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“Believe it or Not”
You can learn here in this page of our Case Study Course, how to anticipate, for the months ahead, when to take profitable action in the stock market. You can do this be simple graphic mathematics. At the end of March, this chart gave you all the information you needed to make money in the stock market during the next seven months, by buying near the lows and selling near the high pivots. “here’s How”, so drink deep of the new revelations from this Fount of Wisdom.
You draw a Median Line (ML) as shown from 1 bisecting the distance between 2 and 3. Then draw another ML from b, bisecting the distance between these same pivots 2 and 3 again. One of our discoveries is that when prices meet one of these ML lines, the probability of a countermove starting at or near the meeting point is high. So whenever prices drop to meet the ML from b on the chart, and stop, you can buy with “impunity and abandon”, figuratively. And when they rise to meet the ML from 1, you can sell.
Our next step is to use our Action-Reaction Method in combination with the above Median Line (ML) Method. So draw a Down Trend line (DTL) from the bottom of the range each week that a low pivot shows. We call these lines Action or A lines. And to the right of the SRL you draw other parallel lines, each equidistant from the DTL to its corresponding A line. We call these new lines Reaction Lines (RL), for when pries meet these lines in the future, they react downward, whereas the price rose from each of the corresponding Action or A lines in the past history as shown by our chart. So you Sell when in the future prices rise to meet these lines.
Now to see how these lines we drew actually work, loosen the rest of the chart from the back of this sheet and fold it over so you can see it from this side. You see that the ML from b told you to buy at 3, 5 and 7,& 9 and that the DTLs enabled you to sell at 4, 6, 8 pivots. This was always before a drop of enough percentage to give you a nice profit.
Next week our Case Study will enable you to apply our A-R lines so you will have still another method for knowing the right times to buy in contract to this weeks use of A-R lines showing when to sell.
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Professor Anderson’s Five Pivot Rules
The late R. N. Elliot and John C. Sinclair of Francis I Dupont & Company were the first to point out that all bull markets are composed of five fluctuations, three up and two down during the rise, and a down –up-down formation during the correction, or counter move following the rise. Elliot’s contention was that this followed a law of nature.
Your director has had pleasant and informative discussions with Mr. Clyde Morse, a former coworker with Elliot, and incidentally the grandson of Morse of telegraph fame. Mr. Morse stated that those apparent inconsistencies where there could be more than five trends counted were termed extensions by Elliot.
Professor Anderson’s Rule differs from Elliot’s in observing 5 P after the zero starting pint for the first rise, and 5 P on the down trend before a down trend line is crossed by rising prices. On the enclosed charts you can see Elliot’s 3 down moves indicated by a, b, c. But in nearly every case you can count 5 pivots after the 0-4 line has been penetrated before the next five Ps follow the crossing of the resulting trend line, and action taken.
The EP formation is a special case of the Five Pivot Rule. It is special because it alone indicates a minimum drop where R equals A max in nearly every case as shown in the Oct ’66 Copper, where the 0-4 line has been drawn in. You should draw in the other 0-4 lines for experience. And notice that on frequent occasions the drop after other rising 0-5 has been penetrated may be less than the farthest P above the 0-4 line. Also on very rare occasions this line may be penetrated temporarily, for a very short distance, before a new resumption of the original trend that continues until another 5 P has formed. The first of the above cases is shown in red on the Feb bellies chart [Ed: Chart at AR44]. The second case of temporary penetration is on this same chart at P6 in August. The resulting “whip-saw” loss may usually be more than offset by prompt action when prices cross either the minor trend line from 5 to 6 in August, or the upward slanting line drawn through the 3 and 5 in July, as examples.
Eventually the extension of any 0-4 line will be crossed and will provide a good gain more than making up any of these rare whip-saw losses. (Shown by the October drop in Feb. Bellies chart)
The great Helmholtz wrote, “Of all branches of human knowledge there is none like geometry. It escapes the tedious and troublesome task of collecting experimental facts. The sole form of its scientific method is deduction”. You have noticed that the morphological approach used in this Course employs simple geometry. It provides consistently unusual profits as long as its rules are acted on. As Helmholtz indicated it avoids the endless facts upon which fundamentalists base their approach toward price prediction.
Alan H. Andrews, Director
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Professor Anderson’s 5 Pivot Rule
Zero to Fourth Pivot Rule
Expanding Pivot Rule
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As soon as you draw your (0-3) as CL for A-R rule start as soon as possible to draw you’re a lines through the top close of each real UT (up trend). Then as new ranges develop from day to day you see where prices will intercept the R lines if they fall to them that day. And if they pass through each or any R that shows the probability of new lows, beyond the recent ones.
What distinguishes the close used for the A line is, it is the close at the top of each fluctuation, with a UT before it and a DT following it.
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“God is a Mathematician”
If you drew in the (A) and (R) lines on May Soybean meal chart as suggested in previous study you see they looked like the lines on the lower left chart. As you notice, “Where lines converge with price, a pivot (P) is formed”, an important Rule. Also note that the centerlines were all multi-pivot lines (MPL). Note that (A)6 above the MPL6 that slopes about 45 degrees had its corresponding (R) at the final low, but it was also the (R) above that MPL6 that was at the peak pivot.
The chart on the right [in this document it is the second chart below – Ed] shows that fluctuations during July and August enabled you to draw several MPL converging around Nov 22. The one with the most Ps was MMPL14. Lay over this the rib of a fan and note how price movement in September and October enabled you to slide your pivot finder along this MMPL14 until ribs O and P were over MPLs in those months. This located the center of the fan also near Nov 22.
As prices dropped along MMPL14 in July and August there were 4 rallies which enabled you to draw WMPL and similarly at W, Y, Z. Notice that the slope of these lines prognosticated a center around the November 15 low. And note that these lines fitted the 10 degree angles made by the ribs. This particular chart is of special interest in many ways. Particularly because the upribs pointed to a low. And these lines were indicated months before anyone dreamed that this Salad oil didn’t exist as stated by the Salad Oil King. Does this fact show that there are no secrets in the world of mathematics that determined where the top and low peaks were to come?
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The Gold chart shows a similar pattern to that of Silver. Since this is a chart I used before there will be no explanation of the course lines that I had upon it. The lines should be apparent to you nevertheless. Since we are discussing EP’s just note that activity within the semi-circle I have drawn. P1 was on Feb 23, P2 was on Feb 27, P3 was on Feb 27, P4 was on Mar 1, and P5 was on Mar 5. There are numerous other reasons for selling this market on Mar 5 to coincide with this EP. Most notably the 5 P’s on the UT from 1-26 and the 11-17 ML 11-30/1-26. We certainly hope this helps in your study of course methods.
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This cotton chart from July 1984 shows a classic EP formation. After a long rise from Feb 13 the market topped out with an EP. This is shown by the circled numbers at each P. NO discussion is made of the other lines as they were already on the chart from my previous trading.
The dates for the P’s are: P1 Mar 12, P2 Mar 19, P3 Mar 21, P4 Mar 27, P5 Apr 2.
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I went back and found some older 1984 charts that I had remembered using for trades and have included them in this letter for our discussion of EP’s. This silver chart shows a good example of an EP, contained within the half circle, and numbered from one to five. Just so there will be no confusion whatsoever I am including the dates of the P’s so you can follow along.
P1 was on Feb 23, P2 was on Feb 27, P3 was on Feb 27, P4 was on Mar 1, P5 was on Mar 5.
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FFES Letter for the week of January 7, 1985
There was no letter last week due to the holiday and shortened trade week.
Just another reminder to those who have not sent in their $25 and still wish to receive the weekly letters.
First of all there was an error in the sugar chart comments in the 12/24/84 letter. Please correct line two (down from the top) to read: “Evident when considering that the last ML of any significance that was reached by price action was.” This should make a great deal more sense to the intent of the comments.
For those members sending in questions for the professor to answer please follow these instructions. Leave an adequate amount of space on your chart or on your paper after the question for its answer.
We have had a few inquiries about option pamphlet information from subscribers. If you would like we will have our broker send you some information, just send us a note requesting this information.
Because of some of the questions sent in about our discussion of expanding pivots (EP’s) and skewed expanding pivots (SEP’s) we are going to devote this whole letter to their discussion and presentation. We had assumed that all of our members were familiar with these formations and their import upon market action that tends to follow their appearance. First, the expanding pivot is a situation where the market makes a pivot, then a lower P, then a P higher than at P1, next a P lower than at P2, and finally a P higher than at P3. This is shown schematically at the bottom of the page. A SEP is similar in that the P’s swing wider but no new lows are made, only the size of the swings increase, This is also shown schematically. Note that P3/4 is greater than P1/2 and P4/5 greater than P2/3.
Cocoa could not make the 9-11 ML 9-24/10-4 and falls to 9-24 ML 10-4/11-13
The 8-1 MPL 10-18 can be a CL to measure A & R. A is at 8-30/9-24 and R is down at this equidistance.
10-4 could be P1, 11-13 P2, and we are falling down to a P3 at 9-24 ML 10-4/11-13 or possibly to its MLH with a possible P3 at the R line.
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1 – Major 2P line from 5-23 to 8-31
2 – Market too weak to rise to 2P line and the 7-30 ML 8-31/10-1
3 – The 8-31 ML 10-1/11-13 points down steeply as does the 9-17 Schiff ML 10-31
4 – Probability is for lower prices than at 132 on 10-1
5 – Note the 5P’s up from 10-29 to 11-13 before a price reversal
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Wheat gave 5 major P’s on DT from May 25
A new UT started on 10-5 and prices rose to the 7-25 ML 8-3/10-5 where 5 minor P’s were made before a reversal down close to the 8-3 ML 10-5/11-6.
If the space at 11-15 holds then prices probably are going higher than at 11-6 on their way to a P3 at the 10?5 ML 11?6/11?15.
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Soybeans are making a P5 of the DT that began 11-1.
Note that the 9-4 Schiff ML 10-5 called the P3 reversal on Nov 28 and is basically containing the downside of price action so far. The 11-12 ML 11-28/12-3 probably will call the P5 in the 600 area.
If this probable market action occurs than this should be the start of a new up trend. Also note that the MLH of the 11-12 ML has been the overhead resistance to prices so far, that is the sliding MLH.
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After 5 P’s of UT from Dec 7 we have made 5 P’s down from 11-23 to the 10-11 ML 10-22/11-23.
The probability is for prices to now rise to the 10-22 ML 11-23/12-4 before a reversal. Please note that the overall trend is still up so we should expect higher prices after a small reversal. Note the 0 ML 1-2 calling P5 of UT and its MLH showing the point to sell after this rise.
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Orange Juice had broken the neckline of a significant head and shoulders formation as noted (H for head and S for shoulders). Prices are in a steep drop along the 9-21 ML 10-30/11-26. The H&S projects to 144. If we use the 7-12 2P 10-30 as a CL to measure A & R we note the A line drawn H to CL at 9?21 high to give us our R objective at 146. It may be hard to believe that O J, going into the potential freeze season, projects to this low area, but that is the current probability.
Remember the course axiom the steeper the ML the faster the price action.
(R line not shown as it is off the chart)
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