase budgetdeficits. Continued talk of moreterroristactivitycontinues to deter peoplefromflying. Althoughthe economic figuresreleased overthe pastfew monthsindicatea recoveryof some descriptionthe employmentfiguresshow little to no improvement. The progressof the recoverydependson consumer spending whichhas beenvery good in recentmonths,now if it stallsor consumer confidence fallsthe marketwill be susceptible to sharpsetbacK. 5&P 5OO lsf Month ContinuousFutures Prices High Lotrt Ege

tg3z.7g 958.50 74.2A

4 Hfl1

taL5.z8 18 I,IRZ 1471.24 50 llfi3 996.11

Bcck below old hiqhs

Trend Indicotors ore oll funting down.

Youonly haveto reviewthis dailychartof the S&P500'sprogressin recent monthsandyou canseewhy the FundsandCommercials areaddingto their positions. short

ContractRollover


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I

lst MONTHCONTINUOUSFUTURESCHART:

t

Now that we are in the rolloverperiodand the activetradingmonthis pricesto our continuous the December December we shouldbe appending futureschart.

I

technical analysis. Thischartis the onewe usefor all ourLONG-TERM

t

an active TheS&P500 futuresbegantradingin 1982andI havebeenkeeping recordeversince.

I I


l^lave Trader 1558.88

lst ,l,ilonthConlinuous Futures

bISHTHLY

nErnffcEt{f,ttrs

1560.69

8.888 ft.333 E.3jBZ a.447 8.4S6 8.508 B.577 6.618 8. EE? E.?AV 8.786 1.008

ffi50.48 120i8.86 ffi59.88 SOB,BB ?50. 88 649. BB

"-'---?6"7.50 1836.86 la?s.s8 trzE,BL 1153.46 LL7g.?5 1232.8s 12ffi.92 1385.44 fi37. ?E 1491.41 15?4.88

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30Jul8Z

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Whenyou examinethe currentmarketpositionrelativeto the bearmarketof 2000-2002 we haveyet to retrace1/3'dof it. The38.2is a wayoff at 1075.5 (see:S2:C2:P18) duringthe (1068on SPX),if you recallfromearlierchapters Onewas50o/oand Bearmarketthereweretwo very impoftantretracements. equalin length,(alsosee: the other 38.2o/o and eachwere approximately 52:C3:P23). Fromthe low in October2002we havenowbeenup 265whichis 25 points largestcorrection on the waydown.Thiscouldmean morethanthe previous we aregoingto go higheror it couldmeanthatwe haveonlyjust movedthe if you believewe arein a wavecountup intoa higherdegree.Nevertheless, recovery, onewouldexpectthe marketto makeit backto the 38.2or the 50 beforeit ranintoa brickwallfor a time.Wellthatis the theoryof ElliottWave if youbelievein it. arealsothinkingalongthe same Mymainpointis this,100'sof otheranalysts If we indeeddo continueup linesandadvising theirclientsof the possibility. the 38.2levelat 1075(SPX1068) in thistimeframewe will haveto negotiate problem for this marketwith the current and that couldcreatea technical stateit is in.

ContractRollover

35




youshouldkeepa correctrecordsoyou In anycaseno matterwhathappens areworkingoff. will knowthe preciselevelsthe professionals Tuesday15s September2003: Anotherdayanotherdollar!Marketshiftsup a gearasthe buyersreturn.Now theonlybarrieraheadis a testof the 1031high. 1834.Bg 1631.EB

The someold things continueto tell the story:

1031

1028^2

LBZE.EB 1825.99 tilzz.SE

[ni #

t}1'rt

Overbaldnce13x13 Bullish :

1819.BA 1016.BB 1013.08 1418.AS LOET.eA 0i$/Bi8,/ZBB3

ESB3Z-14

FO#iC Raies Unchanged 3 DaySuing bockUF

Bg/16

andtodayas a I wouldexplainthe changein sentimentbetweenyesterday The early morning combination of no bad newsand technicalbreakouts. Afterthe breakoutof the 50 only left the 61.8andthe 13x13as resistance. testof the 61.8the marketcamebackto the 50 levelasthe marketdigested the FOMC Theoldclich6sayingis, prior resistancebecomesnew minutes. suppo$ sotheyboughtit andoff it went. of the NewYorkStock Thecontroversy DickGrasso the Chairman surrounding Exchange is an oldstorynow. Thismarkethasits sightsset on the 1075levelrightnow.The3 daytrendis positiveonceagainas the bearsare gettinghoseddown.The bearshavea smallchanceof a doubletop at 1031but judgingby the finishtodaythe buyersshouldkeepcomingfor the timebeing. mayget a Withonlytwo daysleft untiloptionsandfuturesexpiryconditions rightnow. littlevolatile,that is the onlythingto consider It's timeto remindyouonceagain: If the market is going up you buy it - If it is going down you sell it. Youcan keeploadingthe gun untilyou run out of bullets.Whenthe SIGNS will act in their sameold are clearyou can be surethat the professionals ways. ContractRollover


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I

Thereis nothingnewunderthe Sun.Themethodologies I havetaughtyou in this coursewill keep you on the correctpath if you continueto do the preparation workandtakeit onedayat a time.

l

I recommendTTW traderc to keep a continuous 1$ MONTHSWING CHARTof significant market swings:

I I I

Thisway you will havea properperspective of wherethe markethasbeen andan ideawhereit maybegoingin the future.Youwon'tbe guessinglike mostof the otherswhowill be losingtheirmoneythroughlackof knowledge. Theswingswilltakeon the appearance of wavesin lesserandhigherdegree.

:+50r2

i+15 10t'1"6-Glob.x Hiqh

'103?'6

:

I I


:fiv

: 9821.4

.45^5

Thischartis currentrightnowandcontains the swinglevelsof the active1s period. monthEScontracts overthe It is an EsignalES#F continuous chart and was preparedby one of my TTWcolleagues, Yigit Balligilwho livesin procedure Turkey.We haveour own automated for Esignal to produceswing thesecharts. Higherhighsand higherlows meanthe trend is UP. Lower highsand lower lows meanthe trend is DOWN. If you maintaina longer-term biastowardsthe medium-term trendyou can't gowrong.

ContractRollover

J I




as the trendunfolds.You or over-balancing Swingswill be under-balancing levelsof priorrangesasyourguide usethis information andthe retracement to tradersentiment. Theonlythingthat changes of as the marketmovesforwardis the DEGREE larger degree TREND.Largerdegreemovesbegetlargerdegreecorrections; swingswill unfoldin 3 to 5 wavesof lesserdegreeswingsasa generalrule.

llain

ffiA?14

BE;W?4

E3BBBE

trt0819

9369ff2

mAS16

Anothereducated colleague of mine,SteveRifkinwhoyoushouldall knowby now as Steveis runninghis own day tradingeducationprogramfor S&P my own chaftto traders,sent me a chartthis morning.I havereproduced illustrate hispoint. pricesas a meansof identiffing It refersto alsousingthe Globexcontinuous geometry at importantswinghighsandlows. with corrections Stevewasableto tie in the 1:1 geometryin the consecutive low the 1005^2 the other an exact38.2 retracement of the entirerangeat day. I thinkthe pointStevewas makingto me, wasjust to saythat you should examineeverypossible angleandthe answerwill betherein morewaysthan one. Thereis no doubtnowthat after yesterday's buyingspreethat anyonewho that we mattershasseenthe relevance of the 1005^2lowandwill consider haveat the leastonemoreleg up in similardegree.Thisshouldat leastget us upto the vicinityof the 1058/1060 area.

ContractRollover


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Anothercolleague from California hasalreadypointed of ours,PaulBonanno group so outto ourTTW thatthe nextCASHINDEX1:1comesout at 1056.55 betweenall of uswe havethe marketcovered. I am very proudof theseguysthe way they havetakento the educationI haveprovidedandthe way they can nowwork it out for themselves without anyhelpfromme. WhenI retireI knowthat the effort I havemadewill be remembered forever asthe wordspreads to thosefewwhocanlearnto thinkfor themselves.

Tuesday17u September2003:

lffil.48

1031

1428.A6 1gz5.E0

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guidance, Anothersmallrangedaywith no purposeful I watchedfor technical a whileandwhenit couldn'ttest the old top at 1031I left it alone.Nowwe have only 1 more tradingday until the September/December rolloveris complete. Tradersarewatchingnot onlythe ES-Zchaft,but alsothe SPX,the SP-ZandSP-Uchartsandit is becoming confusing dueto the rolloverperiod. DickGrassohasresigned fromthe NYSE todayat the requestof the boardso nowthat newsis out of the ainruaves. Anotherdistraction rightnowis the hurricane off the EastCoastof the USA. Stillin general termsthe marketshouldbe heading up.Thereis nothinggoing on that saysit shouldn'tbe excepttechnicalsellingby the fundsand the commercials. andthe buyers Seehowthe OI went up on the riseyesterday absorbed it.

ContractRollover


Tradine to WIN Course - One day at a time


5P - 0I 5P 871n1

Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Total

246217

+8-'".

t

824181 I

Something else to think about: Cgclefrader

TLTI{E& PRICE ;

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2003:It couldbe impoftant. Tjmewillbe"square" 38.2on 30hSeptember 2003:This Thenthereis anothermajortime fallingon the 23'dSeptember just yet, that it is I am aware but couldalsobe importantit is hardto say something I needto watchon the day if we are makinga higherhighthan recently.

40

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we needto be time and priceconjunction As we get closerto this MAJOR just mean to anything. it out in case turns its consequences awareof

ContractRollover

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Cgclefrader HflRHENS I5I

EaA3Z4 L552.8?

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[c] BryceGilmore2004 This is onotheriechnicolopinionI hoveof the morkot - I hovamentionedthis ogesogo ond why I thought ltliner & Plechier v.rere on lhe wrongtrock.

ru

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TII,IEIYCLE rlags 852 derree trft ueErs LzL.? nths ZE.A gears 2.325 RAHGE ItouE 777.15 I 50.4 Sqr9rl ?ffi6

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BEARMARKET

k

just warningthattheseare Justbearin mindthat I am not makinga forecast in the pathof this marketin the nearterm. BTW the two biggestobstacles Minerand Prechter werecallingthe marketDOWNall the way up fromApril in myopinion. knowledge 2003:it'sa sadindictment of theirself-professed Oneshouldneverrelyon egoaloneandignorewhatthe marketis tellingyou! Youknow,I can be the cruellestcriticknownto manbecauseI alsohaveto acceptanycriticism thatcomesmyway. in yourtradingcareeris goingto be deciphering Oneof the biggestobstacles whoknowswhattheyaretalkingaboutandwhocanproveit works.Manyof the thingsI havetaughtyou in this courseare not originalin any way whatsoever,it is just the way I combinethem that makesthem the most effective tradingtoolsyouwilleverlearn. comeout with.Or The marketdoesnot listento the thingsMineror Prechter "Guru" he wasbadlywrongfromApril for that matterArchCrawfordthe Astro on aswell. on July2nd2003: Justgo backandreadwhatI wrotein S2:C4:P39 Pleasenote: thesefuturetimingdatesand pricepricelevels AlthoughI am mentioning thereis no reasonto believethey will actuallybecomefact.The dateswill comeandgo andthe marketwill dowhateverit wantsto at the time. guidelines to beawareof that is all. Theyaretechnical Whenthe time comesthe marketwill showits handin a varietyof ways whichwe will be ableto identifywithandactaccordingly.

ContractRollover

41




Thurcday18h September2003: IASTTRADINGDAYES-U Todayyou will seethe reasonfor takingeachdayas it comesandnottrying to forecastmorethanonedayin advance. f,sa3z-15

Qcharts CS$ 1848.80 LA44.AB

High todoy 1038^4

ONE bAY AT A TI,l,\E

18ih +16^2

tB4g.Eg 1436.BB 6. 1034'6 hi

u3z.a6

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ffi28.49

tsz4.sg Lgzg.Ba ffilE.gA LBLZ.EE 1S88.BB g9/LB/?gtrJ Bg/95

69/49

gg/tl

09/15

gg/t?

gg/18

Todaythe marketwent exactlythe oppositeof what the average"Joe Blow" in the street expected.Maybethe triple witchingwas what we neededto breakthe overhead resistance the marketwasup against. Nowall thosepeoplewho havebeencallingthe September 8s Highthe final getting highfrom Marchhaveto eat Crow.Theymustbe usedto it by now, the flavourof CrowI mean.But you knowthe stupidthing?The lazypublic will continueto buytheir newsletters andadvice,followthemand losetheir hardearnedmoney. Thismarketrallyfrom Marchhastarnishedmanyreputations sinceit began, but if you studywhatI havebeenwritingoverall thesemonthsyou will see that it wasn'tveryhardto stayon trackandkeepmakingmoneyallthe way. All you haveto do is takeit ONEDAYATA TIMEandforgetaboutforecasting whatwill happento far out. To makemoneyall you haveto do is just tradefrom levelto levelin the just keepaddingup. It is easierto make5 smallerpictureandall the pennies to 10 pointsa daythan hit a homerfor 50 or 100pointson a mediumterm trendfollowingposition. Therewill be dayswhereyou catchthe volatileruns you either up or down if keepenteringpositionswhen the opportunityis signalled, thesearethe bonusdays. Youjust haveto treat this business of makingmoneyas a job and always remember the basics. ContractRollover


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Section 4! chaptert:

The PsychologicalAspectsof Trading to WIN: a Perhaps the mostimpofiantadviceI cangiveyouto assistyou in becoming on winningtraderin the futuresmarkets,is sayto you to only concentrate in it totally. onemarketandspecialise Youneedto developa specialinterestin the marketyou selectto tradeand youneedto understand its habits. who maketheir living Eachindividualmarkethasa hardcoreof specialists "Jack of all tradesanda masterof tradingonlythe onething.Youcan'tbe a none"andbe successful. my tradingcareerI havemovedfromonething Fromtimeto timethroughout to another.I first begantradingSilverandthenmovedontoGold.Whenthe After equities. Goldmarketwentintothe doldrumsI begantradingindividual sometimeI movedintoequityfuturesandthe localSharePriceIndexfutures I havetradedUST-Bondswhen it was an 8olo as the volumesincreased. to a 60/o the contractspecification couponbut droppedit whentheychanged currencies overthe yearsbut foundthat couponcontract.I tradednumerous myselfaroundovermorethanonecomplexI wasless whenI wasspreading effectivein keepingon top of anyof them.Youwill seeby my writingsover the yearsthat I havefollowedandtradeda widerangeof marketsand my techniques canbe appliedto mostof them. marketbut whenI couldsee Fora time I hada loveaffairwith the Soybean platformsbecame in electronic the increasinginterest the S&P500after available I madeit my newhome. On a week-to-week basisI often lookto seewhat someof my old favourites I do not strayfromthe aredoingjust out of interest.Butfor tradingpurposes S&Pnowdays. I haveseriously studiedthe habitsof the S&Pplayers;this givesme a clear you makemoneyfrom, it is by going It is not the professionals advantage. thatmakesyoueasymoney. withthemoverthe top of the inexperienced News I getthroughthe Bloomberg TheS&Psuitsme because the information act on news and seruiceis all I need to stay informed.Professionals prominent provides with traders. constant interuiews technical's, Bloomberg the pointis Youcannottradeeffectively unlessyou havecurrentinformation, tradersthinking. newsmayquicklychangethe professional newfundamental

Psychological Aspects




not just the It's no joke believeme and it appliesto all tradingoccupations futuresmarkets. Psychologically whenyoutakea tradein a marketwhereyouareawareof all the outsideinfluences,you take the trade basedon knowledgeof the technicalpositionand your personalbeliefin how the tradershaveacted edgeover in the past.Thisgivesyou a massive undersimilarcircumstances the restof the field. As longas you understand that you havethe edgeyou are morelikelyto handlethe management of the tradea lot betterthanif you wereworkingin thedark. If youcanjust understand thismuchyoucanlift yourtradingresults10fold. STAYFOCUSED: to adjust Marketconditions are alwayschanging and if you are not prepared withthe marketyouwill nevermakea consistent success of trading. You alwaysneedto havea clearopinionon whichdirectionthe marketis mostlikelyto go. If you don'tthenyou are betteroff to standaside. I'll giveyou an idea- I didn'ttradetoday,I did on Tuesdayand hada good day but the way the marketbehavedtowardsthe end of Tuesdaywas very mixed,sotodayI tookthe dayoff. Therehavebeenno neweconomicreports the pasttwo daysand the next are due tomorrow.Thereappearsto be a perception but therehasbeen in the marketthat manystocksare overualued no followthroughto the downside. The3-dayswingis stilldownbut we have just hadtwo insidedaysin a row.The marketis poisedto go one-wayor the otherandI am not surewhichway.Themarketis yet to tell me. Q2 Eorningsreporting seoson{SECONb WEEK) 993.A0 gg1. B9 98S.60

ss?.Bg

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PsychologicalAspects

Todoyis o bOJI doy . /rtrork of indecision

w/23

a?/23


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Therestof the weekwasno differentto the start- down,up,down,up. Weaks Troding Ronge- 25 poinis Motrday

Tuesdcy Wednesdoy Thursdoy

Fridoy

1886.A0 LAEZ.BE sg8.68 g94.AB s96.BS S86.BB 982.AA 9?8.04 s?4-ag 67/a5/ZgtrJ g7/Lfr Hain

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If you v,rereto look ot o vreeklychort you would think nothinghoshoppened.

in the 1015 As I saidsomewhere 3 weeksagothe marketcouldgo sideways - 960rangefor sometime beforewe havea clear-cutoutcometo the Elliott WaveCountI put fonruard backat S2:C4:P38. Sofar my ElliottWaveopinion is intactunless960comesout on a dailyclose. The mostpositivethingI cansayaboutthis marketrightnowis that the 3dayswinghasturnedup again;so anybreakabovethisweekshighandI will bea buyeragain. ThisCHART showsthe 3-dayswingssincethe 12hMarchlow. w3

S&PsBB High Lou Bge

1414.88 788.54 ZZE.38

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Themostlikelyreasonwe havebeenexperiencing of lateis choppyconditions W3 is major that manyanalystsbelievethat the highI havelabelled a bear marketrallyhigh.It maywellbe but untilthe marketcanbreak960I am not in thatcamp,although I mustadmitI ambeginning to wonderrightnow. Psychological Aspects




Tuesday29b July 2003: You know it is becomingincreasingly moredifficultto makeany senseof wherethis marketis headingin the future.The past6 dayswe havebeen stuckin a 27-pointtradingrange.Notwithstanding therehavebeensomevery good PATTERN geometric ratiosI am accustomed to seeing tradesbut the havebeensadlymissing. All I seein thistradingpatternis CONFUSION! tlrhart'; [5U rF1?.08

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The marketseemsto rallyon the flimsiestpieceof newsor rumourandthen whenrealitystrikeshomeby wayof somefactualeconomic newsthe market takesa dive. With the ConsumerConfidenceback down at a four month low and unemployment for Juneon a nineyearhighit makesyoubeginto wonder. Commentators keepinsistingthe USeconomyis in recoverymodebut you can't see anythingreallypositiveto agreewith their forecasts.OK some companyEPSare improvingbut the stocksthat are showingearnings improvements havealreadybeenbidwayup on thisexpectation. Alsosincethe Junet6tr nighthe BONDMARKET has beenon a consistent downtrend.Usuallythere is an acceptedbeliefthat moneymovesbetween the BONDMARKET and the STOCKMARKET. An old beliefis if bondsare goingup the stockmarketwill go downandviceversa. Contrary to popularbeliefthe stockmarkethasbeentotallyindifferent to this accepted beliefin recenttimes. As far as I am concerned beliefslikethisare onlyoldwivestalescirculated In my opinion by brokersto get morebusiness. it is goodto remember this so you don'tfall for the psychological trapsthat thesefalsebeliefswill causeyou.The samegoesfor any othertwo markets that peoplelike to makethe samecomparison.Eachindividualmarket marches to its ownbeatandshouldn'tbeassociated withanother. PsychologicalAspects

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THES&P? WHAT'STHEMESSAGE IN ALLOFTHIS REGARDING Whatdoyoudo whensituations occurlikewe arein now? PSYCHOLOGICALLY YOUCOULD BECOME CONFUSED! andtradeoff the Wellthe onlythingto do is be awareof the newsreleases PATTERN WITHTIGHTSTOPS. SIGNALS was released at Todaywhenthe Consumer Confidence and Unemployment 10:00amon badfiguresthe marketbrokesuppoftand droppedlikea rock. the Hussein hadbeencaptured, Thena rumourstartedin the pit thatSaddam the early rumourturnedout to haveno substance andaftera doubletop with reports. morninghighthe themeof the dayturnedbackto the economic ESEgI-5

Qcharts CSU 1883.BB

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Wednesday30u July 2003: Todaydidn'tclearthe currentpictureup at all. The Fed'sBeigeBookrepoft wasreleased at 2:00pmETandheldnothingin it to inspirethe market. [charts CSU 99?.58

ss6.B0 Some6EOfiIETRY for youl

ss4.5B 9S3.BB ss1.5g sgo.68 988.58 SB?.BB s65.58 984.88

s8z.58 g7/3B,/aEE3 F'1*il

g?/zg

a?/zg

B7/zg

87/38

td?/fi

g7/38

The only thing constructiveabout today was the way the GEOMETRY maybe returningfrom unfoldedin a seriesof 1:1 reversals. Thetechnicians pointing theirsummerholidays. ThePATTERN down. is still forces Alsodailynegativenewsis comingout of IRAQas the USoccupation are continuallycomingunderisolatedattacksby survivingloyalistsof the SaddamHusseinregime.The whole thing is getting boggeddown and causingsomepoliticalunrestas moreand moredeathsof US personalare repofted.No weaponsof massdestruction havebeenfoundand politically this wasthe reasonfor the war, evenif the coalitionforceshaveremoveda dangerous dictatorfromthe worldstage. Briefingdot comrepoftedtoday: 16:20 ET Dow -4.41 at 9200.05 Nasdaq-9.42 at 1721.95 S&P -1.63 at 987.65: [BRIEFING.COMJ How long does it take to get to nowhere? Apparently,six and a half hours- at leastthats how long it took todayas the Dowand the S&P500 spentthe entiretyof the sessionuacillatingright below the unchanged line and closedthe sessionwithslightlosses. Wth regardto today'seconomicnewq the Fed'sBeigeBookwasreleasedat 1400 4 but did not have an effed on the market.. Thereport indiated that the economy"increaseda notch'!over the past coupleof months,but that capibl expendituresremained "weak'. The market is marking time waitingfor an abundanceof economicrepoftsdue to be releasedon Friday. AnotherAchillesheelfor the marketrightnow is the OIL PRICE at just over US$30 a barrel. PsychologicalAspects


t I I I I I I I I I I I I I I I T

t I I


Tradins to WIN Course- One day at a time


Thursday31"tJuly 2003: Positiveeconomicrepoftsor you couldsay more positivethan previous endof month Nevertheless economic databuoyedthe earlymorningsession. profittakingtook its toll on the earliergainsand by the endof the daythe S&Pwasbackto whereit closedyesterday. p-l tntenoal

,orl@--l]

F Atsessions

Price 0.00 Datr6 07Bt/03 Tirne 15:35:00 Open 99125 High 99125 Low 34725 Close 99t25 Csr% 0.0 t tsars37

141?.BB

It's octinglike o ship v.rithoulo rudderl

1013.BE 10gg.BB

NOTHTNg /I,TEAhIs 74?/o Rclrqcatrrent

1965.49 IEBL.bB 9g?. BB sg3. B0 g8s.68 985.68 s81.08 9T?.gg E?/31/?;0/9.3 f'{ain E'l/11

g7/18

WlZL

E7/24

B7/29

B7/3I

Todaywasanothersoliddayfor the daytraders,yet nothingfor the position traders.The buyerscannotholdany gainsand the longerthis goeson the to buy the marketbut weakerthey are becoming. Daytradersare prepared they won't hold it. Psychologically the longer-termplayersare getting progressively It is periodslikethesethat makeyou moreandmorefrustrated. realisethe advantages of takingit onedayat a time. PsychologicalAspects




Fridayl"t August 2003: The manyeconomic repoftsreleased todaywereat besta'tmixedbag"but the unemploymenttrend continuedto increaseeven if the overall unemployment ratediddropdueto manypeopleleavingthe worKorce. spu03l10l - s&P 500

LAST: 97€

HIGH:gg3.OO

v 9.70 CHANGE:

LoW:gr/.oo

8Jll2O03 1010.00 ,1000-o0 s90.00 s80.00 g70.og s60.o0

.E

2g Tradinq Days

Increasing Uncartainiy

s5o'oo s30.o0 e20.00 910.O0

Whichever wayyou lookat it the marketdidnt like it andthe bestdirection for the daytraderswasto sell.The3-dayswinghasturneddownagainbut it pattern.The currentsupportpointis still meansvery littlein this congestion 960 beforeI woulddeclarethe trendhasdefinitelybrokendown.It ceftainly lookslike the marketnow wantsto test the 960 levelbeforeit decidesone wayor the other. Practically speaking the markethasbeentrappedin a tradingrangefor two monthsandall the longer-term investors havebeenmarching time.Overthis pasttwo monthsmassivecapitalinflowsbackinto investmentfunds have suppofted thismarketso it remains to beseenif thisinflowtrendcontinues. Wellright now I wouldnot bet on it andjust proceedone day at a time as this is the bestcourse.Theonlythingbetweenhereanda 50 pointdeclineis 973and960. As I saidyesterday to the chartpatternis lookingmoreandmorevulnerable weakness right now and it wouldrequirea "giantrally"and a breakabove 1015to provideanysustainable strengthin the mediumterm. pointof It is goingto be interesting to seethe finaloutcomefroma technical view as we havebeenworkingalongwith this unfoldingmarketfor some monthsnow. Personally I don'tcarewhatthe outcomeis froma tradingviewpointbecause all I haveto do is tradewhat I seeand not what I maychooseto forecast.I learntthat muchyearsandyearsagowhenthingswouldunfolddifferently to whatI hadat firstimagined. Youhaveto learnto tradeonlywhatyousee. PsychologicalAspects


I I I I I I I


I I I I I I I I I I

t I I I I

t I I I I



The past 4 days: Tuasdoy 1886.BB

w--edry$gy-."...... --......,-..... ..Il':ri:y*-......-......-.1-::i*y-.

LBig3.AE 1600.BB

ss?.04 ss4.a0 ssl. sB sB8.89 s85. A6 sBz.g6 9?9.BB g8,/BL/z:B/8.3 Fia i lr

Monday4s August 2003: TheMarketcameout of the chutetodayon a downerandevenwith a good factoryordersrepoftat 10:00amdid notstopfallinguntil10:30am. ESA3U-5

Qcharts ESU 1888.BB

1004

1804.BB 1804.B0

gs6.Bs 9gz.Ba 988.88 s84.89 gga. BB 9?6. Bg g7?.EA 968.BB g8,/a,4/zga3

g?aa

Butby the endof the day it hadrecovered to closeslightlyabovethe Friday all closeaftertestingthe 50 retracement of the past3 daysrange.Basically you can say until we get more evidenceis that we just got backto the BALANCE POINTof the recentmarketactivity.But tomorrowwill offer some moreopportunity I amsure. - Dayto Daychecksif youwant I havewrittenmoreabouttodayin S3:C1:P7 to makereference to it. PsychologicalAspects


Tradinsto WIN Course- One day at a time


Tuesday5s August 2003: -10:so nowI amgoingto review I havecovered the daysactivityin S3:C1:P9 the big pictureas todaythe 960 low I havebeenhingingthe bullargument on cameout andthe futuresclosedon its lowat 959.4,a bearish sign.

lst l$onih Futuras

s&P504 date 83961? hi 1B14.BB

DoublaTop

I I I I I

t GgcleTrader

It is iimas lilte now where you hoveto beliave in whot you scc and not rnhat you ar€ hopingfor...........--..

llain

Mythoughtsare:The bucketis leakingandwe couldexpectit to get worse. The S&Pmarkethas not displayeda lot of strengthlately(typicalWave4 behaviour). Butif the currentdeclinecontinues therearea lot of peopleready to bailoutas lastyearis stillveryfreshin theirminds. IEZA.Eg 1008.BE 998. BB 9S4.00

1014,75 6O rrinutE bors from iha JunE 17fh High DoubleTop AAAJOR WEAKNESS

.'rlilllh

l l ': 1h

in patiern

'l t W :

s?z.gg 1:1fails -:>>

960. B0 s48. BB

Next 1:1 .

936. Bg

ES03U-68

945,75

f _ _ _ i l _ _ _ , , , , _ r r r r r { r l i l r l i l | gE/13 g7/93 B?/tE A?/6 EB/ffi

At timeslikenowit is worthrecalling the doubletop in Marchof 2002as the conditions are vaguelysimilarin termsof investorexpectation. Moneyhas recentlycomeintothe marketat an unprecedented paceasthe earlystaters havebecomecomfoftable thatthe worstis over.Wellwhoknows?I don'tbut the signsaresayingto me- don'tbe an investorrightnow! Psychological Aspects

l0


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ANOTHERPROBLEMON THE HORIZON:

plansarefindingdifficultymeetingthe retirement Companies with self-funded currentpaymentcommitments from fund profitsas the interestratesare at income suchlowlevelsandthe streamintotheirfundsareat verylowlevels. Theirtraditionalassetsto backtheir fundshavelost billionsand billionsof dollarsoverthe pastfew yearsandrightnowtheyareshowinglittlehopeof recovery. It is saidthat companies withtheseplanswill haveto dip intotheiroperating profitsto top up the outgoings on the currentcommitments. Anotherthing about the incomestream of the retired sectionof the communityis that they no longerenjoythe benefitsof the high interest will Thisphenomenon regimeandtheirdisposable incomes arefallingrapidly. flowthroughto the consumer demandsideof the marketandstagnatesales andbusiness incomes fuftherin the future. equationleadsoneto with the increasing Thisfactorincluded unemployment nowcouldbe with conditions we are experiencing believethat the economic has run up an unprecedented for The us a Iongtimeto come. USGovernment habitthey deficitthis time aroundand if they do not curbthe overspending policies of today. havefallenintothe futurewill be mortgaged by the stimulus Futuregenerations will have difficultieswhen it comesto socialseruices entitlements on the currentpath. that thingscan only You don't needto be a Rhodesscholarto understand people along. improveif havemoneyto spendto spurbusiness Frommy part all I am spendingmoneyon right now is livingand business expenses, and indulgences such as boozeand cigarettes.I enteftainment for it if andI will be compensated don'tneedto travelunlessit is on business incomebut I have I go anywhere. I haveno debtandI havea considerable no reasonto go out andspendmoneyfor no reason. Theremustbe plentyof peoplein my positionbutthe majorityof peoplewho want to spend do so by borrowing;the private debt level is at an highlevel.Sowheredo we go next? unprecedented Notto far fromhomeI suggest. Withterroristthreatsall overthe worldthere your neckout if youlivein a safeenvironment. is no reasonto stick Anotherthing the occupation of Iraq is provingto becomeanotherpolitical nightmare as it dragsout andwith the priceof oil on the riseit addsanother negative economy. to costof an expanding Anyrruay theseare onlysomeof the thingswe shouldgivesomethoughtto whenwe thinkaboutwherethe marketcanfindanyextrabuyingimpetus. Psychological Aspects

tl




It seemsto methatthe stockmarketis runningon emptythe waythe indices havebehaved overthe pastmonth. Stillit paysto be optimistic. Therealestatemarketshouldbe slowingdownby nowandlet'sfaceit, it has beenoverextendedmorethanI haveeverwitnessedin the past.Evenif your apparentwealthhas increasedin valuewith the explosionin real estate valuesyou areno betteroff realistically asyou havenowhereto go exceptto borrowagainstyour assetand plonkthe moneyinto someother form of investment. who The only onesgainingare the governmentdepaftments haveraisedthe landtaxesbecause of it. I bet halfthe reasonthe stockshave beenbid up so stronglyin the past4 monthsis throughborrowingagainst real estateand investingthe moneyin the market.Now if the alternative investments dont peformthenit is cuftainsfor thosepunters. If you reallywantto seethe stateof the nationyoushouldgo visita CASINO, wellyou don'treallyneedto just havea lookat howthe dailyvolumeon the E-Minihasgrownin the pasttwo years.Thegamblers areall movingontoour your tuf thesedaysandit is asclearasthe noseon face. Thetrendnowin investment circlesis to learnhowto sellshort. I am alreadyan expeftat it so wheredo the peoplecomefromto buyadvice from me. I can see it in the salesof the booksI havewrittenoverthe past two yearsor so. The worldis an amazingplacethe way it goesfrom brickwallto brickwall andthenmakesmoreheadway. Whatreallyamazesme is howpeoplefind me as I don'tadvertise exceptfor my web site and overthe pastcoupleof yearsI am sendingout booK to placesI haveneverevenheardof. Oncethe majorityof my bookswent to Australia,USA,HongKongand Singapore whichthey still do, but nowthere are increasing numbersgoingto Sweden,Germany,Poland,Greece,Spain, Ireland,Turkey,IndiaandevenRussia. Italy,SwiEerland, UnitedKingdom, WorldWide Neveftheless the pointI am makingis that thereis an increasing you you you want to take BUY if canSELLbefore trendto tradefutureswhere advantage of a fallingmarket. Peoplewantto learnhowto tradePAPER andyou haveto considerif that is PRODUCilVE? Maybeit doesnot matterso muchas the oneswho canlearn will onlybe a smallpercentage of the worldmarketsin any to do it effectively to be for moreand morepeopleto takematters case.Butthe trendappears who intotheirown handsratherthanleaveit in the handsof the institutions years. havebeenon a summerholidayallthese


t2



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the Wellyou mightwonderwhy I persistin teachingpeopleto understand players players with. identiff thatthe smaft markets, the andthe mechanics It's reallyprettysimple! themto WIN. I liketo seepeopleWINandtheypaymeverywellfor teaching It's reallya WIN-WINsituationin my mind. but Youknowoverthe yearsI havewrittenmanybookson tradinganalysis I havealwaysfelt I wouldlike as I havegottencloserandcloserto retirement to leavethe very best on the tablethat evena high schoolleavercould understand andfollow. - I neverhavebeen.I havealwaysbeen I am not partof the establishment personsuitsmy lifestyleas I don'thave my ownman.Beingan independent to answerto anyonemostof the time. reminded of the futilityof the I am continually As moreandmoretime passes systemas it standstoday. The education systemhaschangedso muchsinceI wasa kid at school.In my daysif the teacherthoughtyou wereout of orderyou stoodin lineand took a belting.Todaythe kidsare not allowedto be hit for any reasonand is to saythe leasthopeless astheydont havea cluewhatthe theirdiscipline real worldis all aboutuntil they haveto get out and suppottthemselves. Theyonlylearnwhentheyhaveto getout andfendfor themselves. The systemtodayteachesthemto cheatas besttheycanand not worklike the olddaystaughtyou.The moderndaysystemis notteachingpeopleto be boundby their word anymore.The new deal today is to get awaywith It's a realdilemmawhenyou have whateveryou canandhideyourmistakes. in companies taking in universitygraduatesand makingthem specialise foxholes andnot knowwhateverelsegoeson outsideof them. In normalbusiness todaya persongoesout andgetsa job and is taughtto do onespecificthingwithoutknowingthe effectof theirjob on the scaleof the wholeoperation.It's a patheticsituationin my mindandit extendsto all thingstodayin regularbusiness. Youknowwhenyou go to the supermarkettodaythe kidson the registers can'tevendo mentalarithmetic,they just swipethe bar codeswith their machines andwhenthe totalcomesup they punchin how muchmoneyyou gavethemandthe machine tellsthemwhatchangeto giveyou back. Butthis is the newera andwe just haveto workwith it. I thinkthe longerit goeson the greaterthe advantage thereis to the personwho canbecomea of masterof all the facetsof the realworld.All it takesis an understanding youaredealingwith. the competition PsychologicalAspects

13

Section4:Chapter-I



I have I mightappearto be veeringoff trackat this pointbut psychologically changein accepted a perception that we havebeengoingthrougha massive valuesthroughoutthe past 20 years.The internethas made a major is as this sourceof information is transacted to the way business difference available to everyonein the safetyof theirown home.Thingshappenmuch fasterasa resultof it. IN THEMARKETS: You know that in the daily marketactivitywe have lots of optionsand of success. oppoftunities to taketradesthat havea highprobability I am not surewho believesme andwho doesn'twhenI declare Sometimes rightat the timethat the marketis a sellor a buy.I do it liveon my training sitetime in andtime out. Butto my mindit seemsto me it is onlywofththe valuewhenthe markethasrunits courseandmy calleitherwonor education lost. AnythingI say in the heatof the marketcouldpossiblybe seenas purelya guess.But I shouldassureyou it is not a guesson my paft, my callsare inspired froma wellfoundedbeliefthat I havethe oddsin my favour.I know (prettywell mostof the time) what the otherplayerswill do underceftain andI go for it. technical situations whenthey seem to act on technicalsituations Psychologically I am prepared good tradershave that all trading so clearto me. This is the one aspectof learnt.If youseeit andit look realgo for it. If youarein doubtleaveit go. myselfoverandoveragainas I writethis manualbut I am probably repeating canonlyhelpin the long Repetition it is importantthat you get the message. run. to trade Overthe yearsI haveseenmanyotherpeopletry andteachstudents just can think they don't I and the resultshavebeenfar from satisfactory. traderwho to anyoneother than anotherprofessional explainthemselves whattheyaretalkingabout. to understand alreadyhasthe experience in manydifferentvaried WhatI amtryingto do is provideenoughinformation place you may pick it up point in one ways that even if you miss the somewhere elsein thistext. whenI first studiedGann& Elliottworkyearsago,way Youknowsomething, backin the early80's.I hadto readand re-readmanythingsoverandover again,pageby page,to get their ideasinto my mindandtry to understand whattheseguyswereon about.It wasn'texactlysimpleby anymeans.


t4


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Wednesday6thAugust 2003: Howthingscanchangein oneday! the marketopened fromyesterday Evenwith all the bearishsignalsapparent going to fall overbut anddisplayed somestrength.At first I thoughtit was yesterdays points correction 1:1 with a whenthe impliedresistance at 8 up on cameout it wasobviousthe markethada fair bit moreupside. 9S0.BA

Wadnesday6th August 2OO3:

s87. BB

Today storted off with me looking to sall but as foon ali 966.25 come out I reversad inio a buyar.

984. BA s81. O0 978.84 9?5.04 S?Z.EE 969.80 966.BB

966.?5 ->>

983.80 968.99 EE/816/?0/8'3 !f61.?5

g6e.Z5

959.25

961.00

gB/W

andas it went into The highfor the dayterminated on the 61.8retracement is straightout of the the reversalpointit unfoldedas a 1:1, this behaviour lowandback text book.ThemarkethasnowclosedbackdownnearMondays below50o/o of the daysrange. after The one thing that standsout to me abouttoday is the resilience technical breaking the 960 Iow.In my mindthereshouldhavebeenmassive jump sellingfromthe todaybut it didn'tappear. s&P58S date Glg617 hi 1aL4.8g

CgcleTrader

GEOIIIIETRIClcvels The nexi AITAJOR thot could oet os orpport in a fur{fier

llain


Section4:Chapter- 1



Thursday7s August 2003: INSIDEDAY Thb Weeks Cirl+ndrrr G? 5.7% 3.5% Aug07 08:30Productivity-Frel Aug07 08:30InilialClaims B8/il2390K 40CIK Aug07 10:80Wholesale Jun 0.0% 0.2% lnventories Aug07 15:00Consumer CreditJun -$0.48$5.58

3g5K u.0%

2.1o/o1.9% 393K 3BBK -0.4%-0.3%

$6.08

$ 8 . 1 8$ 7 . 3 8

4.0o/o

The marketbeganthe day on a weakernotefor the first 15 minutesand foundsupporton a 78.6retracement of the previousimpoftantrange.Bythe endof the dayit hadworkeditswayallthe waybackto a doubletop. s?6.Eg g?4.68

s?z.ss S?8.BB s68.BB 966.00 964.68 962.Ba s66. BA 9/8,/97/ZAB3 88/95

Ag:38

:165.75

S6?.64

964.25

SEs.BE

Bi8,/97

goodeconomicrepoftsthe Withthe absenceof any badnewsandreasonably marketaimlessly trendedup throughout the day.Thepatternfor the daywas mixedto say the leastbut at this point in time the markethas remained abovethe 960breakfromtwo daysback. It lookslikeeachrallyup as.itunfoldedhadthe daytraderssellingintoit. The lackof followthroughon eachdeclineindicates therewasverylittleconcefted conviction by the bears.Todayalsowasan insidedaywith a 13 pointrange andthe time up fromthe low is two daysnowwith a rangeof L7 points,not either. an inspiring example of buyingconviction Thefactswe havegoingintoFridayarethese: 1 . The3 daytrendis downandto turn up the markethasto tradeabove 982andeffectively 985to lookconvincing. fromthe 958.25 2 . Todayis onlythe seconddaywe havebeencorrecting lowso it is stilldebatable if the lowis impoftantin the biggerpicture. 3 . Thecurrentmarketpositionis on a doubletop witha 61.8retracement labelattachedto it. Psychological Aspects

Section4;Chapter- 1

t t I I I I

t I I I I I I I

t I I I

t I




a the 975.25doubletop it still hasto negotiate 4. If the marketbre.aks

at 981, largerdegree38.2a littlehigherandthena 1:1 at 979a 50o/o 985. high at a 3 dayhighat 982andthe sruing levelsin the next10 resistance of technical 5 . Buyersfacean abundance pointsto the highside.Thecleargroundis onlyabove985.

If the marketcanget above985I wouldhaveto takethe viewthatthe lowat negative 958.25has becomemajorsupport.If not then I am still basically future.The wholebasisfor my outlookis basedpurely aboutthe immediate go throughthesesameexercises nothingmore.I religiously on probabilities prepare. The marketwill tell us soonenoughwhatis onedayat a time and goingto happen. geometry At today'shigh and the BD doubletop we had someinteresting approach. basismyX-ABCD whichis worthrecording Current Bange 13.25 prior ranges cIl-EC 1. BB0 CII-RB B. ?86 8.508 clt-xft Beuerse Eross RIFBC L.ZIZ Insiile Gross CII-RII B. ?88 0utside Eross BI}-ffI] fi, EBB Ilouble Gross HII-XC B.73S Fetrace 2 9.57? cFxu AII-XR E, 836

If fhcy orc Aoingto noke on effort to ssll this market down this is tho plocefo do it. X

985

gg./8?lZAE3 H ai n 8?/39

thingsI can seeat this stagefor the 958.25lowto be The mostfavourable buttheyareonlylesserdegree. imporLant aresometimingelements Friday8s August 2003: Todaythe marketopenedaboveyesterday'shigh on reportsof betterthan normalretailssales,the highfor the daywas980 only 5 pointshigherthan the previous close. The whole days trading range was 7J5 points as the market rocked backwards andforwardsall day,finallyclosingat 978. Goinginto Mondaywe have980 as the 3-dayswinghighwhichwasalsoa major38.2of allthe declinedownfromthe doubletop at L4t4.75. on the marketpositionstillopen. Theactiontodayleavesmy conclusion PsychologicalAspects



[c] BryceGitnore 2004

Theonlythingthat couldbe importantif the marketis to reversebackdown of thetotal fromhereis the factthattoday'shighmarkeda 38.2retracement declinefrom the majordoubletop at t0t4.75. Normallythis wouldbe an importantgeometricretracementlevel; but the way the whole pattern whatthe hellis goingon evolvedfrom the doubletop leavesme wondering here. 1s17.68

X

to14,7n

xs63u-68

1411.O0 1485.A0 sgg. BB 9S3.00 sE?.Eg 981.B0 s?5.09 s6g.06 sffi.aa

Cb = 70.7 of AB

a'J/0i5,/z;B,0'3 E7/89

Bz/LE

g7/ZZ

g?/?fr

I I I I I I I I

t

Eg/94

Thepatternis full of overlaps fromoneendof the chartto the otherandthe on the way down currentleg up hasoverbalanced the prior20.25correction into the recentlow.Thishasthe hint of higherpricesbeingpossibleso you canseemydilemma. hazyto me I just step At timeslike thesewhenthingsbecometechnically picture clear.I figurethat if becomes backandleavethe marketalonetill the I can'tcomeup witha reasonably no oneelseis goingtoo be able conclusion to either. In anycaseI am off fishingfor 4 or 5 daysfromtodayso maybewhenI get backI will havea clearersituation to workwith. s1.BA s?s. o8 s??. B0 975.99 s?3.48

I I I I I I I

9?1.44 s6s.9s 96?.B0 s5.09 963.SB il

W$B/Zw,3 EWBE


ffilg?

0iE/A?

aa/6a

ffilffi

E8,/tr8


I I I




Monday, Tuesday 11th/12th August 2003: Qcharts ESU

ESA3U-18

Ilisplag Bars

I$onduy

Tuasday

za4

PNICE,.. RRNGE 32.25 CHffHGE 3.378 SQN9 degrees 93

I didn'tmissmuchby takingsomedaysoff but the sell at 985 at the old swinghighwasa legitimate sellingpointand if you didn'tget that thenthe breakbackthrough980 wasthe nextcaboff the rank.TuesdaylooK a bit day. moredifficultbutthe worst-case wasa break-even scenario is nowthe The only resistance tomorrowof any majortechnicalimpoftance (993)from 1014.75to 958.25,so goinginto Wednesday 61.8 retracement this hasto be my mainfocus.If this marketattractssellingat this levelI will sell,if it breaKthroughI willbuyit.

Qcharts 8SU 1AZ3.AA

ES93U-58

101?.B0 1S11.BS 1Ba5.aE ggg.B6 gs3.E0 S8?.BB 981.BB s?5. g0 s69.AB

still! Business Ifuarr.y

s53.86 BB/g5ragtrt

g6/13

w/98

g8/lz

NowI am goingto catchup on the newsand see if the chaft lookslike it makessomesenseto me.Thetrendis up againby hookor by crook, PsychologicalAspects

T9

Section4:Chapter-1



BeforeI go on to Wednesday I shouldshow you why 985 was a solid resistance levelfor sellerson Monday. g8g. gB

Prior SwingHigh985

985. BB g81.Bg

;26;:5-

RevarseCross 2.000:1.OOO

S??.BB g?3. BB gEg.BB 965. BB 961. BB

Wednesday13s August 2OO3: Easymoneytodayfor thosein the know!Themarketopenedon it's highand madethe 61.8(993)highfor the dayin the first2 minutesof trading. Thisactionprovideda HOOKTHEOPENSELLtrade.Whenever the market youcantakethe tradewithtotalrisk openson a technical levelof impoftance controlas the stoplossfor thistradeonlyhadto be at 993.5.Thefirst burst of selfingtook the marketbackto 987.25beforethe 10:00amBusiness Inventories repoftwas releasedand then the marketmade986 on a spike volumeburstbeforesomeconsolidation couldnot set in. The consolidation improveon a 50o/orecoveryand set up anotherSELLfor a 1:1 targetdown onceagain.The first 2 hoursof the daywerehighlypredictable if you knew the implications of the technical signals. 9S4.50

993 816 61.8 9i3lam

gs3. BB 9S1.5S

.,,*n[ud

999.9S

r

988.58 SS?.BB 985.59 984.04

E:E3IF1

982.50 ffi,/LS.ZBSS

_ g8/lz


lii l Bg:31

r Sn.sS

r

l r Sxl.BA

r 9S2.0O

r

r rlrlill g!U.ZS ffi/t3






ESB3U-64

Ocharts ESU

razS.aa taLT.sg

Wadnesdoy 13th August 2OO3

1014.75

fill.8A

1004

ffiBs.BA

Jr-lstas expected rigilrt out of thc text book

gsg. B0

ss3.ga s87.96 981. BA 9?5. BB 969. SB 963.6S EE/9,5/ZgB3

after Bythe endof the daythe retreatfromthe morninghighwascontained of the total with a 38.2 retracement a 13.25pointdeclinewhichcoincided would (a level everyone suppoft moveup from 958.25 no-brainer technical havebeentargeting).

51.8oftotol

993.06 98!t.EB

t0t4J5 / 958.?5

3 Day SraingUP

ES93U-1S

985.06 981.68 '

s??.aa s?3.BA

972.75

3 day low

s6s.00 s6s.BB s61.86

9_79.75 supPorT

IlllOB'sare very clcar os we movs along intoThursday

-13,25

E8,/13/Zgg3

once As we headintoThursdaywe haveto go throughall our preparations again.The differencetodaythoughis I needto checkthe time ryclesfor todayas the 61.8 of higherdegreecouldbe very impoftantin the larger degree. higher. to the marketcontinuing Justthe samethreethingsstillgivecredence the 30.5rallyof 1. 993 highis 34.75up from958.25andoverbalances similardegree. 2. Supporttodaywason a 1:1anda 38.2retracement. 3. The3 Dayswingis stillUP. Psychological Aspects

2l




of the 34.75pointrangeup The3 day low is at 972.75andbeyond50o/o fromthe 958.25low. The earlywarningsignof a continuance downhingeson the 6.25point interlude rallytoday.If the currentupswingcannotbreacha 1:1 of that (986)andthe smaller degree50thenthe lesserdegreetrendis down.

994.06

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Youalwaysneedto understand that I dont carewhat the marketdoes tomorrowas I am prepared onewayor the otherto readthe signsandact levels. on themat the appropriate I only play the probabilities day by day. As each day passesnew probabilities unfoldandthat is whatI needto keepabreastof. TIME ?? ETBONACCI rgL?.89 1S11.Bg 1Bg5.0B 99S. SB !H3.90

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the factthat 8/13 = 0.618, 8/5 = 1.618soft of leavesroomto consider sometradersusingthis technicalaspectcouldthinkthe time of this rally hasexpired.Whoknowsjust yet anyway- betterto be prepared. PsychologicalAspects


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Thursday14tr August 2O03: rangetestedthe 1:1and Themarketopenedjust belowthe 50 of yesterdays lookedlikeit wasgoingto fall away.I tooka sellon the declinebackdownto low.Thiswasa goodtradeas I closedout just test the 38.2at yesterdays beforethe testof the 38.2andthentherewasa falsebreakreversal. E503U-5

61.8= 993

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If fhis lineof support onthe 50 lineholds there is o potentiolto remoinup butthe marketneedsto

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The problemwith falsebreaksof this natureis that you canneverbe sureif the falsebreakis a signof moreweakness to comeor a reversalthat just failedto holdthe levelit shouldhave.It doesnot becomeobviousuntilyou haveretracedat least50o/oof the prior swing.I madeseveralothertrades bothon buysideandsellsideduringthe nexthourwhichresultedin a small lossjust on transaction costs.I felt I wasgettingout of stepwith the market whenit did not accelerate afterit brokebackthroughthe openingprice;so I afterthat it was stoppedtradingfor the day.Lookingbackat whathappened a wisemoveon my paft as the markettradedin a S-pointrangefor the rest of the day. The line of supportthroughoutthe afternoonwhere you see the triple for Friday's session. bottomsis at 986.5so this is our ls pointof reference the resistance and high low are and today's 979.25 Outsideof that the 993 The50o/o levelof the 2-dayrangeliesat 986. supportMOB's. The Not muchto work with in my opinionuntil the directionis confirmed. is goingto comeif the marketwereto breakup bettertradingopportunity throughthe 993levelasthat is whereallthe shoftstopswill besitting. NEWSFI-ASH: afterthe closethe marketwashit by PANICwhena massive powerfailurestruckthe easterncoastof the USAencompassing NewYork and surrounding areasall the way downfrom Canada.The first thoughts werea terroristattackbutthat hasnowbeendismissed. PsychologicalAspects

Section4:Chapter-I



/lAqjor pow€r shuidovlnson ihe Eqstern Seoboordofter the norket closadfhe doy sessiontodoy - ot firsi they thoughr is wos tct'rorists

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Anotherimpoftantlessonin the life of a traderas panicstrikesthe fragile stateof the market. of the marketas nowit is unsure Thiscomplicates the currentcomplexion for the Fridaydaysession. whetherbrokerswill befullyoperational Latestnewsis that a lighteningstrikeat a powerstationin NiagraFalls tookoutthe powergrid. in the confusion, the marketdivedand hassince Lookat what happened why you cansleep bouncedback.At timesliketheseyou canappreciate you don'thaveto worryaboutwhat easywhenyou area daytraderand goeson whenyou are not in the market.Beinteresting to seewherethe all tradingdecisions Globexis Fridaymorning.As far as I am concerned for now. areon hold

lrternational Edition I lletscape.com

Lights coming back on across blackoutarea . Power slowly comingback afier massive blackout;rnetroNew York could have power by 1 a.fi. . Officials not sure what caused outsge across 9,300 square rniles trom Detroitto New York to Canada . Canadianofficials say fire at a power plant in NiagarsFalls,New York, is suspecled cause . New York Gov. Patakisays half of state affected

lhe Empire Stde &rildng remaire dark * buildir€s are lit bybackup gensdors.

Aspects Psychological

oths

. Video: * New Yorkers react I Mavor: Normalbv mornino . Galler iesr Suotes I lmasesI Blackout oreo: Map I Elgllg . Conlrolledchaos as liqhts oo out in New York

24






FALSEBREAKS: I'll just put this in hereuntil I decidewhereit needsto go in the contextof the coursebut it mayjust end up stayingherein the end, psychologically thesesituations aredifficultto dealwith mostof the time. Thefirstthingwe needto defineis whatconstitutes a falsebreak? 1. Is it just a breakof a priorlowor highor doubletop or bottomby 1 to 3 ticks? 2. Is it a breakof a mathematical levelof extremeimportance, saya 50, 61.8or 38.2 by 1 to 3 ticks? 3. How far is far enoughto considera legitimatebreakand then a reversalnotto be considered a falsebreak? 4. When is a false breaka failed signalthat makesit an important reversal signal? Allthesequestions needto be answered in the contextof the currentmarket action. In consideration of the guidelines we needa planof howto actwhenwe see whatwe consider to bea falsebreakout. .A

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To my minda falsebreakoutcannotoccurwhilstthe priceis still strivingto geometric reacha legitimate targetas that targetwasin my opinionalways achievable. But shouldthe targethavebeenpreviously achievedand then the market makesthe "FALSEBREAK"and reversesalmost instantaneously it has exceeded the geometric targetandFAILED. Sothe questionis howdo we dealwith situations likethis as theycanoccur whenwe leastexpectthemto! Psychological Aspects




Let's staft with points #L and #22 Is it just a breakof a priorlow or highor doubletop or bottomby 1 to 3 ticks? In the strictsenseanybreachof a priorlowor highby 1 to 3 ticksthat does not proceedcouldbe seenas a false breakoutthat did not succeed. The reasonthey dont succeedis becausethere is no followthroughbuyingor sellingpoweras the marketteststhe new level.This situationshouldbe viewedas a sign!Themarketis talkingbackto youat the timeandif youare youcantakeadvantage listening of the situation. But more importantlyif a false break occursat a level that would be recognised levelof resistance by manyas an impoftantgeometric or suppoft, saya 50 levelor 38.2or evena 61.8and breaksit by 3 tickswith no follow throughyou shouldimmediately view it as a FAILEDSIGNALand cut any breakout tradeimmediately andlookto tradebackthe otherwayat the next signthe markethasreversed. If you ignorethesesignsyou couldbe missing a lot of low riskentryopportunities. Youdon'thaveto givethemmorethan you oneshotbecause theyshouldbe definitiveif theyareworkingotherwise just takea smalllossandstandaside. Therearenumerous instances whereyouwill encounter thesesituations on a dayto daybasisbutthe betteronesarewhenthe markethasbeenmovingin reasonable ranges(larger:say 8 pointsor more)priorto their occurrence. Falsebreaksin a 5 pointrangearenotwofththe botherbut if youget a false breakreversal whentheyoccuraftera 10 or 15 pointrangeor greaterthey havea lot moreriskrewardfor youto trade. YearsagowhenI wasstudyingthe GanncoursematerialGannusedto refer to the phenomena he called"lostmotion".Thatwaswherethe markettraded pricelevelthat technicians up or downslightlyaboveor belowthe geometric like us wouldtarget.It did not seemto botherhim that the marketcould breachlevelsslightlybut it took me a long time to cometo gripswith it personally. But as life goeson andyou becomemoremarketsawy you will seethat you haveto dealwith thesesituationsall the time.Theyprobably occurbecause the marketis gettinghit with a lot of orders"at market"andit driesupthe bidsor offerson the priceexactgeometric ticklevel. Theoddsof a falsebreakat an impoftantgeometric levelcouldbe as highas you 50/50but they shouldneverexceed3 ticks.If takethis possibility into accountyouareonlyriskingat maximum5-6ticksby tradingfor a reversalin trend.Whenthesetradesdo workyou canoftenget a runnerbackthe other wayfor a muchlargerreturnthanwhatyourIosses will everaddup to. Whenthe markettestsknownimportantgeometriclevelswhereit hasthe potentialto reversedirectionremembera "failed signalis the strongest signal".This meansif the breakoutfailsthe trendis goingto reversefor at periodandmoneycanbe made. leasta temporary Psychological Aspects



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Points#3 and 4#: breakandthen a legitimate #3: Howfar of a breakis far enoughto consider a reversal notto be considered a falsebreak: In my mindonceboththe ES& the SPbreaka levelby morethan1 full point redundant levelbecomes to myfutureanalysis. thatgeometric #4: Whenis a falsebreaka failedsignalthat makesit an impoftantreversal signal?Usually whenit falsebreakson a spikevolumeandis followedby a 5minutereversal bar. backthroughthe originalbreakpointby morethan Oncethe marketreverses signal. 1 full pointon a reversal barpatternit is givingyoua reversal to confirmthe situation. will continue EachS-minute barfollowingthe reversal Friday15h August 2003: Hereis a goodexampleof what I havebeentalkingabout.Righton the 10:00am5 minutebarwith no repoftsreleased at the timethe marketbroke yesterday from by 1 point,touchedthe 50% downthroughthe triplebottom retracement on a 1:1andrebounded backthe otherway. Fridoy 15fh '4ugust2O03

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The low was 985.5 and one of my novicestudentsmanagedto SELLat 985.75probablynot beingawareof the 50 there at the time. He sayshe His mistakewas closedout at 987.5for a lossof 3.5 pointson 2 contracts. not reversing longwhenthe marketcamebackinsidethe break,if he did he wouldhavegot hislossbackandmademoney. A seasoned traderwouldhaveknownthe riskof the 50 and1:1 beforetaking thetradeandboughtwitha Stop& Reverse orderbelowthe 50 level; Psychological Aspects




1:1 with the alternate The 50o/oretracement of any rangeand a coinciding wavearethe basictoolsI havebeenteachingmy studentsto be awareof for years.I wouldneverhavesoldthat breakif I hadseenall the impliedsuppoft belowit. Whenyou considerthe situationin retrospect the buy signalwasa stronger signalthanthe choiceto sellthe breakin the first placeandalsoa buyright at the 50 wasevenwarrantedor the sellshouldonly havebeenmadeon a breakofthe 50 andnot before. In any caseI havediscussed the matterwith him on the phoneandhe has realisedthat he jumpedthe gun by only lookingat the triplebottomas his signto takethe sell.My adviceto him wasto alwaysthinkonestepahead. Askyourselfthe questionbeforetakingthe trade,"Whatwill I do nextif my tradedoesnot workout?Andthentry to workout all the thingsthat cango wrongbeforehand". As for the day I was not tradingbecauseof the POWER OUTMGEon the EasternSeaboard. Lookingbackoverthe day (afterthe close)my datafeed showsan outrageor systemclosurefor 45 minutes.Everything shouldbe backto normalby Monday. The closetodayat 990.75hasthe marketpoisedfor an assaulton the 993 (61.8high).Oneway or the otherthereis a tradingopportunityloomingas we go into nextweek. THISWEEKEND I HAVEBEENWRITING- the WEEKTO WEEKchapter whichexplains the largerdegreepictureof wherethe marketpositionappears to be.SeeS3:C2:.PL4 gg!t.86

6oing inlo the ltlondoy doy sessionthe overnighl 6lobax hod olreody brokcn through lhc 993 resistoncelevel:

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Priorto Monday's day sessionopeningGlobexhadtradedabove993 - the signsfor Monday aresignalling dayat the veryleast. a shortcovering PsychologicalAspects


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Qcharts ESU 1401.04 9S?.9S s93. BB 98s.68 g85.AA s81.08 s77.98 g73.BA

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The marketopened993.5 retestedthe 993 by 3 ticks to staft with then signalled a HOOKbuy backthroughthe opening.Thisadvancedidnt attract the softof volumeI wouldhaveexpected andwhenit wasn'tgoinganywhere I bailedthe positionfor a scratchtrade.Thesecondtest of the 993 breakout madeit backto 992 and couldnt go downany further.On the breakup throughthe 993 the volumestaftedto rise a little and there were good indications that it wouldstayabovethe 993thistime.I didn'thangaroundto findout asthe breakouthadbeentoo sloppyfor my liking.It looked-like short you from 2 minute coveringratherthan new buyingto me. As can see the chaftthe wholedaywasa grind. The reasonI didnt worryaboutit wasthe limitedpotentialbetween995and my 999target.Untilthis marketcanbreakabove1015(if it can)the buyside nowis goingto befairlyfragile. PsychologicalAspects

29



[c] BryceGilmore2004 1015

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t The more news I watchthere is a growingbullishsentimenton the US markets,I tend to worry that they are talkingit up! Especially when the marketis struggling alonglikea swimmerwitha rocktiedaroundits neck. Factsarethe USmoneymarketsneedto attracta billionanda halfUS$a day you lookthe European fromoutsideof the countryand everywhere markets seemto be stillin recession. Wellso it is, what'sit matteranywayif I just go alongone day at a time settingmy guidelines andmakingsureI dont overlook anything. I knowone going give thing into tomorrowandthat is I am goingto a test of 1004 a SELLshotwitha tightstoploss anda breakbackthrough993getsit aswell. PsychologicalAspects


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Tuesday19s August 2003: ESB3U_5 1885.BB

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Theysoldit andthenthey boughtit. Afterthe strongfinishtodayall you can Theold highat sayis this rallyis resilientandkeepsmakingsomeheadway. 1004is underattackonceagain. ESB3U-15

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all the way up to 1015if overhead Thereis a bunchof technicalresistances rightnowon the 1004highdoescomeout.The marketis clearlyoverbought grinding now until 1015 right and up the dailychart.IMO this marketis down.The timingI had comesout it is susceptible to a sizableretracement sothe plotthickens. a reversal for yesterday hasn'tlookedlikeit hassignalled patternsincethe 17thJunehighneedsto be resolved Thiswholeconsolidation beforethe picturefinally clearsitself up. I wonder how all the other professional arefindingthe goingrightnow? tradersandanalysts


31




with L0t4.75to 958.25so BTW - 1004hasa 0.809retracement relationship it holdssomerelevance in termsof ElliottWave.Afterthata 1:1withthe rally backto the doubletop July1-14comesout at 1012.5just belowthe existing doubletop. Wednesday20h August 2003: situotion is nov.r11.5points - Avary compressed 3 DAy R./41'l6E 1Ba3.aB 1081.50 IBBB.OA 9s8.56 99?.BA

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Todaycameandwent prettymuchas it stafted.Thereweretradestodaybut the opportunities werelimited.I managed a gainof 6.75grosspointson 6 I tradesin the 7.5 pointrange,in fact the rangeI was in was lessbecause didn'tbeginuntilthe doubletop. I couldhavedoneslightlybetterbut I made a mistakeandmisseda shorttradein the lasthour. Thetotal rangefor the past3 daysis downto 11.5pointswith the midpoint at 997.75- thls is something I haven'tseenfor a while.The tradersare all focusingon the 1003.25high then the 1015areaand tryingto keepthe marketabove1000. Anotherissueis that dailyvolumesin the EShavedroppedbackto halfthe normalactivemarketlevels.Thiscanonlymeantwo thingsandthat is either no one is homeor a lot of peoplehavelost moneyrecently.Not surprising because veryfew peopleknowhowto tradein tight markets. Mythoughtsaftertodayarethat if the highat 1003.5doesnot get takenout in the next day and the 1015 high within a week we couldbe in for a pullback. substantial All it is goingto takeis for somebig playersto recognise the opportunity andcomein sellinghard. This marketappearsto be hangingaroundjust waitingfor somegoodnews to primeit up.If it doesn'tget it soonimpatience amongthe bullscouldsetin as the mediais now tellinginvestorseveryday that we are in a new bull market.I wonderhowtheyareso sure? PsychologicalAspects



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Thursday21* August2OO3: ES03U-3S

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Themarketopenedat 1004.5andretested1003.25slightlybeforemakinga highof 1009.5at 10:08am andsoldoff. Aftera rumourhit the pit sometime therewasa panicselloff back laterthatsomebrokerhadsold30,000E-Minis (998.25). lowof yesterday downto a doublebottomwiththe lateafternoon afterthe 12:00am backto 1006.5at 12:14pm Otherthana 73.3retracement Index (whichcamein at Manufacturing releaseof the AugustPhiladelphia 22.L on a consensus of 10 and a prior of monthof 8.3) all the waves until relationship as the marketrangescontracted followinghelda geometric the end of the day. The closewas back belowthe open and belowthe previoushigh 1003.5so it remainsto be seenwhethera highof impoftance wasmadetoday.A declineof over 13.75pointsfromtoday'shighis required to overbalance the waveseriesin forceto date.Volumewasgreatlyimproved todayalthoughthe marketwasspookedprettyeasilyon the rumourandan interuiewwith a floortradershowedthat they didn'thavea cluewhat was goingon. It wasalsoprettyclearfromthe priceactivity. Qcharts f,SU

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Tradine to WIN Course - One day at a time


Friday22ndAugust2003: WELLIT HADTO HAPPEN!!! The marketwent into Fridaywith a strongrallyto new highsvia the Globex session not longbeforethe daysession openedin NewYork. The reasonwasa pre-market by INTELthat they hadrevised announcement for Q3andthiswasthe newsallthe"blind theirturnoverandprofitestimates wasit came Freddie's" werewaitingfor. Theproblemthey hadto encounter heavy whenthe marketwas showingsignsof exhaustion and approaching technical levels. resistance 6AP Outsidc Reversol

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I recognisedit for what it was worth immediatelyand had it in mind earlier this weekthat 1012.5(a lowerhigh than the doubletops) was goingto be the linch-pinthat would hangthe bulls.Well they coppedit from the open and couldn'trecoverall day.

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Todoyv,roso perfoci exompleof the things I hovabeen teochingyou in this TRl4DIl.lG To Wllrl Course.

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The way the day startedand the obvioustreatmentit got by the localsas theydigestedthe INTELnewsandfiguredit wasnot goingto be enoughto breakthe marketup abovethe 1015level.INTELitselfwastradingat a PE ratioof 35/1alreadyandthat wasthe cueto just SELL,SELL,andSELLevery time the marketcouldnot breakbackmorethan 3.25 pointson any rally. Therewasno moreconstructive newsto comeout throughthe dayandbeing a Fridayit wasalmostcertainas the dayworeon that no onewantedto go homewitha longposition. 38.BB

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In one sessionwe haveturnedthe 3-dayswingbackdown, had a GAP REVERSAL DAYandclosedon the lowfor the day.Anyonewhotook OUTSIDE weekend. the dayoff andis stilllongwill be havinga sleepless Well anotherFridayhas passedso we mustdo our weeklyreviews. See 53:C2:P22. The next thing to do is to calculatethe next day'sMakeor Breaklevels, Levels. Balance PointsandPriceRetracement PsychologicalAspects

3s




andwillgo overwhat to finishoff thatchapter I havedonethisin 53:C1:P12 this chapter.I wouldhateto happensin the comingweekor so to complete if you are studyingthis manualin yearsto leaveany readersin suspense come. Oneweek on: ls83u-18

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Thedeclinefrom L0t2.25onlylastedtwo daysandthe markethaseffectively this repoftsreleased beenrecovering for threedaysat this time. Economic is not thatthe recovery weekhavebeenfavourable overallwiththe exception jobs. producing We havea holidayon Mondayandthe marketwill be new closedso Fridaycouldbe a mixedbagastraderstakethe dayoff. Friday29thAugust 2OO3: The day beganin a mixedmoodand aftera goodrepoftat 10:00amthen barandthe whipsaweda little.The 1005^6highwasmadeon the 10:25am 1000^2lowonthe 12:50pm bar. nsmu-s

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At the end of the daywe are onlypointsawayfrom a test of lastweeK high andthen a test of the 1014^6majordoubletopsfrom JuneandJuly.The hightodayhasbrokenabovea largerdegree1:1 andthe 3-dayswingis up sothereis no reasonwhyan attemptat the old highsshouldnot be made. the WINDOW Todaywasa very lowvolumeday,whichwasto be expected, DRESSERS had an easy day for the end of the monthpaddingup their portfolios. the The largestcorrection sincethe 990^2 low is 5^4 so that nowbecomes yesterday. not does long the 9^4 as first benchmark So followedby the 9^4 overbalance the upwardtrendis stillintact. which the economy regarding Thisweekwe hadsomegoodfiguresreleased has everyonetalking of a better than expectedrecovery,all we needto happenis for it to translateintostockbuying.Thenon the otherhandmaybe the marketanticipated this and it is all factoredin rightnow.Myviewis the with a breakout of 1015andthe bullishcaseoverallneedsto be confirmed thismarket. largerdegreerectangle has that beencontaining Thissideways movement hasbeengoingon sincethe lune 17urhighandthe markethas beentrappedin a 54-pointrange.It is alwayspossibleit could stayin the rangefor a whilelongerbut not realylikelynow. Onlytime will tell, so as I havesaidso manytimesbeforelet'stakeit ONE DAYATA TIME. But nowwe havea chanceto proveall the bearishpunditswrongand have themrunningintohibernation. Tuesday2ndSeptember2OO3: Hello!Wave5 begins..,.... Qcharts f,SU 1026.68

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as it wasan I havewrittena repofton today'spriceactionin S1:C18:P110 interesting day. The focal point of today'slow was the attemptto breakthe 38.2 and overbalance the currentwaveseriesthat begana weekago,this failedand indicated the marketwasgoingto attemptto go higher. Withthe breakoutto newhighsabovethe 1014.75Wave3 highswe havea confirmation that we are in a Wave 5 of largerdegree.This is pretty the bearshavebeenkickedin the teethby the importantstuff now because bulls. Psychologically the bearsare goingto haveto rethinktheir position.They went into todayfully committedaftersellinginto the rallyall lastweek.The similarto is somewhat net shortpositionof the fundsand the commercials whereit wasbackin midMarchwhenthe S&Pwas230pointslower. The nexttimezoneof any impoftance I canseeaheadwill be 1800fromthe March12frLowand that is right on the contractrollover.I haveto write a chapteron the contractrolloverperiodfor this courseso I will coverwhat Thiswill be chapterS3:C3. happens fromnowon in this newchapter. By goingbackover and over this chapteryou shouldbe ableto learnthe It is not difficult correctapplication as eachdaypasses. of my methodologies your rulesall the to remainflexibleandfollow but it doesrequirea discipline time. If you do thesethingsthe marketwill continueto tell you what it is doingandthenall you haveto do is isolatethe pointswhereyou caninitiate lowrisktradesto be a winner. WednesdaylOthSeptember2003: at the highon Monday. I just hadto showyouthis patternwe experienced Qcharts CSU 1035.B0

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A breakout which failed to go on. The markethad been experiencing weakness from Wednesday of last week and madea final gaspto forge ahead,it just couldn'tdo it. Thisis whatI calla failureof largerdegree. You mustseewherethe low todayfinishedas it leavesa solidfootprintto workoff tomorrow. ffi35.A€ 1832.BB IBZS.Ag 1826.B0 LAZS.gB lAeA.O0 1617.04 1814.AA 1811.08 gg/EE/zgg3 Eg/95

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El perfecto! you. I havebeenteaching Thisis onceagainlivingproofof the methodologies this Youmustalwaysremember the geometrykeepstellingthe storybecause is all the tradershaveto guidethem,all they havebeentaughtto do in the last100yearsis to tradeoff the geometric levels.If you knowthisyouwill be predict will Long ableto howthey act next. asthereareenoughof themlying in waitat the obviousretracement levelsthe marketwillturn. I suppose if therewasevera placeto enda chaptersuchasthisoneit would be now.Duringthe pastmonthI havebeenwritingthesepageson a day-todetail the technicaland the day basis.I have explainedin reasonable psychological tradingplan.If I havenot aspects that are paft of my personal mademy innerthoughtsknownoverthis time then it wouldbe impossible thatI evercould. I thinkthat you shouldalwaysremember this chapteras a phasein my life where I didn't know what the marketwas possibleof doing, but as I approached it on a dayto daybasisit wasnot that difficultto stayin frontof the crowd. Eachday is a new day and with the newsand the currentactionsof the playersyou will be influenced on howyou shouldhandleit. Youwatch,you plan,andyoukeepyourdailyandweeklyanalysis up to date.Dothisandyou you get thatyou understand. cannever intotroubleif onlytradesituations Pleaseremember life is not a dressrehearsal this is the realthing,makethe mostof it. It canbea lot of fun whenyouhavethe moneyto spend. PsychologicalAspects




CHECKLIST YOU CAN PREPAREEACHDAY: INDICATOR

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High

Low

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Notes: I adviseyou to checkall thesethingseachdayandyou will educateyourself to get prepared! Overtimethesethingswill become secondnatureto you. PsychologicalAspects

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A little stoly for you on my trading psychology: I was at the golf club for a few cooloneslast night and nearlyeveryonehad left exceptfor a coupleof closedrinkingmatesandthe barmanwho is alsoa friend. Peterone of the guysI playgolf with is an air traffic controllerwho I knowwell and enjoy his companyand he was quizzingme aboutthe markets,andhow to take advantageof them. Mattieis the bar managerand Johnworksfor the GoldCoastCityCounciland managesSouth StradbrokeIsland(A resoftislandnot far from here). Well unbeknownto me my reply shockedthem becauseI started off talking about just playingpoker with the other tradersand trying to read their minds in so far as what they were likelyto do next with the chartthey had in front of them. This at first didn't make a lot of senseto John but Peter works as a traffic controllerat BrisbaneAirport and saw the rationale.That is what he has to do every day when he is watchinghis screens.He has to work out if the pilotsare followinginstructionsor havethey missedthe plot! Anywayafter a while of e:
I

I said,John that is informationon the theory of marketsthat traders use to makedecisions from and that is all. They have beentaught all this stuff in ohe form or anotherfor over 70 yearsor more.They know nothingelse and they are obligatedto use it for whateverresult they canget from it.

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BUT,What I do know becauseof it is what they are supposedto do and I just go with the flow. If the stuff fails to work I just go the other way becauseit is not working.

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THATIS WHYI CALLIT POKER.Nowdo you seemy F..,.........point? The deckis dealinga new handall the time and you haveto readit for what it is. Peter understood.John was confusedand Mattie the barman had no bloody idea, all he knowsis how to hit a golf ball! I hopeyou get this messageas it is importantto realisethat the guys trading againstyou only have at best the same tools we do, and if they are not working you discardthem immediatelybecausesomethingelseis goingon. Whenthe theory is workingyou embraceit and playthe samegame. That is why you must cut any lossesvery quicklyif you wish to be consistentlyprofitable.If you don't the loserswill eventuallyoutweighthe winnersbecausepsychologically it is easier to holda loserthan a winner. Truefact :-))))


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My thoughts on how you should approach this businessof trading: Youcannotafford if you wantto succeed. is everything Moneymanagement andkeep from the beginning play game lead You have to frombehind. to this kickinggoalsor it is betterto leavethe field. The firct rule of businessis to presentecapital: you tradeat a time if you end up down(5) No matterhow manycontracts a lossof 5 points S&Ppointson anysingledayyou shouldquit.Quitbecause is easyto recoverthe next day,what you don'twant to do is dig a holefor yourselfthatyoucan'tget out of easily. You will makeyour biggestmistakesin this businesswhen you become greedyor desperate. It isjust notworthputtingyourselfin that position. Theret an old saying known only to experiencedtraders. *Better to loseyour opinion than loseyour money!" The secondrule of businessis to take only what you know you can getr Remember that smallbiteswill add up to a meal.Only trade the regular patternsI haveoutlinedfor you that havea greatchanceof success.Don't try andreinventthe wheel. Dont setyourgoalsto high,it is muchbetterto aimfor 5 pointsprofita day andmake10or 20 acceptit as a bonus.To manytraders but if you get luclqy try and get everylastdropout of a positionandend up givingprofitsback. Takewhatyou knowyou canget fromthe marketandbackoff. If the market is tradingin largerrangesexpectlargerprofitsfrom your trades.If the marketis movingin smallrangesthentradefor scalps. lust thinkaboutit. Thereare 250tradingdaysin a yearandif you onlytraded100of themand you madean averageof only4 net ESpointsperdaypercontractovera year trade10 that is 400 pointsor $20,000.Trade5 lotsandthen it is $100,000, you make a could 50 lotsand lotsandit comesto $200,000, $1,000,000. If you studythe patternsI havegivenyou in this courseandonlypickedon the mostreliableonesto tradethe resultswill astoundyou.

My Private Thoughts


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The third rule of businessis to never enter a trade unlessyou have two very good reasons: If you makea killingearlyin the day,myadviceis to takethe moneyandrun. abouthowmuchwas Letsomeone elsehavethe restandneverbeconcerned lefton the table.Onceyou havewhatyouwantget up andleave. Timesof the day to trade: Setyourselfa planto tradeonly whenthe marketis active.Youcan often trade betweenthe openand 10:00amand makegoodprofitsif thereis a at 10:00am. repoftsto be released trendin forceandsignificant andwait untilthe markethas Stayflat whenreporGareaboutto be released plenty of timeto takea positiononceyou have absorbed them.Therewill be allthe news. I wouldrathertrade eitherthe morningsessioninto 12:00middayor the from 1:30pmETon. session afternoon earlyin the dayandexits Thesmartmoneyaswe knowit oftensetspositions in the laterstagesof the day.Volumesin the morningwill usuallybe the highestfor the day.Theywill taperoff between12:00and2:00pmandpick by 3:00pmyou will seeif thereis up in the last2 hoursof the day.Usually goingto be potential movein the lasthourof trading. for a significant Therearealwaysgoingto be dayswhenyoucannotworkout whatthe smart moneyis doing(maybeon thosedaystheyjust don'tevenknowthemselves). In caseswhereyou feel likethis it is betterto quit for the day.Neverpushit if it is notgoingyourway. In lots of wayssuccessful day tradingis the equivalentof a job as a top jockey.Firstyou studythe form, then the field and selectyour ride.The staftinggateopensand the fieldjumps,it is eithera goodstaft or a false break.If the raceis on you manageyourrideuntilyouseethe winningpost. Figureout whattheyareup to andyoucant miss. CONGESTIONS: phasethat lastsfor an houror Whenever the marketgetsinto a congestion players time to thinkandthey will staftto planwhatthey moreit givesthe aregoingto do if it breaksout eitherway. range.Your Thisresultsin a buildup of stopson eithersideof the congested job is to figureout if theyaregoingto buythe lowerendof the congestion or phase could the highendof a congestion sellit andpushit down.Conversely the Usually to the upside. if it result in sellingor them buying breaks preceding will beyourbestguide. activitybeforethe congestion My PrivateThoughts

Section4:Chapter-2



LEVELS: OR RESISTANCE SIGNIFICANTSUPPORT Thesecouldbe priormarketreversalpointswherea doubleor tripletop or bottomcouldform. If the marketis strugglinggoinginto them expectit to rapidly whenit reaches haltfor a correction them.If the marketis advancing goingintothemexpectit to breakthroughwithoutmuchtrouble. in S1:C18 Go backand reviewsomeof the dailypatternsI haveillustrated andyouwillseewhatI mean. LEVELSfollowed by a higher low or a lower 50o/oRETRACEMENT high: of the andthe predictability Thesearesituations that everyone canrecognise lling. marketbecomes self-fulfi LEVELS: RETESTS OFSIGNIFICANTBREAKOUT whenthey don't Theseperhapsresultin someof the besttradesbecause to reversebackthe otherway. worktheygiveyouthe opportunity GAPOPENINGS TO A NEWHIGHOR LOWfor the week: If the marketopensto a newhighor lowfor the weekandthenimmediately reverses backto fill the gap and breakbackinsidethe weekstradingrange highor lowit is tellingyouthat all the stopsaboveor belowthe previoushigh or lowhavebeentakenout andthatsideof the marketis exhausted. Takethe appropriate as it will oftenresultin an excellent actionimmediately trade. TRENDS: STRONG ESTABLISHED Buy or sell the breakoutsinto new territory if the correctionsare not The trend shouldbe clear as a bell to everyoneso the overbalancing. shouldsucceed. breakouts CHOPPYMARKETS: overlaps andtight As soonasyou recognise a choppymarketby the continual rangesstoptradinguntilthe marketfindssomedirection.Betterto just take the dayoff insteadof beatingyourselfup. LEVELS: GEOMETRY AT REVERSAL Makesureyou alwaysinterrogate the marketwavesfor signsof significant geometry to be havingdifficultyaftermakinga newhigh wheneverit appears onceyou knowthe or low for the week.I can'tstressthis enoughbecause going in the existingdirectionit makesit reasons whythe markethasstopped easyfor youto adaptto whatwill happennext. MARKETS: OVERBOUGHT & OVERSOTD Although Alwaysmonitorthe positionof the marketrelativeto the indicators. marketscttn remainoversoldor overboughtfor long periodsof time the LEVELhavean RETRACEMENT chancesof a reversalat the next CARDINAL extremely highprobability. My Private Thoughts

Section4: Chafier -2

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SOMECLICHfS AND RULESTO NEVERFORGET:

Thesearesomeold clich6sI useto keepmyselfon track: 1. Tradewith the trend.If the marketis goingup buy it, if it is going downsellit! 2. Oldresistance becomes newsuppoft. newresistance. 3. Oldsuppoftbecomes limit up usually 4. Everystrongmovewill be followedby a correction, resultsin limitdownandviceversa. 5. Trendlinesaremadeto be broken. 6. Nevergo to bedwitha losingposition. 7. Believe whatyouseeandnotwhatyouthink! B. Whenin doubt,stayout. 9. Donottradeunlessyouhaveprepared. 10. Alwayshavetwo verygoodreasonsfor everytradeyoutake. in your favourget out and 11.If the tradedoesnot moveimmediately staftfromfresh Mark Douglasexplainsit beautifully. "The market will never saveyour you haveto saveyounself". I get out and start If I entera positionand it is not workingimmediately again.Thereis no roomfor hopeI ameitherrightor wrongstraightaway. You haveto learnthat the marketis an evolutionof fact. As the facts become clearertraderswill acton massandmovethe market. patternsandthe Youcantell whenyou are on an easyday by the S-minute waythe marketis adhering to allthe thingsI havetaughtyou. If the signsare difficultto readthen standaside- no one is forcingyou to trade.Nevertradeon emotionaloneyou mustalwayshavea cleartechnical andfundamental reasonfor eachnewtrade. Expectthe unexpected! Stayout of the forecasting business! You have to think smaft to last a long time in this business.Trade for the "NOW" when everything appears clear and forget what is possibletomorrow or next week. If you studythis courseand followthe advicecontainedhereinand you it is not for cannotbecomea winnerthen get out of the business because you. My PrivateThoughts




BeforeI finish I just want to leaveyou with some words of wisdom to consid€r..........

GAMBLING: Theaveragegambleror non-professional To startwith gamblingis a disease. to lose. he knowsno better- heentersthe gameexpecting is a loserbecause gamblerscan win at the gamesthey know;only if they have Professional studied the odds and they continuallywork on the correct money management. gamblersshouldonly playthe odds To win consistently seriousprofessional theycanrecognise. on oppoftunities NOIll|...rrrrr,

to bet losebecause theydon'tplayit safeandcontinue Mostnovicegamblers theylikethe IUICEOFIT. on anything theyfanryjust because you likethe threatof the riskyou Alsoremember that if you betjust because willeventually lose.

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TOWIN: treat your You have to maintain a strict discipline, gambleslike a repetitivejob in a way that it often becomesvery boring.The point is it no longerbecomes fun. If youwantto win youjust haveto learnto be a mechanic the rewardsis Spending and to get your fun elsewhere. fun! I have learnt these basic home truths over the years by watching the faults of others. Continually remind youltselfof them if you get on a losingstealgthen go back to squareone with the right attitude.

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Blyce Gilmore 18s January 2OO4

My PrivateThoughts

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S&P500- SomeHistory: I have beenfollowingthe S&P500amongstother You know something? years now.I haveseenit go throughmanyphasesof thingsfor well on 20 evolution. it cameaftera I remember the crashof 1987realwell.Whenit happened progressively strongeractivebullmarketthat beganin 1982.TheS&Pfutures begantradingin 1982andas the bullmarketunfoldedbecameprogressively morepopularwith tradersandtradingfunds.In thosedaysthe pit contract was$500a handle(1 point). It took the S&P500 indextwo yearsto recoverall its lossessufferedin the 1987crash.In all the time between1987and2000the marketreallynever Therewerea coupleof periodsof L2 months hadanylongperiodsin decline. did not last wherethe marketwentsideways anysharpdeclines but generally longerthan90 days. the bullmarketfrom1991to Theonethingthatsticksin my mindthroughout namespredicting a top were many famous 2000is that all the way up there guiltymyselfbut whenI did I usually everymonthor so. I wasoccasionally the S&Pwasnot goingto In 1994I realised onlygot the top of a correction. stopgoingup butasthe marketrosehigherit wouldbecomemorevolatile. llaue Trader 1??8

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bull marketandthe The NasdaqIndexhadgonethroughan unprecedented as publichad beenon a feedingfrenzybuyinginto everynewIPOavailable justiff the they cameto market. It was difficultfor any sanepersonto valuations astheyweresofar out of linewith reality. It wasno surpriseto mewhenthe marketrolledon its backandgoingdown techstocK. withthe biggestlossescomingfromthe overualued I thoughtbackto the crashof L987andhowthe goldstockshada goodrun afterthe 87 crashandhowthe realestatemarketwentintoa boomperiodas investorsmovedmoneymadefromthe stockmarketinto it. hasoccurred againand the samephenomenon Strangely or not so strangely nowwe arefacedwithan unprecedented boomin realestatevalues. Have frader 11?48

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with the It againsurprisesme now that so manyanalystsare comfoftable valuations andthat pensionfundsare buyingup everybit of paperfromthe existingloans. fundsto refinance banksastheycontinue to advance I oftenask myselfwhereall the moneyis comingfrom. Butthe truth is the moneyis createdout of freshair andthishasbeenso sincethe goldstandard wasdroppedin the early70's. Nowthe first thingto remember aboutstockmarketindiceslikethe S&P500 listedon is that it represents valueof the top 500companies the combined go come and as new stocks This meansthat the NewYorkStockExchange. ones becomeworth more,as a resultthe downsideis prettywell limited as it did in year2000. ridiculously over-valued unlesseverything becomes jr. hadan Elliott I remember backin 1987afterthe crashthat RobeftPrechter Wavecountthat he reckoned wouldtakethe Dowdownto a levelof 400.Its previous highhadbeen2746.Howhe dreamtthat up I don'tknow. S&P Review

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thinkingin somecases.The It just goesto showyou the lackof intelligent stocksin the USAso therehadto be another DJIAis the top 30 INDUSTRIAL the valueof the existingonesif theyfell out 100or morecapableof replacing insane is notgoingto ceasejust because of favour.Weall knowthat business investors havebidstockstoo high. indexgo to in wheredoesthe S&P500 Soyou canaskyourselfthisquestion, the future? it will move up. Notwithstanding It can only go one place,progressively reach extremely it long doesn't way as as throughtradingrangesalongthe onceagain. levelsbasedon madness over-valued is to havethe S&Pcompanies in a healthyeconomy Theaccepted benchmark Ratioof between15 and 25 to one.If tradingbetweena Priceto Earnings get themto be a yearor so back thingswereto ever as badas we assumed the accepted lowerendcouldbea PEof 10-1. index,but it is hardto go up sotoo doesthe valueof the S&P500 Asearnings a boomsimilarto the 1990'sin my lifetime imaginewe will everexperience possible afterwhatwe haveseenrecently! again.Maybeanythingis In anycasewhatI am leadingup to is that in my opinionthe bearmarketin in October2002whenthe valueof the S&P500 stocksmusthaveterminated in valuefromits all time high.Nodoubtwheneverit indexhaddeclined50o/o asthe March2000valueit will havemany doesget backto similarvaluations newnameson board. in the upperendof the accepted valuations Butrightnowwe areapproaching envelope.The only thing that can propelthe S&Pmuchfurther upwards Thatdoesnot appearlogicalto happen in earnings. wouldbe improvements overnight.So to my way of thinkingit will pay you to keepan eye on the as a guide.The companies for the S&P500 earnings beingreleased estimates stimuluspolicies of the FEDandtax cutset cetera,haveturnedthe economy aroundin 2003 and most of the largestcompaniesin the USA have restructured to reflecton the bottomline.Buttheyhavedone theiroperations can to dateby cuttingstaff. much they aboutas as at: is througha membership earnings A goodplaceto monitorthesecompany hftp:/ /www.briefinq.com It's beenan interesting20 odd yearsfollowingthe risesand falls in the that hasbeenappliedby othersover world'sstockmarketsandthe rationale thistime. 2003:Therehavebeensome As I am writingthis it is the 31* of December continuingexamplesof bad newseveryso often mixedin with the good news.Butthe marketis stillclimbing. economic S&P Review




It seemsthereis debtlevelsarestilla concern. Unemployment andconsumer in the systemthat andbankruptcies stilla bunchof legalclaims,prosecutions There needto be resolvedbeforewe can lookto the futurewith confidence. I heard the other the blue. hick of still hasto be a few more upscomingout daythat UnitedAirlines,whichwasoncethe biggestairlinesin the world,is equityamountsto nothing.The same effectively worthlessand shareholders fatecouldstillbe in storefor manyof the old highflyers. bearmarkethas So rightnowit wouldseemthat the baseof the 2000-20A2 not yet been fully establishedand somewhereup towardsthe 50o/o retracement bearmarketrangethe currentuptrendwill run of the 2000-2002 intoobstacles. Wehaveexceeded somelevelswhicharemajorindustrydecisionpoints- the 38.2retraceof the entire2000-2002 bearmarketin S&P,the nextmajorSPX levelaheadis the 50o/o whichliesat 1161andjust belowa doubletop with importantthe technically the lanuary2002high.This couldbe something tradersmaytake into accountas a signto takeprofitsfrom the bull market originating in Marchof 2003. Nevertheless, I am a realist.I adaptto the dailycurrent I am not a forecaster marketconditions. It's the onlywayto tradein my book. Eachdaythe marketgivesme reasonsto form a planbasedon whatwent before.I only needto knowif traderswill decideto buy and sell,nothing moreand nothingless.As long as I continueto believethey will act in a similarmannerto the way they have done before,when the signsare obvious, I haveeverychanceto be profitable. I knowall the patterns,I alsohavethe newsandas longas I knowhowto preparefor eachnewdayin advanceI am so far aheadof the fieldyou cant believeit untilyoudo it eachday,thenyouwill knowfor yourself. The majorityof marketplayersarejust a bunchof turkeysin my book.They will neverknowwhatI know.My methodsarelikehavinga gunto shootthe feathersoff themeverydayI wishto if I makethe choice. Tradingcorrectlyis just a matterof attitudewith me now and if you can well- with oneprovisodevelopmy mindsetyouwill succeed, andsucceed you mustquit everytradeentrywith a minimumlossif it doesnot movein yourfavourimmediately; this is my number#t rule.You betterbelieveme, or youwill sufferthe consequences andI don'twantthat. SomeFinalthoughts: Throughout writingthis courseI havestressed the impor€nceof readingthe motivesof the otherplayers.

S&P Review


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Tradins to WIN Course - One day at a time


It is importantin this tradinggamefor you to havean ideawhat the big patterns in playersaremostlikelyto do giventhe seriousness of the unfolding the intra-daymarketmovements. professional I wouldliketo remindyou beforefinishingoff thatthe individual tradersare all doingthe samething.Theyknowonlyto wellthat the market to is madeup of so manytypesof tradersthattheycannotallowthemselves patterns a different telling them are takea view and stickwith it whenthe story.This allowsthem to remainflexibleand in tune with the market movement. Thereare so manyfundsandCTA'stradingfuturesmarketswith very basic modelsand thesedo causea lot of noisewhenthey havelargeordersto execute.The primaryreasonwhy the marketruns when a suppoftor is brokenis orderflow.Oncethe orders resistance levelof somesignificance beginto flowintothe marketthe marketwill rununtiltheyareexhausted. Intra-dayreversalsoccur mainly becausethe market reachesa strong technicallevel essentiallyin an overboughtor oversoldcondition.Those playerswith a winningpositionmaychooseto take profits,and unlessthere are ordersto absorbtheir profittakingthe marketwill reverse.You must a zerosumgame. that the futuresmarketsare essentially alwaysremember Whena sharpmovein any directiontakesplaceit will havehalf the field losingon it and the other half winningor retrievingprior losses.Human natureis suchthat moveswill onlyextendwhenthe trendandnewsis fullyin thatare agreement andlargepositionholdersareforcedto liquidatepositions causing extremepain. thatwill propelthe marketfromonepricelevel Beingawareof the mechanics and the Parabolic The Stochastic to your success. to anotheris paramount is chaftthatthe equilibrium (SAR)aregoodwarningindicators on a S-minute out of balance. Youwill seewhatI am talkingaboutif youalsowatchthe volumebarswhen indications. indicators areshowingpotentialreversal nothingmore intra-daytradingis all aboutidentiffingopportunity, Successful or less.As the marketweavesalongthe signsof wherethe professional playersare buyingor sellingbecomes fairlyobvious.Forinstanceif theyare levelandholdingthe marketin a rangeandcannotget it buyinga correction reversepositionandtakeit the otherwayalong to movetheywill eventually in the afternoonperiodwhen every the line of leastresistance; Generally pieceof newsfor the dayhasbeenevaluated. Eachday you mustpreparebeforeyou trade,andthen whenthe bell rings you obserue signalsthat mayhavesome the priceactionrelativeto technical players. impoftance to the professional

S&P Review




Whenthe technical cluesdon'tappearto be workingyouthenhaveto resoft to the moodor feelof the marketas yourbestguideandjust movewiththe patterns. If the marketstagnates in a tightrangeyouarebetterto waiton the sidelines for guidance ratherthanto try andguesswhatit will do next. Overa daythe marketwill providenumerous set-upsfor youto maketrades. you will As longas you get straightout whenthey don'twork immediately alwaysbe readyfor the nextone. Thereis an old saying,'The marketalwaysappearsto be climbinga wallof worry". Thisis true mostof the time because how the puntersare neverconvinced far it can rise beforeother traderswill come in selling.And you must remember thatthe professional sideof the marketrealisethisandat anysign of weakness to sellto makequickprofits. areprepared Sellingat the correcttime in an up trendingmarketis an aft onlyknownto professional players,the publichavevery little knowledge of marketlevels andtendto enterpositions at anyold place,mostlywhenit fits closeto some indicator readingtheyhavespentmonthsstudying. The publicare basically inconsistent whereasthe professionals areconsistent and giveyou the leadmostof the time. Professionals useclosestops,the publicandfundsusewidestops.The fundshavedeeppocketsand mostof the timetheywill hangintoa positionuntiltheirmodelstell themto exit.This is why on mostoccasions a reversalbaron a S-minutechaftcanbe marked witha highvolumespikeasallthe ordersin the flowareexhausted. Foranyfastmoveto continuethe volumemustkeeprisingas onesidekeeps pushing the otherthroughtheirpainlimits. To be successful day tradingyou haveto teachyourselfto onlyfocuson the "Now"andforgeteverything on else.Youhaveto lookat whatis happening the dayor the hourandthinka few stepsahead.Youmustlookbackacross yourchartand observepriorsuppoftand resistance levelsthat couldact as futuresupportor resistance andwhenthe marketteststhemact immediately if theyholdor break. Don'twait untilthe marketgetsawayfromthe decisionpointbecause if you do you cannotadequately controlyour stop loss and withoutthe correct youwillfail. moneymanagement If I wereyou I wouldreadtheselastpageseachdaypriorto tradingso when you enterthe ringyou will havea clearandconciseviewof whatyourdaily job is allabout. S&P Review


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AsI havesaidso manytimesbefore- Believe whatyouseeandnotwhatyou thinkandtakeit onedayat a time. Anywaythis is aboutall I haveto say right now,I can'tdo anymorethan I havedoneto prepareyoufor a lifein the tradingarena. I wishyou well,I hopeyou succeed, but it is still up to you to do it, nobody elsecando it for you. Recently on December 14h I had a devastating experience whenI crashed my car into a steelelectriclight poleandtotalledit, I wasin ICUfor 5 days andI was luclqyI didnt die but if I did it wouldhavebeenmy fault,I know that much.Nowthat I am 90olorecovered andslowlygettingbetterI wantto tellyouthat my long-term goalnowis to enjoymy life. I alsohaveothertradingtoolsI cansellyouto makeyourllfeeasierwiththe process tradingdecision butyou mustbe a workerto usethemeffectively. As you learnmoreaboutthe marketsyou canalwayscomebackto me andask me questions, I mightbe onlyworking2 daysa weekin futurebut that will keepmy interestup.WhenI feellikea weekoff I willtakeit. I hopeyouguyswho buythiscoursewill embraceit for its true meritandgo on to biggerandbetterthings. I am sure you will if you follow my rules- if you don't well I can't be responsible for youractions. BryceT. Gilmore. Thisis the wreck:

53


Tradingto WIN Course - Oneday at a time


4r Section 4= chapter

EsignalRoutines: It is nowthe 13hMarch2004andit hasbeennearlysix monthssinceI first completed the originaldraftfor thiscourse. of 2003the S&Pindex Sincethe originaltext was completedin September hashadsix monthsto forgeits way aheadsomemore,but rightnowit has sincethe lowof the staggersup asthisweekhasseenthe deepestcorrection a yearago.The futureshighlastweekcamein at 1163.5andthe SPXcash levelof the SPXBear high terminatedat 1163.23,the 50%oretracement to 1160.75. marketfrom2000-2002 calculated Thisweekhasseena rangedownfromthe highon the futuresof 42.75 and from March2003by on the advance exceeds the previouslargestcorrection impliesat this timethat a top of somemajor 5.25points.Thisoverbalancing wavedegreesimilarto the June17h2003top is in place. Edtr+

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ESIGNAL

54



I I I I I I I I I I

t I I I I I I I I I



S&P 5OO- lst Month Continuous PIT DAILY + J E q u i r i s s -J o h e r t n s y 6 b . G e s - c o l r @ l n c € r

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The only logicalconclusion you can reachlookingat thesechartsis that the S&Pis losingsteamandthe profittakersare movingin. Therewasa feeling all alongthat the professionals only expectedthe S&Pto reach1170(the levelsof the 2002highs)but with PE'shoveringin the 2511and higherzone onthe Bluechipstheyarefindingit harderto findgrowthstocksto buy. ESIGNAL

55


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Tradingto WIN Course - Onedayat a time

ESMarch Day session- Hourlyover the past two months: gs

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Therehasreallybeenno excusefor not knowingwhatwas goingon lately' The lasttwo breaKto a new highfailedwithoutgaininghardlyany.ground. 3.zs pointsabovetop #1 andwasfollowedup with Thetop #2 onlymanaged points a seriesof triple tops] top #3 did a little better breakingout by-5 beforefailing.But look ai the sidewayshesitationafter the 1163.75high beforeit fell out of bed.Themarketwassayingthe writingis on the wallthat it couldn'tfindthe buyersto keepit goingup. Nowthe onlyproblemcomingup is that we arein the rolloverperiodto June and the priorswingpoints6n ine Junecharthavebeenmadeat different levelson low voturie.But the SIGNSare all thereandthey weresayingto youLONG WASWRONG.Lookat the IUNEESbelow' AEr+

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Section4: ChaPter- 4


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After evaluatingthe currentweeksactionand the reactionup on FridayI havemappedout somelevelson the lune ESwherethe trendshouldconfirm downagain. Wewouldhaveto go up for anothertwo daysfor meto thinkthatthisweek's downturnwasonlytemporary. Ef+

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Themaximum uppertargetlieson the 38.2at 1125.If it breaKabovethatI wouldbeginto consider again. buysignals EEf+

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Now for tomorrow: Whatyou mustrealiseis that the S&Pmarketis just an ongoingAUCTION, whereeachday newbuyerscomealongto buyandold buyersor newsellers comealongto sell. The BIDquotesare buyersandthe ASKquotesare sellers.Eachsidehasa perceptionof their own positionstrengthsand weaknesses basedon whatevervaluesthey useto guidethem.Theythen placeordersthey believe to besuitableto theirownneeds.Theycouldbe rightaboutthe marketgoing upor downor theycouldbetotallywrong. Aseachdaypassesthe marketmovesalongwithinlevelsthat satisfywhatwe FACILITATION. referto as MARKET is a fanry namefor the willingnessof buyersand MARKET FACILITATION sellersto meetat a pricethat satisfiesbothsides. If the buyersare not willingto paythe currentpricesellersare asking,the pricewill go down,as sellerswill haveto reducethe LEVEL of theirASKING PRICE to makesales.On the otherhandwhenbuyersare keento buy and the buyershaveto BID up the priceto thereare limitedsellersOFFERING, by the actionsof meetthe sellers.Thereforethe marketis alwayscontrolled it comes downto this,if words willing In other the willingor not so SELLERS. If they are to quit positions the marketdeclines. the SELLERS are URGENT not urgentto sellthe marketit eitherstayswhereit is or it risesasthe buyers areprepared to payhigherprices. as In the futuresmarketthere is a differencethat needsto be considered, you don't haveto own anythingto be a seller.Youjust haveto havethe perception buyersthe market that if yousellnowwhenthereareno apparent will go down,andthenyou will be ableto buy backlaterandmakea profit. This is probablythe main reasonmost downwardmovesare usuallyfast to collecttheir affairsandendabruptlyasthe phantomsellerscoverpositions profits.Yet in a sustained wherethe sellingis comingmorefrom downtrend the ownersof stockit won'tfindthe samesuppottin a hurry. that causethe sellersto take action,and If you understand the conditions wherethe sellingis comingfrom or not comingfrom,thenyou will havean trendcouldendurefor. ideaof howlonga downward 50%in valuefromits bearmarketlowsand Currently the S&Phasrecovered of 2000to 2002 asa resultholdersof stockwhohaveriddenout the declines past severalyears. overthe theirbooklossesencountered arenowrecouping for themto sellout now. Myopinionis that it wouldbecome attractive why anyonewho hasheldstockthrougha two I'm sureyou canunderstand yearbearmarketfeelsrightnowwhentheymaybecloseto breakeven. ESIGNAL



t I I




AlthoughI am goingto reviewthe nextfew daystradingas it unfoldsin the what happenshourto hourunless S&Pyou will neverbe ableto understand youwerethereto experience it. I will try andgiveyou an accurate of account what I seehappening overthis comingperiodandthen you maybe ableto learnfromit. No matterwhatdoeshappenyou hadbetterunderstand that I am goinginto prepared with from my Thethree-day thiscomingweek a bias analysis. trend is downandFridayappears to be onlya shortcoveringrally.Yetif something changesand the marketdoes not flow with the trend, I will changemy opinionveryquicklyif certainpricelevelsareexceeded. My mainpointrightnowbeforewe seewhathappensis that to convince me we havelongliquidation in this S&Pmarketand not just speculator selling, this marketwill haveto stay belowthe 38.2 retracement of last weeK That level is 1125. decline. around I havea clearlydefinedplanin mindandI havecontrivedit aroundthe logicI understand to motivatemarkettrends. Thechances LONGLIQUIDATION from theselevelsarequite of a prolonged realin my mind,yet onlytimewill tell.The lynchpinto me at the momentis the 1100level.If it breaK, the immediate futurefor the bullswouldlook ratherbleakandattractmoreselling. Cgclefrader

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Thisis the pictureeverytechnical traderhasof the S&P500 positionas we transitthe weekend.Forthe first time in twelvemonthsthe movedownlast weekhasexceeded all priorcorrections by a significant amount.Thiscoupled weakness. Thereis no other with a breakof the uptrendline is signalling youcancometo. conclusion Onlya rallybackabove1125wouldgivethe bullsone morechanceto get out,andthe logicalthingfor themto do is takeit. ESIGNAL




My longer-term Elliott Wave perspective: Way backin June 2003when I was writingChapter3: Section2 of this manualI outlineda proposition on mythinkingof the ElliottWaveposition. Nowthat the SPXhasmadethis March5h highof 1163.25it is puttingit to the test.The percentage declineinto July 2002w?s 50o/odownfromthe top up fromtheJuly2002low.The1163.5highis also andthislatesthighis 50o/o 590daysfromthe July2002low- that is 1.618years. In Gann& Elliotttermsthiswouldbea terminalsignal. I just wantedto pointit out to you at this time, becauseit is thereand it makesplentyof technical senseto me. CpleTrader

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Whetherit will meananythingto youjust yet remainsto be seenbut if the to marketcontinues in the currentweakstateit is in it will meansomething youin the future. the lowin October2002 Thereasonwhy I favourthiswavecountis because "false wasa breakaffair".Thedayof the lowthe marketmadea gapopening wentto the new lowfor only minutesandthen madean outsidereversalon the day. of the current Nowyou can seethe detailI havegoneto with my analysis marketposition.This is what it takesto remainin controlof your personal I doubtveryfew peoplewouldtakethetroubleor in thisbusiness. destination for that matterevenknowhowto go aboutit. you needto learnthe thingsI am teaching If you want to makea success you,you mustlearnto analysethe marketwith a fine toothcomb. I always in my book. strivefor perfection nothinglessis satisfactory ESIGNAL

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Monday15fr March 2OO4: Thedaybeganwithan openingprintof 1115andmadea highof 1116from thereon the marketjust beganto slipaway.Throughout the morningsession thereweremanyinteruiews withanalystspredominately on Bloomberg saying the marketwasa sellat theselevels. The only ray of hopefor the bullscameafter the marketdoublebottomed withthe daysessionlowof Fridayandralliedback38.2o/oof the 16.25point legdown.Therewasno clearindication to sellthe firsttimethe marketcame backto 1110buton the second it was test a sellwhenit reversed at 1110.25. EEf+

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Therewereseveraleasysellsto be hadfromthe openingprintrightup until the 1103.5reversallevelat X on this chaft,as the corrections on the way points went downwere3.25and 3 respectively 8.5, B andthe wavesdown and6 intothe doublebottom.Another2 pointsdownwouldhavegot it to the 1101Globexdoublebottomand madeit a and8.5 - 8 - B or 8.5 downso therewasnowayit wasgoingto break1101on the firstattempt.

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The low for the day was 1101.5forminga doublebottomwith the 1101 Globexlow from earlytradingon Friday.Thislowwasmadeverylatein the intact afternoon anda shortcoveringrallyfinishedoff the day. 1100remains once again and today was effectivelyan insideday with the trend still pointing down. Aftertodayand the staft to the weekthe bullswill be nervouscominginto to tomorrowas we havean FOMCannouncement fromChairman Greenspan be released. Speculation is, theywon'traiseratesbut thenwe alreadyknow they won't lowerthem anymoreeither.Therecouldbe a surprisecoming, whoknows? Tuesday16h March2OO4: The marketopenedup and went to the 61.8 retracement of LLL9.75and 1101.5at 1113,madea doubletop over 20 minutesand startedto go sideways. Sofar I havemade5 trades.Theresultswere+1, scratch,-L, -^4 and+1^6. I shouldhavejust soldthe 61.8andput a stopaboveit andwent to bed.Greenspan thisthing is not speaking until2:15pmETso the chances patternsofar the will do muchuntilthenis remotenow.Withthe established suppofton the downside lieson the 1:1 at 1108^2if the 1109.25double bottomcomesout so there is no valuein sellingit to gain half a point.It wouldneedto breakbelow1108to confirma sell now.The other pointis so thereis 50%of 1101.5 to 1113liesat 5.75downfrom1113or 1L07.25 verylittleroomto movebefore1107is takenout. Edtr+

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The biasis definitely is limitednow downin my opinionbut the oppoftunity untilwe get below1101.I won'tbe bothering to tradeagainbefore1101is get is broken,that the all clearsignfor meto backintoit. Somedaysyoucan to run knowwhatit is doingbut it is difficultto maketradeswith a potential just far andyou haveto keepscalping. ESIGNAL

62


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Thefirst breakof 1109.25wasarrestedat 1108with a rallybackto 1109.75 beforethissnapwastakenwith the markettestingthe new61.8at 1105.75. I haventtradedanythingsincethe 1109.25doublebottomon this move because I recognise that I shouldhavebeenshortfrom 1112.5whereI took myfirsttradeandjust heldit all day.It just showsyouafterthe factthatyou don'tneedto havefeathersto be a goose. JEquitisr- JOh€rinB./ab. E6+ IESIt4-2 . StP SlXlE-mini Futur€r Bryce!x{AC!@ BID/ASKD€PTHJEI

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12:30ET and the GAPhas beenfilled- that'sa buy signfor floor traders especially in the luncheonperiod.Yetthe trendis definitelydownon the day and it doesn'tseemto be havingany troublebreakingshort-termtechnical supports in thisperiodleadingup to the FOMC announcement. Myconclusion nowis if the FEDcomesout withsomething the marketis notexpecting it will fallapaftsoa breakof 1100willbea goodtrade. ESIGNAL

63




1:3opmET: It neverceasesto amazeme.The marketcomesand goesthroughoutthe and day.Someminutesago it cameright backup to the 50o/oretracement withthe 1109.25breakout to the downsideearliertoday.I let it go coincided thenbut nowit is a betterchanceto reverseheresinceall the suppoftswere you arealwaysa chanceif yougo negatedearlier.Astheysayin the classics potential hereif I don't get stoppedout is 7.75 downto to a dance.The 1101.5 we willsee,I thinkit is a chancebutI willonlyholdit if it is winning announcement. untiljustbeforethe FOMC Edtr+

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The I scratched that tradefor breakevenbeforethe FOMCannouncement. went the market as UNCHANGED and announcement at 2:15 ETcameout what can happenon dayslike crazy,havea lookat this andjust remember today.It rocketedto a dailydoubletop and then fell like a brickto neara dailydoublebottomin the spaceof 5 minutes,thenwentbackthe otherway madesomemoney- butwho? again.Someone 6Er+

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2:4opm ETBusinessas usual: Now the feathersfrom the Turkeyshavesettledit is time to get on with business as usual.Thetrendwasdownso I soldit andit just plunged, it was goodfor a quick5 pointsbackto the 1101area. EEF+

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Amazingday reallybut it couldgo backwards and forwardshere unlessit breaks below1100. THECLOSEOFTHEDAY: EEF+

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Wellanother dayis overandwhatdidyoulearn? It paysto take everyday one at a time is what I think, that is the best approach. ESIGNAL

65


Tradinsto WIN Course- Onedav at a time


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Wednesday L76 March 2OO4tSt Patrick's Day goingintotoday?I'm not exactlysurebutone yesterday Howdo youevaluate thingfor ceftainis thatthe 1100levelis the support.1113andthen1125is Thisat leastleavesus a lot of optionsandthat is all we the upperresistance. needto knowto workeffectively.

but it is In thiscourseI havegivenyouthe meansto outwitthe otherplayers, you. for excuse is no you now there to do it. I cando it so stillupto

I I I I I I

for usto Eachdaythe marketopensanddoeswhatever,but it leavesSIGNS takeadvantage of. Whatmoredo youwantin life?

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tomorrow?I don't. Whocareswhathappens is just a Merry-goRound.The Youwill reatiseaftera whilethat this business contesteachday is to readthe tapecorrectlyandoutwitthe otherplayersas the daygoeson. You shouldgive this somethoughtif you want to succeed;it is the best adviceI cangiveyou.

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The marketgot off to a goodstarttodayopeningabovethe 1113resistance a pausein the rallyas The old high at 1119.75heralded from yesterday. the hypothetical levelnowbecomes sellersmovedin for a while.This1119.75 nowwe are2 hoursintothe suppoft. Mytargetfor todayis 1125maximum, we haveteena highof It22.75,whichhassomeratio.I wouldstill session signalbefore solidlikethe 38.2andgivea reversal liketo seeit hit something throughthe come back I sellit. If it doesn'tmakeit to 1125it will haveto support zoneto signala sell. ESIGNAL

66


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Thismarketis a buy rightnowoff the 1119.75 Potentially it could supports. goto the38.2at tt24.5 fromhere. Obserue the 3 pointcorrections on the way up. Alsothe 1119.5highthis morningwas 1 tick fromthe old highof 1119.75and 2 ticksshortof a 1:1 (1lx11)up.

I

A breakbackthrough1119.5wouldsignala sell.A breakbackthroughthe nextlowercorrection lowis at 1116.5andthat is a definitesellpoint.

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Nowthis is the momentof truth, only problemis that we are gettingreal closeto theendof the dayandwe groundourwayup hereon lowvolume. Makes mewonder,butI soldit andputa stopon at 1125^2. ESIGNAL

67




4:15pm ET:Closeof Day Session. EEtr+

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The tradewas there but the latenessof the day killedit. Still I shouldn't - neverlooka gift horsein the mouth.Thereis something elseto complain "what if the marketwentup be learnthereas you couldhavebeenthinking, 1:1withthe previous 6.25pointmove?"Theanswerto that oneis the larger overthe minordegreewaves. levelstakeprecedence degreeretracement Wellwe will haveto waitandseewon'twe? Nowwhatabouttomorrow? Buttomorrowis the lasttradingdayfor the MarchEScontractandwe have the triplewitchingwith the optionsexpiry.Therecouldbe a war breakout betweenthe bullsandthe bears. OnethingI do knowgoingintotomorrow for sure,"for surePatrick"is thatabove1125is a buyandanythingelselower is a sell. @Esccil €tcc O 1 g5 EEf + J Equines.J Dherlntsfzab.

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Tradine to WIN Course - One dav at a time


I sawsomewhere somehowthat the sharingof knowledge wasa gift - then the phonerangandgot meoff trackso my originalthoughtwaslost. Thursday18s March 2004: Last trading day MarchSP& ES: + -lEquiriss- JDh€rliEtr./ab- @eS":Clt €lO3

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Turnedout likeI figured,a battlebetweenthe bullsandthe bears! Theearlymorningeconomic indicators released at B:30amhadthe Globexon the run and set the marketup for a slidein the day session.It wasn'tuntil 12:00thatthe Philadelphia Fedmanufacturing indexwasreleased, andcame in muchlowerthanforecast. The marketdroppedsuddenly, rallied, then then gradually proceeded (1113)retracement downbreaking throughthe 50o/o low of the range1101up to the 38.2 highat 1125.The tradingthroughthis periodwason relatively lowvolume. SP + JEquirjss- JOhstnHrab@ E S - C O H@ m Dtmamic.0tO:{:m pElryed)

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69




At 12:30ETfroma lowat 1111.5,withoutanygeometrythe marketstarting aideof Osamabin Ladenhadbeen movingup on newsthat a chiefal-Qaeda troops.As this newsbecamemorewidelyknownit corneredby Pakistani (1113.25) retracement fuelledmorebuying.Thebreakbackthroughthe 50o/o which broke The 12:50 bar, low wasthe first signof a strongrallybrewing. high backthroughthe 12:00Otlockhighsat 1116wasmadeon extremely to runall volumeindicating a BUY.It didn'ttakelongas the frenzycontinued the ES in its tracK, but dead stopped the SP way up to 1125 where the back brokethroughto 1126.5on lostmotion.Thenin the following4 minutesthe marketwhiplashedbackdownwipingout mostof the gains. sellingas The markethadgonefrom newsdrivenandthen backto technical profittakersmovedin. It's funnyhowthesethingshappenbut youcanguessthattherewasa WALL OF SELLordersthat went marketat the doubletop of 1125basedon the Therealsowouldhavebeenplenty resistance of yesterday. 38.2retracement just of ordersto buy above1125for a breakout, but whenthe SPnevertook quickly.Whenthingslike out the doubletop theywouldhavebeencancelled of the ratioswe useandalso on youthe importance this happenit reinforces usedat the CME. H(ECLIflON SYSTEM thefragilityof the ELECTRONIC ONEMINUTEBARS Eotr+

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to get out andthis Theguysthatwerecaughtlongat the top hadto scramble wouldhaveaddedto the floodof sellingoverthosenext4 minutes.It wasas if the marketwascaughtin a downdraft. close.As onlyonetickfromyesterdays Nowthe markethasclosedat LL22.75 after the close anyonenot followingthe one of my studentscommented marketcloselyduringthe day,and who loggedon afterthe closeto check howtheir401'sweregoing,wouldhavethoughtthatthe marketdid nothing ontheday!O ESIGNAL

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Trading to WIN Cowse - One day at a time


Far from it, fortuneschangedhands.Now we can ask ourselves the next question. Wheredoesthe marketgo ontotomorrow? I havethe sameanswer - just prepareproperlyandseewhathappens. to thatoneI hadyesterday So here is the preparation: SPChaft 6+

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The1125levelis the RESISTANCE, butat the sametimeit couldbe brokenas all the bearsknowthat, that is theirvulnerable pointor theirAchillesheel rightnow.Thethree-dayswingis UPandthe marketis in a two-dayposition so that if it takes out 1125 it signalsmore upside.To makethe bears comfortable the marketneedsto go below1121first andthen 1116.That's myfeelings for tomorrow andI willworkaroundthem. Friday19h March2004: Settlementof MarchOptionsand Futures. EEf+

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71




One of the questionsI am regularly asked is how do I deal with the Globex session when it makes a higher high than the day session and appearcto negatethe geometry in force at the time? above1125whichwe In today'scaseGIobex madea highof tI27.2 breaking haveasan important38.2fromearlierin the week. My view is that the SPX(CashIndex)overrulesthe futureswhenit comes picture. the largerdegreetechnical downto assessing

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Witchingtherewas the fact that we weregoinginto Quadruple Considering boundto be an effort by vestedintereststo rampup the priceon one side andfor othersto try andpushit down. openedthe marketwasbackdownbelowthe 1125so I Whenthe daysession still wouldhavefiguredthat to be my decisionpointto confirmthe market was goinghigher.Whenyou look backat the earlierpaft of the weekthe 1100but couldnot rally marketfoundsuppoftjust abovethe psychological abovethe 38.2of the priortwo-weekdecline. front.TechstocK on the employment Thetalkall weekhasbeenof concerns aresaidto be overvaluedandhavebeenin decline.AsI pointedout a couple The of weeK ago the insidershavebeenbuildingsizeableshoft positions. moredifficultto find growthstocKthatthey fundsarefindingit considerably beenrange Theoverallmarkethasbasically caninvestin for the longer-term. of February. boundsincethe beginning we haveto go on is the market information Andthe mostimportanttechnical to the retreatover the last few weeK is comingfrom a 50o/oretracement entirebearmarketof 2000-2002. ESIGNAL

72



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Friday's trading: I wentout for dinnerand didn'tcomeinto my officeuntil5:00am(2:00pm ED. My thoughtsas I studiedmy chartswerethat the marketwasexhausted to the upside,andas it was late Fridaythe bullswouldwantto bailout before the weekendclose.It wassnowingin NewYor( so manyof the WallStreet traderswouldleaveto go homeearly. Therewasno newsleft to comefor the weeksothe marketwouldworkitselfto the technical signals. At 2:30pmthe marketreversedon a 50o/oretracement of the daysrange givingthe 2ndSIGNit couldgo downfromthere.The lst SIGNwasthe falae breakof suppottat 1115. I just figurethat anyotherprofessional traderwho wasthinkingalongthe samelinesas myselfwouldsellthe 50o/oretracement andas the lowsfor the daywereon shakygroundit wouldn'ttakeanyeffort for themto break. Nevertheless the safesellwason a breakof 1115,as that wouldbe a good confirmation that the bulls had given up on the day. The next technical suppoftbelow1115was at a doublebottom1111.5and a 1:1 downfrom 1118.5- pretfysimpleto work out. If afterthat if 1111.5cameout the marketwouldjust slidefor the restof the afternoon. ES Ed+

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Whenyou seewhat happened after this it will explainto you why LOGIC playssuchan importantpartin yourtrade togetherwith technicalknowledge process. selection Onceyou know how the moneyplayersthink on mass,tradingto WIN becomes easy. ESIGNAL

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for a shorttime the 1111.5targetI hadthe marketstabilized Afterachieving pointing downand and rallieda smalldistancebackup. The signswerestill by now it was3:38pmETandgettinglate.Therewasvery littlechancethe buyersweregoingto comebacknow. 1111.5- BREAI(S: EEF+

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Thebullshadpackedtheirbagsandso it wenton downintothe closemaking lowerlowsand lowerhighs.It neverlookedlikerallyingitselfout of trouble, retracement. the 50o/o asit hadto rallymorethan3.5 pointsto overbalance Nowwe will havea coupleof daysbreak,refreshour minds,andthencome andkeepon doingthe sameoldthingswe do eachday. backMonday game. it isjusta disciplined Nothing changes ESIGNAL


I I I I I I I I




Stafting point for Monday: SP EEf+

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I'll be usingthe SP levelsfrom the day only tradingas my guideto the technical signals.Noticehowthe marketwhenit camedownFridayhadno levels.I thinkthe reasonfor obvioussupportat the 50 and61.8retracement thiswouldhavebeenthat mostof us werenot confidentwith the 1125high as the market whenthe ESday and SPGlobextradedhigherintermittently paft wastestingits highsthroughout the latter of the week. The thing one has to rememberas we go into next week is that all the distractions of the expiringcontractsand optioncontractswill be out of the positionand way.The largerplayerswill haveto assesstheir longer-term renewbuilding in thatdirection. up positions Personally I don't know what will happeneachday or in the beforehand eachday I will know available longer-term. Butas new information becomes youwill alsoknowhowto handle howto handleit. If youfollowmy approach it. Thetruth is it takesworkand if you don'twatch and listen to the market youwill nevermakea success. the market Youcouldsaythat understanding predictable wife, at timesand is notunlikeunderstanding a highmaintenance you is actingin find the market When mostof the time. totallyunpredictable manneryouonlyhaveto standasideuntilyoucanget back an unpredictable or an in stepwithit. Themarketis onlya bunchof peopleactingin a rational irrational manneron masswhenit is allsaidanddone. The moreyou studythe marketactioneachdayandseewhattheydo when or keyto WIN.As all the technical signalslineup you will havea passpott longasyouapproach the marketeachdaywitha clearheadyouwillbeOK. ESIGNAL

75




I

From Briefing dot Com Weekly Wrap March L9,2OO4 If you didn't count Mondayand Friday, it would have been a pretty good week for the market. However,when those two days are thrown into the mix, the balance of power quickly shifts back in favor of the bears. On those two days alone, the Dow, Nasdaq and S&P were down approximately 250, 70, and 30 points, respectively. The retreat on Monday was attributed to concerns over al-Qaeda's reported responsibilityfor the Madrid bombings. Meanwhile,the retreat on Friday, which was a quadruple witching options expiration day, occurred largely in the afternoon trade. Presumably,the expiration activity contributed to the late selloff, along with some frustration on the part of speculative accounts that were banking on confirmation that Osama bin Laden's right-hand man, Ayman alZawahri, had been captured. Reports on Thursday indicated that it was likely that al-Zawahri had been corneredby Pakistanitroops. Whateverthe motivation might have been, Friday'spullbackensured yet another down week for the market. The losseswere most pronouncedamong the big-cap technology issues and small-cap stocks. With the market in corrective mode, their underperformancestands to reasonas they had the biggest gains last year, and thus, have greater vulnerabilityto profit taking activity. Comparativelyspeaking,the Dow fared the best among the major indicesfor the week as it declinedjust 0.5olo.Gainsin 3M (MMM79.76), which increasedits Q1 and FY04 guidance,Caterpillar(CAT 76.30), AT&T (T 19.65), and SBC Comm. (SBC 24.62) underpinnedthe blue chip average. Microsoft(MSFT24.63) was a notable drag, though, as it withered in the wake of reports that it failed to reach an agreement in settlement talks with the EU. Shares of MSFTnow stand just a little more than a dollar above their 52-wk low. From an industry perspective,the employment services,Internet software, steel, home entertainment,gold, householdappliances,machihery,footwear, managed health care, and oil & gas equipment were your relative strength leaders. On the other end of the spectrum, the department store, systems software, computer & electronics, health care equipment, home furnishings, commercial printing, semiconductor,and semiconductorequipmentgroups were the notable laggards. Semis were particularlyweak, as evidencedby the 4.5olodecline in the SOX Index and the utterly disappointingIPO of SemiconductorManufacturingInternational, which fell L7o/ofrom its offering price. Commodities,once again, had a strong showing as the CRB Index was up 3.2o/o for the week, driven by ongoing supply concerns. Oil prices, which are the most watched of any commodity, tacked on another 5.2o/oand ended the week at $38.08/bbl. Gold prices,meanwhile,postedtheir biggestweekly gain this year, shooting up 4.3o/o to $4L2.7O/oz on persistent safe-haven buying interest followingthe Madridbombings. The yen was a star performer on the week, too, as it gained 3.7o/oagainst the dollar with Japan making waves with its declarationthat it will be backing off its interventionefforts to weaken its currency. The Treasury market was pretty much flat for the week with the yield on the 10yr note at 3.77o/oby Friday'sclose. That was off its best closing level of 3.680lo earlier in the week as traders booked some profits from the overbought market. A stronger than expectedPPI report for Januaryfacilitatedtheir efforts as did the speculationthat al-Zawahrimight soon be captured.

ESIGNAL

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The FOMCmeeting on Tuesdaywas largely a non-event as the fed funds rate was maintained at 1.00o/owhile the directive repeatedthe stance that the Fed can be patient with its accommodativepolicy. Some added attention was given to the slight change in wording of the directive with respectto the lag in hiring activity, but for all intents and purposes, there was little that was new in the Fed's stance. Economic data this week was mixed, but generallysupportive of a reboundingeconomy. There was nothing in the way of substantiveearnings warnings and the earnings news itself was solid with Lehman Bros. (LEH 85.19), Bear Stearns(BSC 36.86) and MorganStanley (MWD 59.61) highlightingthe action with blowout reports. General Electric (GE 30.14) announced it was acquiring InVision,but more importantly,indicatedQ1 and Q2 earningsshould be at the high end of its target ranges. The encouragingtrend in earnings is a major factor for why Briefing.combelieves the market's recent struggles are nothing more than a normal correctionwithin a bull market. That correction arguably has more room to run, but even so, we remain grounded in our moderately bullish long-term outlook and forecast for a mid- single digit gain in the market this year.-- PatrickJ. O'Hare Briefing.com

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Be prepared. Nextweekis the Marchequinoxandthe 4h anniversary of the March2000 S&Phigh.Thereare a coupleof otherimportantanniversary datesas well wheretheS&Pmadeimpoftant sentiment swingsin 2001and2002. ESIGNAL




Therewas somethingelse I meant to tell you: from Backbeforethe S&P500 finallymadeits recenthightherewasevidence the DJIAthatan important timeryde in USstocKwaspresent. Thepicturesaysit all. Dov.rJones Industriol Index

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50o/oof the time downwouldhavebeen498 daysup - the recenthighon the DOWwas497 daysup from the October2002low. The DOWincreasedin valuefrom the Octoberlow 50.3oloin this time period. Here we are now: IIJIfl date B40Z1g hi 1B7S5.BB

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Week ending 26b March 2OO4: This week developedinto a mixed bag - first down and then up, finishing backnearlywherewe closedon the previousFriday. --Lfuinsr-Johwrns.€b. @es-ccru OtDc Or €s Oco @DsihOri*

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Mondaystaftedoff with a gapdownto testthe 1101lowsandpromptlybroke down.Tuesdaythe marketmadeseveralattemptsto get backthroughthe 1100andfailedon eachoccasion, this resultedin a hugeselloff latein the day.Wednesday after someto andfro the marketreverseddirectionbackup froma majordegree38.2retracement level.Bythe endof the day,evenafter a sharprallyit closeddownon the day.Thursday's tradingbeganwith a gap up openingwhichthey couldn'tfill and finishedthe day abovethe 1101 resistance. Thismoreor lessvalidated the 38.2reversal as a changein trend. Fridaythe marketwasgenerally most up of the day,but in the lasttwo hours or so cameback8.75off the dayshighclosingunchanged on the day and unchanged for the week. Therallyhighon Fridayreached within2 ticK of a 38.2retracement backup of the Lt62.75highand t084.75low range.Butthe rallyexceeded a 1:1 of the previous correction lastweekby 3.75. 29.25versus25.50 I wasthinkingon Fridaythatthe 1:1(1110.25) wouldhavebeenan excellent shoftandit did looklikea chancefor a while.Butin the endthe marketcould notoverbalance the previous smallercorrections it hadmadeon the rallyup. I havea friendfromGermany visitingwith meandhe is continually askingme questions. Onething I havebeentryingto explainto him this weekis that you canonly be guidedby whatthe marketactuallydoesandthat is why it doesn'tpayto forecast.It is alwaysbetterto just takeit onedayat a time.

ESIGNAL

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As we go into next weekwe now havethe marketsittingabove1100but undera 38.2 retracement of the currentdecline.But we havealso been the 1:1Alt. andexceeded rallyingfroma majordegree38.2retracement Whowantsto makea forecast? EEf+

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ThepointD D is subjectto change. OnthischartX, A, B & C areestablished. is 8.75downfromC. AB= 11.5. WaveCDof ABliesat 1102.50 Soa 1:1Alternate There's a 38.2of XCat 1102.75 A 50o/o retracement of XC(3 dayrange)is at 1099.50 Andthe psychological or naturalsupportis 1100 it is not. If the marketbreaksbelow1099it wouldlookbearishotherwise

ESIGNAL

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Week ending 2ndApril 2OO4= This week the marketopenedat 1112.5on a gap (low for the week) and finishedat tt42 after makinga highof 1145on Friday. DAILY ESCONTINUOUS - @E$coil @nc @r Os O60 Eoeir Orirt EEtr + J Equitis. J grhsrinFv!'5 (€S iF - SIP 5lE E-m!!i FuluE XIBCD e1-59 b.vft!

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range. 1145represents of the 1163.75-1084.75 a76.4(2x38.2)retracement Throughout this weekthe marketcontinued to feedon the bullishsentiment reportsto talk aboutand that abounded. Therewere no negativeeconomic reportcamein with an increase of 308,000 on Fridaythe Marchemployment jobs for the period.This repoftwas released at B:30amETandthe Globex marketralliedstronglymakingthe 1145highin advanceof the day session opening. Friday's tradingrangewasa mixedaffairwitha lO-pointrange- down- updownandthen up to finishthe day.As we cameintothe last90 minutesof the session tradersboughtthe marketoff a doublebottomon the day.There werenota lot of traderswhowantedto be shortoverthe weekend. If you look back on the week you will see that the upwardtrend was confirmed eachstepof the way.Firstoff on Mondayit tookout the 38.2,then The nextresistance wasthe aftera pauseat the 50 brokethroughTuesday. for a while.Thursday whenit tested old 1126.5highthat heldup progress the 61.8it wentstraightthroughbut did reversea littlehigher,then it went sideways for the restof the day.Fridaywe knowaboutalready. Aswe go into Mondaywe are left with supportat L134.75(Ihursday'shigh) and1135(Friday's low).Theactionon Fridayhaslefta gapto befilled. ESIGNAL

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I've markedthe followingsupportsLL34.75,1128and 1125that wouldneed to be brokento indicatea reversalof this upwardtrend that has beenin progress highnot for overa weeknow.Onthe highsidewe havethe LL63.75 got there. far awaywhichwouldceftainlyattractsellingif we AsI havesaidso manytimesbeforeI am not makinga forecast.Neveftheless recovery the jobs repofton Friday(if it is correct)giveshopeto a continuing numbershas long beenthe subjectof in the US economy.Employment past year. for the Justthe samethe US economystill needsto discussion Bush create3,000,000 morejobsto get backto whereit waswhenPresident in in storefor investors waselected.Sotherecouldbe a few disappointments the monthsahead.I alwaystakethe viewthat it is betternot to countyour chickens untiltheyhatch. It won'treallymatterwhatthe S&Peventually doesin anycase.Justso long go as eachday it continuesto up and down and createregulartrading oppoftunities.Somethingsdon't changeand eachday it just offersthe chanceof makingeasymoney. : n0.00 .tm0fit

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The NYSEadvisedon the 1s Aprilthat it wouldbe replacing 3 stocksin the DJIAindex.Thenewstocksenteringthe DJIAindexnowhavea muchgreater capitalisation valuethan thosestocK beingremovedfrom the index. It is hardto say how muchthis wouldaffectthe valueof the indexunlessthey will haveto adjust INDH(FUNDS adjustit to fit the changes.Nevertheless, portfolios selling their by buyingthe newstocksand out of the old ones.This couldhavea bullishimplication for the DJIAoverthe nextweekor so. I did mentionthat Backabouttwo weeksago,on page25 of this appendix, just the DJIAwastrading abovethe 10,000levelwhenwe werein the recent supportof some The 10,000-level decline. wasthenviewedasa psychological significance. The DIIAdid not tradebelow10,000beforethiscurrentrallywe areexperiencing so it hasto beviewedas an importantlevelin the future.By as that I mean,if the DJIAwereto breakbelow10,000it wouldbe perceived position holders.Sofor nowwe canuse a bearishsignalfor the longer-term thisasa guideto the currentstateof strengthor weakness. Week Ending86 April 2OO4- EasterHolidays: for Thisweekstartedwith a rallyto a new highof L149.75,then sideways two days.Thursdaythe marketopenedon a doubletop with a highof 1150 economic aftersomegoodprofitreportswerereleased andno reallynegative news.Butthen it just tradeddownon low volumefor mostof the day in a controlled technical manner. Youshouldstudythe 5 minutechaftfor Thursday as it onlygoesto reiterate you allthethingsI havebeenteaching in thiscourse. ESIGNAL

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Today'sselloff beginsfrom a doubletop with Mondayandfills the gap left A weakrally backup to whereit brokethe from the closeof Wednesday. prior highon the way downfollowedby anotherselloff. I supportfromthe couldn'tsee a lot of reasonsfor the supportat 1139.5but the rally that of the daysrangeto date retracement followedstoppeddeadat the 38.2o/o market Whatfollowedwasa sideways offeringa clearcut sellingopportunity. forming a RECTANGLE on low volume and setting up anotherselling testedthe priorlowfor the day Theinitialbreakof the rectangle opportunity. Whentheycouldn't at 1139.5andtheyboughtit backto retestthe breakout. once againandthey clear-cut sell get it backinsidethe rectangle it becamea it downto newIowsfor the day.Therewasanothershottcovering hammered rallyof 2.75pointsthat didn'tmakea lot of sensebut the targethadto be 10.5downfrom the 38.2pointat 1143.5and as it turnedout the decline terminated exactlyat 1133settingolf a rallythat lastedfor the restof the afternoon. closewith a Asfor the weekwe finishedonly2 pointsdownfromlastFriday's rangeof t7 pointsfor the week.We certainlyhaven'tseenany sign of weakness to speakaboutthisweek.Butthenwe haven'tseenmuchstrength either.As I saidlastweekwhat'sit matteranyway,just so longas it goesup anddownfor useachday. technicalpicture I wastryingto roundoff this coursewith clearlonger-term of the US stockmarketbut it seemsto me that we are stuckin a trading bearRobertMinerwasat rangerightnow.I seethisweekthatthe perennial two weeksago the S&Pwouldtop out between it againwith a prediction "B" joined waveof majordegree.Oneof hissubscribers 1125and tI47 in a myTTWgroupthisweekandwantedto knowmyopinion. ESIGNAL

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Well,for all the goodit will do anyoneI am teachingto day trade,doesit matter?It reallydoesn'tmatterto me whatthe marketdoeslong-term. Just as longas it staysopenwill begoodenoughfor me. JEquili4.

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You neverknowbut this marketmaybeforminga headand shoulders top patternor it couldbe settingitselfup for anotheradvance. Two thingsare obvious. 1. The high at 1163.75is a 50o/oretracement of the completedbear marketfrom2000-2002. 2. The low at 1085is a 38.2o/o retracement of all the gainsfrom the advance that beganin Augustof 2003. ThebestadviceI couldgiveanyoneis to just takeit ONEDAYATA TIME. Followmy rulesand applymy logicto the marketandyou will be fine.As soonas you learnto do your own workandforgetaboutwhatthe so-called "Guru's"are sayingthe sooneryou will be ableto makeconsistent money trading. Tradingis just a job to me now,well maybeit is morethan that - it has becomea way of life. I feel that by havingwrittenthis bookI am giving something to the futureI can be proudof. I hopeall thosepeoplewho buy thisbookgetoutof it whatI intended. Goodluckwith it. BryceT. Gilmore 10bApril2OO4 ESIGNAL




Epilogue: Nowthat I havecompleted this manualto the beststandardI canrelateto I wouldliketo mentiona fewthingsI amgratefulfor. of tradingI owemy Overall the yearsI havebeeninvolvedin this business continued success to the peopleI havemet alongthe waywho encouraged minds futuresandmixingit withthe smartest meto think.Tradingcommodity man's in theWorldis a thinking business. somehavebeen Mystudentshavecomefroma widevarietyof occupations, tradersbut manyhavejust beennormalpeoplewhowantedto learnhowto tradeandaskedmeto helpthem. In the processof them askingme questionsall the time on the various aspectsof my trading approachthey also helped me understandthe havewhentheytry to entera newprofession. difficulties newcomers Severalyearsback,when I first promotedan Internetsite "Club L44" for studentsof my soft\/areandbooks,peoplewhowantedto learnandneeded a teacher.I attracteda new breedof students.Frommy interactionwith someof thesestudentsI soonbecameawarehowotherswereoverlooking thesimplest of thingsI wasusingto makemoney. Manyof the thingsI haveexplained in this text are not new.Manyof them I have traders.Nevertheless are taken for grantedtoday by professional give in long run. But the edge the to mea better developed somerefinements mainthingI havedoneis to prioritise an orderin myapproach. wastheirinherent ThecommonproblemI havefoundwith mostnewcomers faultfor complicating everything. Tradingis a simplematterof Tradingis not a complicated occupation! identiffingan opportunity and takingit. If it workslike it shouldyou make money.If it doesnotworkyoutakea smallloss,getout andstartagain. that openup a window thereareceftainsituations Onceyou canunderstand of oppoftunity andofferyou a chanceto profityoutakethemandas soonas the windowclosesyou get out andgo backto the drawingboard;thenyou willbeTrading to WIN. Thereis no roomfor fear, hopeor greed,or what mighthavebeenrn my equation.Eachday is a new day and you just take it as it comes.To do trading. will onlyleadyouintobadhabitsandunprofitable othennrise BryceT. Gilmore. Epilogue

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Trading to Win - Bryce Gilmore

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