Market Technician

Issue 82 - March 2017

The Journal of the

Society of Technical Analysts

MYANMAR:
A NEW CHAPTER OF THE STA

24 31

Unravelling the The Manifestation

DNA of the Market of Universal Law

Applying the Double Complexity, Chaos and

Helix Framework to Wyckoff the Elliott Wave Principle
and Elliott by Peter Goodburn
Contents

Foreword 06
Our thanks to Deborah Owen

News 07
Current and former presidents come together
Our new Myanmar Chapter
Introducing the STA Forum

Research 10
The Crash of 2017
Space and Time: The final frontier
Unravelling the DNA of the Market:
Applying the Double Helix Framework to Wyckoff and Elliott
The Manifestation of Universal Law:
Complexity, Chaos and the Elliott Wave Principle
Did you know?

Analyst Focus 37
The STA has been instrumental to my success
Head and Shoulders Above: Humans are the problem

Book Review 40
#TradingThought by Stephen Hoad

The Society of Technical Analysts 41

Benefits of STA Membership
STA Calendar
STA Library
The Education Channel
The STA Executive Committee

Disclaimer: The Society is not responsible for any material published in The Market Technician and publication of
any material or expression of opinions does not necessarily imply that the Society agrees with them. The Society
is not authorised to conduct investment business and does not provide investment advice or recommendations.
Articles are published without responsibility on the part of the Society, the editor or authors for loss occasioned
by any person acting or refraining from action as a result of any view expressed therein.

Editor's Letter
Nicole Elliott
Technical Analyst, Private Investor,
E-journalist for the STA
The Society of Technical Analysts: www.sta-org.uk
3
Its with delight and trepidation that I write this, my first letter to STA
members. Im honoured but also worried because Ive got some very big
shoes to fill - those of my talented friend Deborah Owen who has been
doing this job brilliantly for many years.
You will have already noticed the new layout of the journal and I should warn
you that from now on it will only be available in electronic format. Im guessing
several other IT dinosaurs like me will miss the printed edition, but postage costs
have become prohibitive - as has the sheer physical effort of stuffing and lugging
envelopes. All is not lost though as the new version has its advantages: lots more
pages for a start, and we can embed links to other articles and to the STA website
that might be relevant and useful.
Likewise, the Home Study Course is downloadable via a link format only and this
has proven popular with those who find it difficult to get up to London as well as
people who prefer working at their own pace.
Talking of on-line, the STAs Library offering has also changed and, Im sure youll
agree, improved. You can see the most popular books we own on The STA library
or CloudCollectorz.com and UK based members can borrow them. They will
be posted to you but this does, of course, mean missing out on an outing to the
Barbican Library or the City Business Library, a reference library, where hard copies
are held.
In financial circles, technical analysts are known for their collegiate and co-
operative attitude, for being friendly, and for enjoying each-others company. What
with our summer and winter parties, monthly networking and drinks, and annual
dinner, Id say were quite the party animals. High spirits were out in
force on the 30th November as we celebrated the 30th anniversary
of the incorporation of the STA. The gorgeous National Liberal Club
did us proud so no wonder a record crowd of 120 showed up.
You might have thought that was enough for a year, but weve
already got a new date for your diaries. Pencil it in now: Thursday
7th June 2018, a very special celebration for the 50th year since the
Association of Chart and Technical Analysts (ACTA) was established
(ACTA was the predecessor of the STA). It will be at Londons Living
Room - City Halls Venue with a View - sometimes known as the
Citroen headlamp building almost next to Tower Bridge on trendy
South Bank. We cant guarantee that Mayor Sadiq Khan will be there
for selfies, but weve got other surprises in store.
Its not all fun and games though. The Society takes its educational
role seriously and continues to offer the highly regarded Diploma
Course, now with CISI accreditation. A thank you to Simon Warren,
who has organised and coordinated the University Trading
Challenge at the Cass Business School. We must also mention Tom
Hicks who manages to convince or strong-arm top notch speakers
to address us on the second Tuesday of the month. And now, in this new format
Journal of the STA, you have more pages of fresh research.
Enjoy!
 PART I VIDEO - DRIVERs/ThEmEs:
RE-SYNCHRONISATION
between DM & EM Stock Indices
+ 2nd Phase of the INFLATION-
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[Elliott WavE/CyClEs - REpoRt/8,400
WoRds +38 gRaphs vidEo 1hR 30 mins.]
Institutional subscription enquiries, please contact Peter Goodburn @ services@wavetrack.com or visit the Help-Desk @ www.wavetrack.com
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COMMODITY REFLATION to
record highs Base Metals/
Miners, Precious Metals/Miners,
Energy Sectors/Crude/Brent Oil
[Elliott WavE/CyClEs - REpoRt/9,200
WoRds +68 gRaphs vidEo 1hR 30 mins.]
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PART III VIDEO - DRIVERs/ThEmEs:
8-YEAR US$ DOLLAR CYLCLE
completion in 2017 Major
Reversal-Signature G8
Currencies, EM Currencies,
Commodity-related Currencies,
U.S./European Interest Rates
[Elliott WavE/CyClEs
REpoRt/5,000+/- WoRds +52 gRaphs
vidEo 1hR 30 mins.]
INSTITUTIONAL CLIENTS
Business trip to Dubai?
Learn on the go with STA's Home Study Course

This Home Study Course (HSC) is for students who wish to learn at
their own pace, rather than in a classroom, or who are unable to attend
the weekly lectures in London due to either time or geographical
constraints. The STA Home Study Course is the official publication from
the STA, containing chapters written by leading authors in their field.

The program is divided into 12 units designed to cover all relevant

aspects of the STA Diploma Part 1 and 2 syllabus and examinations.
Each unit carries a series of multiple choice questions to test the
students understanding of each topic before he/she sits the Part 1
Exam. Advice on report writing, commentaries and exam preparation
are also included in the package.

Cost: 495.00
For more information click here

www.sta-uk.org
 FOREWORD
6

Our thanks to Deborah Owen

Our editor for nearly 25 years, Deborah

retired from the Board of the STA at the
end of June 2016. Over more than two
decades, she had contributed to every
aspect of the Society, helping to raise
our profile, expand our membership
and achieve global standards in
financial qualifications.

She initially became involved as

the Editor of the Societys Journal,
The Market Technician, in 1992, and
joined the Board shortly after. She
was always an active Board member
and, in addition to editing the Journal,
she was also part of the Ethics and
Grandfathering Committees, helping
to draft our policies on both of these
important matters.

In 2008 Deborah became Chairman

of the Society and served in that
position until 2013. During this time,
the education work of the Society
continued to grow, and the Home
Study Course, which had been in
development for some years, was
finally completed and published.

When she finished her term as

Chairman, Deborah took over as Head
of Education and held this role until
she left the Board, contributing to still
further expansion of this aspect of our
work.

Over the 2012-15 period Deborah

was also a member of the IFTA
Board. During this time she was the
Conference Chair for the 2014 IFTA
conference held in London. This was a The STA Board thanks Deborah
very successful event, attracting some
for her work for the Society
220 delegates to the United Kingdom.
over more than two decades.
The STA Board thanks Deborah for
her work for the Society over more
than two decades. We look forward
to seeing her at future events and
meetings.
Keep up to date with the conversation by joining us on:

NEWS
Current and former presidents come together
The STA recently celebrated its 30th Anniversary of Incorporation dinner at the National Liberal Club
On Wednesday, 30th November,
the Society of Technical Analysts
celebrated its 30th Anniversary
of Incorporation dinner at the
National Liberal Club in London,
commemorating three decades as the
industrys guiding body.
The STA is in fact the oldest
professional body of its kind in the
world - its predecessor, the Association
of Chart and Technical Analysts, or
ACTA, was founded in 1968.
Looking around at everyone here this
evening, old members and new, brings
home to me just how far we have come
since 1968 in expanding awareness
and understanding of technical
analysis and behavioural finance, said
STA Chair Axel Rudolph, FSTA MCSI.
Half a century ago, technical analysis
was about as mainstream as reading
runes. Today, our discipline is accepted
and welcomed as a vital investment
The Society of Technical Analysts: www.sta-org.uk
7
tool in an increasingly complex as well as Head of Marketing Karen
financial universe. Jones, responsible for the societys
Marketing Committee, who was made
Rudolph was able to thank two of his a Fellow. Fellows Luise Kliem and
predecessors for their many years of Mark Tennyson dEyncourt were also
hard work. The STAs very first leader thanked, Luise for her sterling work on
Philip Gray, Chairperson from 1986-89, education and Mark for the impressive
made an audio presentation to the achievement of being on the STA board
120 guests assembled, while the after for the past 30 years.
dinner speech was given by Robin
Griffiths, who chaired the society from Please click here to see photos taken
1989-92. at the event.
Griffiths reminded members just
how much financial techniques
have advanced along with modern
technology. His first adventures with
technical analysis involved laboriously
filling in sheets of graph paper - the
methodology pre-dates modern
computers and spreadsheets by
many years.
Also thanked at the dinner were STA
Administrative Services, Katie and
John Abberton and Shirley Kimber,
 NEWS
8

Myanmar Market Analysts Society Myanmar Market Analysts Society

(STA Myanmar Chapter)
Knowledge Sharing Seminar and CPD
becomes a Chapter of the STA Event for CISI/STA members

15th January 2017

Yangon Stock Exchange Building

The STA Executive Committee is pleased to announce that the Myanmar Market
Analysts Society (MMAS) has become a chapter of the STA, thanks to the co-
operation of Mr Aung Thein Tun (Chartered MCSI, MSTA, CFTe).

This marks the third such chapter, alongside those established in Ireland and
Scotland. By making the Myanmar society one of its chapters, the STA marks its
first step in helping the MMAS become an IFTA developing society.

Even though the MMAS is only a few months old, it has already 24 members!
This is a tremendous achievement and bodes well for the future.

We wish Mr Aung Thein Tun and the Myanmar STA chapter every success.
 The Society of Technical Analysts: www.sta-org.uk

The STA Forum: a new way to find out more about

technical analysis and the STA exams

Rajan Dhall The STA Forum is a great tool for any member looking to ask a professional any
questions about technical analysis or the STAs exams. It is run by Rajan Dhall MSTA/
CFTe who has been working as a professional technical analyst for more than nine
years. If you have upcoming exams or just have general questions about technical
analysis, the Forum is a great resource.

Even if the questions asked are not about a specific lecture, we ensure that they are
answered by the correct person.

How to use the forum:

Log on to www.sta-uk.boards.net where Rajan Dhall MSTA,

We hope that you will find from the STA, will answer any questions you may have regarding
technical analysis, the course and future examinations.
this new forum to be a
useful tool and study guide, Once you are registered, you will also be able to post questions to the STA
and welcome any feedback that a course lecturer, author or fellow will answer during the week.
you may have on this new
venture.

How to register:

1. Click on www.sta-uk.boards.net
2. Click on the register button in the top right hand corner
3. Follow the registration procedure instructions to create a
Forum account
4. You will then receive an email with an activation key. Insert this as
requested by ProBoard.

We ask that you adhere to the forum guidelines which are available here.
 RESEARCH
10
The Crash of 2017
David McMinn
David completed a Bachelor of
Science degree from the University
of Melbourne in 1971 (geology
major) and subsequently became a
Minerals Economist in ANZ Banking
Group Ltd.
Since leaving this position in
1982, he has conducted private
research on cycles arising in seismic
and financial trends, publishing
numerous papers on cycle theory,
especially in relation to the 9/56
year cycle.
1.0 Introduction
This paper discusses three of the most consistent trends in US stock market
patterns - the 60-year October intervals, the lunar phase effect for major DJIA
highs and the Decennial Cycle. The first two have been published on previously
but received little publicity, even though they are superior to many other cyclic
patterns. The Decennial Cycle, by contrast, was first written about in 1939 and
has been widely appreciated for its endurance in DJIA history. A good coverage
is offered on these three cycles and their relevance in the timing of US stock
market panics occurring since 1990. By extrapolation, another autumn panic
may be looming on the horizon in 2017. The findings offer support for the Moon
Sun Hypothesis, in which financial markets are viewed as being mathematically
structured in time, in tune with Moon Sun tidal harmonics.
An annual one-day (AOD) rise or an AOD fall is taken as the biggest one-day
percentage rise or fall in the DJIA during the year commencing 1st March. They
represent the most extreme one day shifts in market sentiment during a given
year and are very important in financial patterns (McMinn, 2000, 2004). Moon
Sun data was timed at noon (New York) on the relevant trading day with daylight
saving being ignored. Degrees on the ecliptic circle have been given as E, while
the angular degrees between the Moon and Sun (lunar phase) were abbreviated to
A. Thus, 00 A denotes a new Moon, 90 A a first quarter Moon, 180 A a full Moon
and 270 A a third quarter Moon. Pre 1896 data was based on the 12 Stock Average
index. The closing daily DJIA data has been used throughout the assessment.
2.0 Key Financial Patterns
The following three cycles are among the most important in US financial history.
2.1 60 Year October Intervals
According to McMinn (2010),
Since 1885, some 10 major DJIA AOD falls ( -3.60%) occurred between 10 September
and 31 October. Adding or subtracting 60 years to each of these dates gave a
corresponding AOD fall ( -2.45%) between 19th August and 20th December, with no
exceptions. A full coverage of the 60 year October intervals has been presented
in Table 1.
 The Society of Technical Analysts: www.sta-org.uk

11

TABLE 1: 60-YEAR INTERVALS AND US OCTOBER PANICS Source: McMinn (2015)

In recent centuries there have only
been two exceptions to the 60-year
effect. The major banking panics of
Date DJIA % AOD Fall Event 1847 (Britain, 23rd October) and 1907
Oct 09, 1839 na US banking panic (US, 22nd October) did not produce a
crisis in 1967, while the 1873 US Black
Dec 18, 1899 -8.72 Two leading NY financial firms fail
Friday (19th September) gave a DJIA
AOD fall in 21st July 1933 (-7.84%),
about a month earlier than could have
Oct 14, 1857 na US banking panic
been expected.
Nov 01, 1917 -4.16
Bolshevik Revolution in Russia
Nov 08, 1917 -4.14 60-year intervals were also evident for
the 11 major DJIA AOD rises ( +4.00%)
Oct 09, 1927 -3.65 DJIA AOD fall
happening between 24th September
and 5th November since 1885 (McMinn,
Oct 19, 1987 -22.61 Black Monday 2010). By adding or subtracting
60 years, most of these rises had
a corresponding DJIA AOD rise (
Sep 24, 1869 na US Black Friday. Gold panic +2.50%) between 20th August and 30th
Oct 28, 1929 -12.83 US Black Monday December. There were two exceptions.
In 1914, the US stock market was
Oct 13, 1989 -6.91 Friday 13 panic
closed for more than four months after
the outbreak of WWI. Presumably, a
Oct 09, 1871 na Chicago Fire panic rally would have taken place once
the US Government confirmed that it
Sep 24, 1931 -7.07 UK suspended gold standard would remain neutral in the conflict.
Nov 15, 1991 -3.91 DJIA AOD fall The stock market rose +7.65% on
5th September 1939, after President
Roosevelt announced that the USA
Oct 18, 1937 -7.75 DJIA AOD fall would not enter into WWII. In 2008, the
AOD rise happened on 13th October
Oct 27, 1997 -7.65 US Blue Monday
(+11.08%), minus 60 years gives 1948.
However, this year did not record any
Nov 03, 1948 -3.65 Upset of Trumans presidential win significant one day rises over +2.20%
and was anomalous.
Oct 15, 2008 -7.75 After Lehman Bros failure
From the DJIA AOD rises in 1897
(+2.97%, 31st August) and 1957
Dec 18, 1895 -6.61 Monroe Doctrine scare
(+4.12%, 23rd October), the AOD rise
Sep 26, 1955 -6.54 Presidents heart attack for 2017 could be expected to occur in
Aug 24, 2015 -3.39 Chinese Black Monday the latter part of the year.

Sep 21, 1897 -3.95 2.2 Peaks, Seasonality and

DJIA AOD falls
Oct 12, 1897 -3.90 Lunar Phase
Oct 28, 1957 -2.54 USSR launches Sputnik Similar market outcomes and similar
lunar phases were observed for those
2017 ? ? DJIA peaks at the beginning of a bear
market and occurring around the same
time of year (McMinn, 2015). The links
Aug 19, 1903 -4.07
Oct 19, 1903 -4.17
DJIA AOD falls between the timing of the tops and
lunar phase have been summarised
Nov 22, 1963 -2.89 DJIA AOD fall. JFK assassination. in Table 2. Only the 26th September
 RESEARCH
12

to 10th December timeframe did not exhibit this phenomenon for whatever reason. When a major peak is forming, it is always
worthwhile assessing its lunar phase and the time of year because these can be indicative of an emerging bear market. The
lunar phase effect held up very well for the peaks at the beginning of a DJIA decline over -18.5% since 1890. However, several
anomalies arose for post WWII corrections registering declines of between -12.5% and -18.5%. Thus the technique is less
reliable for moderate slumps in the DJIA (McMinn, 2015).

TABLE 2: A SUMMARY OF LUNAR PHASE AND SEASONAL DJIA PEAKS, 1890 - 2012 Source: McMinn (2015)

Solar Interval Number of Highs Sun E Moon E Phase A

Jan 16 - Feb 09 3 295 - 325 195 - 235 235 - 295

3 350 - 040 310 - 325 270 - 335
Feb 10 - Apr 28
3 345 - 000 030 - 065 030 - 080
Apr 29 - Jun 30 4 055 - 090 040 - 105 340 - 015

Jul 01 - Jul 31 2 110 - 120 035 - 040 280 - 290

3 150 - 165 160 - 180 000 - 015
Aug 01 - Sep 10
2 160 - 170 340 - 350 175 - 185
Sep 11 - Sep 25 2 165 - 180 150 - 160 330 - 350

Sep 26 - Dec 10 8 No overall pattern

Dec 11 - Jan 15 3 260 - 295 335 - 030 075 - 095

NB: The 1st March - 15th April and 1st August - 10th September time frames each had two lunar phase clusterings.
Source of Raw Data. Bespoke Investment Group (2008) for the beginning of DJIA bear markets post 1900.
The author expanded this listing to cover the period 1890 to 1899 and included five additional corrections with declines from -18.5% to -19.9%.

2.3 The Decennial Cycle

The widely appreciated Decennial Cycle was first proposed by Smith (1939). Under
this scenario, the US stock market tended to bottom in a 2-ended year and then
progressively rose to a peak until a year ended in a 6 or 7, followed by a crisis and a
major slump. The stock market recovered to reach another peak in a 9- or 0-ended
year and then experienced another collapse in the prices. This cycle can be used
very effectively for stock market speculating.

According to R W Miller,
if one were out of the market at the beginning of the 0 year, entered the S&P 500 on
June 30 of the 2 year, then were out from August through October of the 7 year, and
re-entered until the end of the 9 year, the value of $1 invested in 1900 would be worth
$6,660.86 in 2002 versus just $148.41 were you instead fully invested over the entire
period of time. An awareness of the 10-year cycle would have produced 44.9 times the
return.

A major stock market peak usually occurs in a 6- or 7-ended year, followed by a

bear market (see Table 3). Mild corrections in 1927 and 1997 were the exceptions.
The market troughs nearly always occurred in the six months ending 31st March
of 8-ended years and were followed by a strongly rising market. Thus 8-ended
years were historically very favourable for US equities, although there were two
anomalies.

The May 1946 and October 2007 peaks were followed by poor returns in 1948 and
2008 respectively, reaching a low in the ensuing 9-ended year. In 1966, the market
decline commenced in February and was over by early October, although a mild
correction commenced in September 1967.
 The Society of Technical Analysts: www.sta-org.uk

13

TABLE 3: BEGINNING OF DJIA BEAR MARKETS IN 6- AND 7- ENDED YEARS

7 Ended Yr DJIA High DJIA Low % Decline

Then there is the 7 Autumn jinx to
consider. Of the 11 AOD falls ( -2.20%)
1887 Dec 03, 1886 Apr 02, 1888 -20.1 in 7-ended years, eight happened in
1897 Sep 10, 1897 Mar 25, 1898 -24.6 the two months commencing 15th
September (see Table 4), whereas 1.8
1907 Jan 19, 1906 Nov 15, 1907 -48.5
could have been expected by chance.
1917 Nov 21, 1916 Dec 19, 1917 -40.1
1927 Oct 03, 1927 Oct 22, 1927 -10.2 (NB: The twin autumn AOD falls in
1887, 1897 and 1917 were each treated
1937 Mar 10, 1937 Mar 31, 1938 -49.1 as one event.) The three exceptions
1947 May 29, 1946 June 13, 1949 -24.0 were in 1907 (a major banking panic
1957 Apr 06, 1956 Oct 22, 1957 -19.4
happened on 22nd October, 1907),
1947 and 2007. Furthermore, there
Feb 09, 1966 Oct 07, 1966 -25.2 were five October AOD rises in 7-ended
1967
Sep 25, 1967 Mar 21, 1968 -12.5
years. Why the US stock market often
1977 Sep 21, 1976 Feb 28, 1978 -26.9 experienced AOD rises and/or falls in
1987 Aug 25, 1987 Dec 04, 1987 -35.1 the autumn of 7-ended years remains
unknown.
1997 Aug 06, 1997 Nov 12, 1997 -13.2
2007 Oct 09, 2007 Mar 09, 2009 -53.8

TABLE 4: DJIA AOD RISES AND FALLS IN 7-ENDED YEARS

Year AOD Fall -2.20% AOD Rises +2.20%

Strangely, there are two types of
October panics - those that occur a
Sep 19 (-2.24%) few days prior to a new Moon (300340
1887 (a) Oct 20 (+2.32%)
Oct 12 (-2.29%) A) and those that form around the
Sep 21 (-3.95%) full Moon (150205 A) (McMinn, 2004).
1887 (a) Aug 31 (+2.97%) October panics also occurred almost
Oct 12 (-3.90%)
exclusively in years ended in an odd
1907 Mar 14 (-8.29%) Mar 15 (+6.69%)
number - the October 2008 panic being
Nov 01 (-4.16%) the exception.
1917 (a) Jan 31, 1918 (+3.66%)
Nov 08 (-4.21%)

1927 Oct 08 (-3.65%). Sep 06 (+2.95%)

1937 Oct 18 (-7.75%) Oct 20 (+6.07%)

1947 Apr 14 (-2.95%) (b)

1957 Oct 21 (-2.48%) Oct 23 (+4.12%)

1967 (b) (b)

1977 (b) (b)

1987 Oct 19 (-22.61%) Oct 19 (+10.17%)

1997 Oct 27 (-7.18%) Oct 28 (+4.71%)

2007 Jan 21, 2008 (c) Jan 24, 2008 (+4.75%)

(a) Two days of almost equal percentage declines occurred in 1887, 1897 and 1917 and thus
both have been included.
(b) No significant AOD rise or fall exceeding 2.20% occurred in this year.
(c) Worldwide stock market panics occurred on January 21, 2008. This has been taken as the AOD fall for
2007, even though the US market was closed due to the MLK Jr holiday.
 RESEARCH
14

3.0 US Stock Market Panics

The following section discusses the timing of major US crashes since 1990.

3.1 Panic of 2015

A panic was expected to occur in the four months to December 20, 2015 from the 60-year series 1895 1955 2015 (McMinn,
2010). The DJIA record high on 19th May 2015 had lunar phase at 019 A, which was within range for other DJIA peaks between
29th April and 30th June (see Table 5). Therefore, market outcomes in 2015 were expected to follow similar patterns as
experienced after the 1901, 1946 and 2001 highs (McMinn, 2015), which recorded major one-day falls six days apart in early
September. However, the panic happened in late August rather than early September and there was no six-day interval between
major one day falls. The 2015 anomaly may have arisen due to a weekend distortion.

TABLE 5: LUNAR PHASE AND DJIA PEAKS 29TH APRIL TO 30TH JUNE Source: McMinn (2015)

DJIA Peak Phase A 1st OD Fall Phase A 2nd OD Fall Phase A

Panics of 1901, 1946 & 2001

Jun 17, 1901 015 Sep 07, 1901 298 Sep 13, 1901 010

May 29, 1946 343 Sep 03, 1946 091 Sep 09, 1946 159

May 21, 2001 342 Sep 11, 2001 281 Sep 17, 2001 004

May 19, 2015 019 Aug 24, 2015 113 na na

Panics of 2008 & 2011

May 02, 2008* 321 Oct 09, 2008 115 Oct 15, 2008 192

Apr 29, 2011** 321 Aug 04, 2011 067 Aug 10, 2011 143

* Market high for the calendar year

** Beginning of a -15.9% correction
Abbreviation: OD: One Day

The first one day fall in the 1901 and 2001 panics had lunar phase between 280 and 300 A (after the 3rd quarter Moon), while for
the 1946 and 2015 panics it was between 90 and 115 A (near the 1st quarter Moon).

3.2 Panics of 2008 and 2011

In 2011, the author presumed another autumn panic was imminent because the high on 30th April 2011 had lunar phase
at 321 A. This was the same as occurred on the 2nd May 2008 high prior to the Lehman Brothers failure. However, the 2011
panic happened in early August and was thus out by several weeks. A 60-year interval effect did not apply as 1891 and 1951
experienced no crises let alone an October panic. The 60-year effect showed up in the timing of the 2008 AOD fall (-7.75, 15th
October). Minus 60 years from this date gave the AOD fall in 1948 (-3.65%, 3rd November).

A six-day interval between two major one day falls happened during the 2008 and 2011 panics. Notably, the AOD rise in 2008
occurred four days after the first one day fall, whereas the AOD fall showed the same timing in 2011 (see Table 6).
 The Society of Technical Analysts: www.sta-org.uk

15

TABLE 6: THE 2008 AND 2011 DJIA PANICS Source: McMinn (2015)

Panic of 2008

OD Fall AOD Rise AOD Fall

Oct 09, 2008 Oct 13, 2008 Oct 15, 2008
+4 days +2 days
-7.33% +11.54% -7.87%
Panic of 2011 (a)

OD Fall AOD Fall AOD Fall

Aug 04, 2011 Aug 08, 2011 Aug 10, 2011
+4 days +2 days
-4.31% -5.55% -4.62%

(a) Occurred during a DJIA correction of -15.9%.

Abbreviations: OD: One Day. AOD: Annual One Day.

3.3 Panic of January 2008

Eight DJIA peaks were recorded from 26th September to 10th December, but there was no lunar phase clustering. It was the
only time frame during the solar year that did not show a lunar phase effect for DJIA highs. The peaks of 30th September 1912
and 9th October 2007 formed at about the same time of year, but they did not share a similar lunar phase (see Table 7). Even so,
the AOD falls took place on 20th January and 21st January respectively. The latter date saw major stock market panics around
the world, due to troubles experienced by Socit Gnrale. The US market was closed on the day because of the Martin Luther
King Jnr holiday. Even so, it was taken as the AOD fall for 2007.

TABLE 7: DJIA PEAKS BETWEEN 26TH SEPTEMBER AND 10TH OCTOBER Source: McMinn (2015)

Panics of 2008

DJIA High Interval AOD Fall

Sep 30, 1912 Jan 20, 1913
112 Days
230 A 153 A
Oct 09, 2007 Jan 21, 2008
104 Days
346 A 169 A

3.4 Panic of 2001

The 21st May 2001 high happened in tune with highs in 1901 and 1946, because
lunar phase ranged between 340 and 020 A (see Table 3). The ensuing outcomes
were very similar with other panics in early September (see Table 5). The parallels
were particularly notable for the 1901 and 2001 episodes, even though the trigger
was completely different.

In 1901, President McKinley was shot on Friday 6th September, causing a stock
market panic the following Saturday morning. He survived the shooting but
lingered for several days. His impending death caused another panic on Friday 13th
September and he died on the Sunday.
In 2001, the New York stock market failed to open on the day of the 11th September
terrorist attack and remained closed for four trading days. It reopened on 17th
September with the DJIA plunging -7.13%.

3.5 Panic of 2000

Between 11th December and 15th January, there were three highs in 1961, 1973
and 2000, with lunar phase between 75 A and 95 A (see Table 8). The correction
commencing on 5th January 1960 also had its lunar phase within this range. There
were no parallels in the timing of the ensuing panic.
 RESEARCH
16

TABLE 8: DJIA PEAKS 11TH DECEMBER - 15TH JANUARY Source: McMinn (2015)

DJIA Record High Lunar Phase A* DJIA AOD Fall US Crisis

Dec 13, 1961 076 May 28, 1962 US recession

Jan 11, 1973 084 Nov 26, 1973 OPEC oil crisis

Jan 14, 2000 092 Apr 14, 2000 After tech mania

16.7% 1960 Correction

Jan 05, 1960 089 No panic US recession

3.6 Panic of 1998

The 16th July 1990 and 17th July 1998 highs had lunar phases at 286 A and 284 A respectively. The AOD falls occurred on 6th
August (-3.32%) and 31st August (-4.98%) respectively and the bear market slumps were both around -20%. Lunar phase did not
align closely for the AOD falls or the post-crash lows.

3.7 Panic of 1997

This could have been predicted by adding 60 years to the October 1937 panic, which would have given 1997. Additionally, there
were five DJIA tops between 1st August and 10th September, all of which had lunar phase around the new Moon or the full
Moon. The five biggest one day percentage falls in DJIA history ( -8.70%) occurred after the new Moon peaks in 1899, 1929 and
1987.

The remarkable parallels between the 1929, 1987 and 1997 October panics have been commented upon by Carolan (1998) and
McMinn (2004). For these three panics, the prior record highs happened between 6th August and 3rd September and around a
new Moon. The 1895 and 1899 highs occurred on 4th September and 5th September respectively with the former happening
around the full Moon and the latter around a new Moon. The ensuing AOD falls took place at about the same time of year on
20th December and 18th December respectively, with the AOD rises occurring a few days later. The 1897 peak was anomalous
as it did not align with trends in Table 9.

TABLE 9: LUNAR PHASE AND DJIA PEAKS 1ST AUGUST TO 10TH SEPTEMBER Source: McMinn (2015)

1929 and 1987 Bear Markets

Record High AOD Fall AOD Rise Post-Crash Lows (a)

Sep 03, 1929 Oct 28, 1929 Oct 30, 1929 Nov 13, 1929
003 A 313 A 338 A 137 A
-12.83% +12.34%
Aug 25, 1987 Oct 19, 1987 Oct 21, 1987 Dec 04, 1987
013 A 324 A 347 A 173 A
-22.61% +10.17%
-13.2% 1997 Correction
Aug 06, 1997 Oct 27, 1997 Oct 28, 1997 Nov 12, 1997
037 A 320 A 330 A 155 A
-7.18% +4.71%
1895 and 1899 Bear Markets

DJIA Highs AOD Fall AOD Rise

Sep 04, 1895 Dec 20, 1895 Dec 23, 1895
185 A 051 A 084 A
-6.61% +4.38%
Sep 05, 1899 Dec 18, 1899 Dec 19, 1899
006 A 199 A 210 A
-8.72% +4.72%
(a) The DJIA lows for 1987 and 1997 occurred on the day of the panic. The post-crash lows were taken as the lows after the panic.
 The Society of Technical Analysts: www.sta-org.uk

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4.0 Discussion and Conclusions

The three trends outlined in this paper have one thing in common - they have proven reasonably persistent throughout DJIA
history. From the 60-year intervals and the 7 Autumn jinx, both the DJIA AOD rise and AOD fall should occur in the four months
to 10th December 2017. This was derived from the series 1897 + 60 1957 +60 2017 (see Table 1). From the Decennial Cycle, a bear
market could also be expected to accompany this panic. It will be very interesting to see if this prediction is realised. The 60-
year intervals were a very accurate forecasting technique, remarkable considering the simplicity of the approach.

According to the Moon Sun Hypothesis, financial markets are mathematically structured in time and fluctuate in tune with
changing Moon Sun cycles (McMinn, 2004). The links between DJIA peaks, the Suns ecliptic position and lunar phase offered
support for this proposition. How lunisolar effects influenced market trading remains completely unknown. According to the
prevailing paradigms, such weak lunisolar forces should have little or no impact, but this contradicts the observed facts.

The techniques outlined in this paper are based upon extrapolations from history. Such approaches leave a lot to be desired
in their forecasting accuracy. Only by deciphering the mathematics associated with the Moon Sun tidal harmonics can more
precise predictions be realised. The Suns ecliptic position and lunar phase were very important in the timing of major DJIA
peaks at the beginning of a bear market. By implication, the changing angles between the Moon, Sun and spring equinox point
(000 E) are crucial in solving the mystery. Nothing more can be stated. Further breakthroughs in cycle theory offer the potential
to achieve the Holy Grail of technical analysis - accurate financial forecasting. Alas, such findings probably will not be published
given the potential profits to be made. It would give traders in the know a huge speculative advantage.

References
Bespoke Investment Group. 2008, Historical Bull and Bear Markets for the Dow: 1900-Present. 14 October.
www.bespokeinvest.com/thinkbig/2008/10/14/historical-bull-and-bear-markets-for-the-dow-1900-present.html
Carolan, C. 1998. Autumn panics: a calendar phenomenon The Market Technician. Journal of the Society of Technical Analysts. Issue 32. p 12-18. July.
McMinn, D. 2000. Lunar Phase & US Crises. The Australian Technical Analysts Association Journal. p 20-31. January/February.
McMinn, D. 2004. Market Timing By The Moon & The Sun. Twin Palms Publishing.
McMinn, D. 2010. 60 year intervals and October panics. Market Technician, Journal of the Society of Technical Analysts. Issue 67. p 13-15. June.
McMinn, D. 2015. DJIA Peaks, Seasonality and Lunar Phase. New Concepts In Global Tectonics Journal. Vol 1, No 2. p 15-22. September.
Miller, R W. The Decennial Cycle: Dow at 40,000 by 2009.
www.triplescreenmethod.com/MonthlyArticles/MonthlyArticle1204.asp
Smith, E L., 1939. Tides and the Affairs of Men. Macmillan. 178p.
 RESEARCH
18
Space and Time: The Final Frontier
Shaun Downey
Shaun Downey MSTA is a
grandfathered member of the STA
and winner of the Technical Analysis
Book of the Year 2014 'Mapping Your
Voyage of Discovery'.
Shaun is a veteran of the markets,
trading, commentating and
mentoring on all asset classes since
1979 to the professional market via
his 4th Dimension by Trading Time
Homepage website.
www.trading-time.com
Introduction
With this paper, Shaun returns to his first book published in 2007 Trading Time: New
Methods in Technical Analysis and explains how those studies and codings have
developed into what today is called the Fourth Dimension. It includes Multiple Time
Frame analysis from a single picture and highlights his work on divergence, time
based momentum, step theory and fractal qualification, as shown on CQG, eSignal
and the Technician platforms.
The Fourth Dimension (Part 1 of 2)
Over the decades, I have spoken with thousands of traders across the globe and in
all asset classes, and a few consistent themes emerge.
1. Timing of any trade is a key factor as, with the wrong timing, even the best
ideas in the world will lose money.
2. Trade location is also vital as, unless trades are placed at levels of true
points of support or resistance, the trader can get picked off by incorrect
stop placement and have no framework for applying the correct volume.
3. It is essential to understand the correct timeframe to use in relationship to
trading objectives.
4. Traders must overcome the conflicts in direction that analysis of different
time frame charts often create.
5. Trades can be missed due to not seeing the opportunity.
6. Screen Real Estate: traders dont have enough space to see all the charts
that they wish.
This last point struck a chord, especially as the vast majority of traders I have
visited all used multiple time frame charts. The reality is that there is a physical
limit to how many instruments and timeframes can be monitored at once. For sure,
the use of alerts can help in that area, but in my experience, setting them up is an
onerous task thats easily neglected.
My first book, Trading Time: New Methods in Technical Analysis, published back in
2007, concentrated on what I regarded as a massively neglected sphere of analysis
and study creation. Surely if trading is all about time and timing then having an
understanding of price in relationship to time is essential? Check out any software
programme and there can be hundreds of different ways of measuring momentum,
but a mere fraction of that number on price and time. This led to the release of 20
new indicators and concepts that have remained unchanged since their emergence
into the public domain.
What has changed since that point, though, is how I have re-visualised those
concepts so that now traders can see up to 10 timeframes of analysis in just one
picture. This means for strategic traders the use of a daily chart, and for day traders
whatever intraday timeframe, is preferred. The problem of Screen Real Estate is
solved and opportunities are no longer missed.
For the purposes of this article I am going to concentrate on the strategic trader but
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19

Surely if trading is all about time and timing then having an

understanding of price in relationship to time is essential?

the principles and concepts are identical to intraday charts and apply to any market and any asset class. Users of what is called
the 4th Dimension exist across the globe.

The definition is as follows: Using the Fourth Dimension to create a third spatial visualisation from a two dimensional image.

The first building block is the creation of true support and resistance. Think of this as the foundations to a house. How many
times does a piece of analysis reference some previous high or low as a support or resistance, without any quantification
or calculation about how relevant that high or low actually is. The reality is that some previous highs or lows have far more
relevance on the chart you are viewing, but a higher timeframe may also have some relevant highs or lows that are not
visualised unless you look at that chart. Those higher timeframe qualified highs or lows also have more power.

The studies Peak Expansion and Peak Energy measure the relationship to range and volume on any swing or fractal point
and compare that to an average of those values over the previous 1000 bars. Only if they breach that average by a certain
percentage will that swing pattern of fractal be deemed to be important. It should also be referencing higher timeframes than
the one being viewed so for a daily chart it is weekly and monthly levels.

Figure 1 shows a daily continuation of the Bund. The black lines represent weekly swing levels and the blue lines monthly ones.
There are a variety of patterns and relationships that can be utilised but two of the most potent are the combination of weekly
and monthly levels shifting to indicate major tops or bottoms, and the length of time that has elapsed since the last time that
a support or resistance line changed in value. Three features of the data have been highlighted. The first is when the weekly
resistance moves to the top of the trend. The second is when the monthly line does likewise. That line had not changed in
value since over a year previously. The longer a line has not changed in value and then does, the greater the importance of that
shift. Subsequent to those weekly and monthly levels indicating a major top to be in place, price returns to those points before
reversing back down sharply. The final circle is on the current bar and shows that weekly support has shifted higher from 151.41
to the recent low. This level represents major but final support.

FIGURE 1: 10-YEAR EURO BUND, EQUALISED ACTIVE DAILY CONTINUATION

 RESEARCH
20

Figure 2 shows how the Buxl (like the Bund but the name of the futures contract for the 30-year Euro) moved its monthly
resistance in October which coincided with the Bund high. The same happened in US T-Bonds and the Ultra Bond, whilst
US 10-year T-Notes also failed at a monthly level on the same day.

FIGURE 2: 30-YEAR EURO BUND FUTURES, EQUALISED ACTIVE DAILY CONTINUATION

Chapter 3 of Trading Time concentrated on the Stepping process of trends and how they had to consistently move up through
timeframes in order to keep the trend intact. This was done by referencing the price when a study such as the Stochastic
crossed up or down. This was visualised in a somewhat primitive manner by only showing one timeframe at a time. The premise
was that if the Stochastic crossed up from a higher price value than the previous time it crossed up then the uptrend was intact.
The trending timeframe is indicated once that stepping process reaches 4. No trend can last within its own timeframe for ever,
so the extensions of trends need to move up timeframes with positive crossovers to indicate that the trend was extending and
maturing.

The major development of this theory came in two parts and is highlighted in Figure 3. Again it is the daily Bund chart which
has a multi-coloured histogram beneath it. This represents the stepping process of the 60, 120, 240 and 420 minute chart. Each
time a timeframe steps high the histogram goes up by one and visualises the performance of each timeframe in one picture.
On the chart itself, a diamond is highlighted. There are two others as well and they compute when a timeframe has gone above
the critical stepping limit of 6 and then reset to zero. This means that the trend in that timeframe has exhausted itself, which is
the 120 minute. The exhaustion of a lower timeframe stepping process that is at support or resistance indicates that the trend is
either over or must have a period of reflection. The higher the timeframe resistance the higher the likelihood that the trend has
ended as occurred here, with the stepping process ending at the monthly resistance point.
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FIGURE 3: 10-YEAR EURO BUND FUTURES, EQUALISED ACTIVE DAILY CONTINUATION

Whilst the cessation of the stepping process is useful when at support or resistance, the reality is that this confluence of
events is not always going to occur. Therefore a further layering of code and patterns is required in order to increase both the
frequency and the opportunities that can be exploited. The first is in the area of divergence. Divergence is easily visualised
and in fact nearly all trends diverge, but it is the ability to quantify which divergences are relevant that is critical. Without this,
premature exits to good trend-following trades will occur, or worse, counter trend signals will appear that give false indications
that the trend is changing. Those familiar with my work will know I have spent decades on this topic creating a variety of
patterns, with the concepts and theories associated with it (dealt with in detail in chapter 4 of the book). Whilst those concepts
are powerful in their own right, it is the connection between those patterns and support and resistance itself that hold the key.

The Bund chart shows the first pattern I ever created called UFO that is highlighted by the Blue arrow. This represents two
separate patterns that quantify divergence in its traditional sense, but more importantly also possess the properties to
highlight what I refer to as divergence as a continuation pattern. It is RSI based and simply states that in order to be true price
must be making a 9 bar high and the RSI a three bar low. There is no value placed on the RSI, which is why it can also produce
a continuation pattern. As a traditional divergence signal, if they are appearing randomly it is simply a warning sign, but if it
appears at resistance then it indicates a potential reversal in trend. The chart shows two such signals. The first occurs at weekly
resistance and simply creates a period of sideways reflection. The second appears at what is the more powerful zone of weekly
and monthly resistance and confirms the top.
 RESEARCH
22

FIGURE 4: 10-YEAR EURO BUND, EQUALISED ACTIVE DAILY CONTINUATION

Since the publication of Trading Time, the visualisation has advanced but at that point I had not worked out how to discern
whether a pattern at a major line would be the instant catalyst for a change in trend or breakout, or what the target would be.
The signals had undoubted power but I was often asked where I expected price to go to. The opposite supports or resistances
were obvious magnets but I had no method for knowing whether there was the space and time for this to occur, or that the
timing was indeed optimal for it to happen. This led to the creation of the final study which is called Splits and is shown in
Figure 5.

Splits or Time Area expands on the multiple timeframe concept, but increases the number to include Daily (Green), Weekly
(Black), Monthly (Blue), Quarterly (Pink), Semi-Annual (Brown) and Yearly (Red).

The first two simply track momentum, but it is the relationship between the monthlies and higher in terms of their stepping
process and its relationship to current price that holds the key.

I have condensed the chart to show more of that stepping process. The rally through the first part of 2016 sees a period whereby
both the monthly (Blue) and Quarterly (Pink) step higher, which indicates that the uptrend remains intact. However, the critical
timing point arrives as highlighted in October when the quarterly jumps to be above the current price. This jump allows for
space to develop underneath as suddenly the nearest support is the semi-annual value and now the target of the new trend at
160.32. It is this shift or flip in dynamics of time and price that creates the switching from support and uptrends to resistance,
reversals and downtrends. The process of the patterns mentioned earlier in combination with the weekly and monthly support
and resistance levels are what create the set-up, but it is the stepping process shifts that create the ultimate timing point and
subsequent target.
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FIGURE 5: SPLITS

...to be continued in the next Journal. Shaun will be discussing the above indicators and his latest book in the 14th March 2017
STA Monthly Meeting at the British Bankers Association.

For more information please click here

Special introductory offer

To celebrate the launch of our new look journal we have put together a great offer for you.
Book onto any of our courses, including the Home Study Course, before 30th July 2017 and save 50.

SIMPLY CLICK HERE and enter code JNLPROMO in the coupon box to redeem your 50 discount.
 RESEARCH
24
Unravelling the DNA of the Market: Applying the
Double Helix Framework to Wyckoff and Elliott
Henry O. Hank Pruden
Henry O. (Hank) Pruden, Ph.D., is a
Professor of Business and Director
of the Technical Market Analysis
Program at Golden Gate University,
San Francisco, CA, USA. He is a
past Chairman of the Technical
Securities Analysts Association of
San Francisco (TSAASF).
A few among his many plaudits
are the Judith E. Browning Award
for Outstanding Teaching (2012),
the Lifetime Achievement Award
from the International Federation
of Technical Analysts for his
many services to the discipline of
Technical Market Analysis (2013),
and a Certificate of Recognition
from Golden Gate University
for Outstanding Scholarship
of Application, Integration and
Discovery (2007, 2010).
Preface
DNA was first isolated by the Swiss physician Friedrich Miescher in 1869.
In 1953, James Watson and Francis Crick suggested what is now accepted as the
first correct double helix model of DNA structure.
A metaphor is a figure of speech that describes a subject by asserting that it is,
on some point of comparison, the same as another otherwise unrelated object.
(Wikipedia)
So DNA, which is in itself a kind of metaphor; is one more, and perhaps the ultimate,
way to consider how markets possess a kind of life of their own. This is useful in
encouraging the analyst to identify ever more basic structural components, how they
interact, and ultimately to predict outcomes...
Robert Miltner, Scientist, Chemist and Entrepreneur, Larkspur, California
Introduction
The following series of visuals were inspired by the theme of the IFTA 2014
Conference in London: Unravelling the DNA of the Market. I found the topic
particularly appealing because for years in both active trading for my own account
or in teaching classes at Golden Gate University, I had found synergy in combining
the Wyckoff Method with the Elliott Wave Principle. The two approaches working
together created something that was greater than the sum of their two
respective parts.
I believe that Wyckoff and Elliott represent ever more basic structural components
of the market. I further believe that the double-helix framework of DNA is a very
useful metaphor for combining Wyckoff and Elliott for better, more profitable
market timing decisions.
 The Society of Technical Analysts: www.sta-org.uk

25

Wyckoff is a straight-forward price and volume

method for analysing the present technical
position and probable future trend of price
behaviour in stocks, bonds and commodities.

FIGURE 1: THE DOUBLE HELIX FRAMEWORK

Figure 1 is an abstract of the double helix structure of DNA. This shall be used metaphorically as the market structure that
combines or binds together the analytical components of the Wyckoff Method of Market Analysis with the Elliott Wave Principle
of Market Analysis.

The Wyckoff Method

FIGURE 2: THE WYCKOFF METHOD STRAND

Figure 2, The Wyckoff Method Strand, is defined in Table 1.

 RESEARCH
26

TABLE 1: DISTINCTIVE CHARACTERISTICS OF THE WYCKOFF METHOD

Wyckoff is a straight-forward price and volume method for analysing the present technical position and probable future trend of price
behaviour in stocks, bonds and commodities. The method is a collection of the best practices and concrete experiences of the old time
pool operators observed and recorded by Mr Richard D. Wyckoff. He gave primary emphasis to price and volume behaviour reflected on
the ticker tape and shown on charts. Mass behaviour (the public) was generally on the other side of the trades from the smart money
operators. Wyckoff condensed the smart money into a construct he named the Composite Man.

The Wyckoff Method is a judgmental approach to interpreting the behaviour of the market. Mr. Wyckoff and his associates condensed the
patterns of market behaviour they observed into three laws, nine tests and several schematics, plus additional principles and procedures.

It was a bottom up approach based upon the best practices of actual traders and not a top down set of hypotheses deduced from a
grand theory.

FIGURE 3: SCHEMATIC OF THE WYCKOFF CYCLE

Wyckoff Theory

Distribution
Markdown

Re-accumulation Re-distribution

Markup

Accumulation

Figure 3 is a schematic of the Wyckoff Cycle. This is a drawing of the price action depicting the key Wyckoff stages of
Accumulation, Markup, Distribution, and Markdown.
 The Society of Technical Analysts: www.sta-org.uk

27

FIGURE 4A: ILLUSTRATION OF WYCKOFF APPLIED FIGURE 4B: ILLUSTRATION OF WYCKOFF APPLIED
Source: September 1998, Technical Analysis of Stocks & Commodities, pg.77 Source: September 1998, Technical Analysis of Stocks & Commodities, pg.77

Figure 4A, is an idealised illustration of the Wyckoff Method Figure 4B, continues the idealised illustration of Wyckoff
applied to the stock market behaviour using the vertical or applied using a figure or point and figure chart.
bar chart.

FIGURE 5: THE ELLIOTT WAVE PRINCIPLE STRAND

Figure 5: The Elliott Wave Principle Strand, is defined Wikipedia, the free encyclopaedia, as follows:
The Elliott wave principle is a form of technical analysis that some traders use to analyse financial market cycles and forecast
market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors. Ralph
Nelson Elliott (18711948), a professional accountant, discovered the underlying social principles and developed the analytical
tools in the 1930s. He proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves, or
simply waves. Elliott published his theory of market behaviour in the book 'The Wave Principle' in 1938, summarised it in a
series of articles in Financial World magazine in 1939, and covered it most comprehensively in his final major work, Natures
Laws: The Secret of the Universe, in 1946. Elliott stated that because man is subject to rhythmical procedure, calculations having
to do with his activities can be projected far into the future with a justification and certainty heretofore unattainable.
 RESEARCH
28

FIGURE 6: SCHEMATICS OF THE ELLIOTT WAVE PRINCIPLE

Figure 6 is an assembly of Elliott Wave Principle cycles in three different degrees of refinement, thus wave 1 in the first level,
top schematic that is the first of five waves found in a bull market. Wave 1 in turn is composed by another five smaller wave bull
movement, illustrated immediately below it. The third level schematic is in turn sub divisible into 21 sub waves that reflect the
five wave bull movement of the immediate higher degree.

Wyckoff and Elliott: Partners in command

Partners in Command (New York, The Penguin Press, 2007) was written by Mark Perry to review the remarkable relationship
forged between U.S. Army Generals George Marshall and Dwight Eisenhower. That partnership in command helped lead
the Allied Forces to victory during WW II. In this acclaimed book: Perry shows that Marshall and Eisenhower were
remarkably close colleagues who brilliantly combined strengths and offset each others weaknesses in their strategic
planning, on the battlefields, and in their mutual struggle to overcome bungling, political sniping and careerism of both
British and American Commanders that infected nearly every battle and campaign[ I]. Marshall and Eisenhower were titans
in war and peace.

In a loosely parallel fashion, the teachings of Richard D. Wyckoff and Ralph N. Elliott can be brought closer together to
benefit the analyst-trader. Wyckoff and Elliott can combine strengths and offset each others weaknesses. As David Penn
had written in the Technical Analysis of Stock and Commodities magazine [2], both Wyckoff and Elliott were titans
of Technical Market Analysis. Then in a more recent TSAA Review article [3], I wrote about the ways Wyckoff and Elliott
were sufficiently independent, yet complementary. They are powers. When used together; Wyckoff plus Elliott generate
synergy or the famous 2+2=5 formula.
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29

Applying Wyckoff Plus Elliott

A trade in the DJIA Illustrates the Power of Wyckoff Plus Elliott

Please see Figure 7 for a Wyckoff Analysis and Figure 8 for an Elliott Wave Analysis of the 12th June 2008 DJIA. The
analyses of these charts presume that the reader has a reasonable familiarity with the rudiments of both the Wyckoff
Method and the Elliott Wave Principle to follow the interpretations presented below.

In Figure 7, the one-minute bar chart of the DJIA shows a classic Wyckoff sign of weakness breakdown and a pullback rally
to a last-point of supply set-up around 12:45-1:00pm at DJIA 12,225 on 12th June 2008. A put or a short ETF position could
have been entered. The DJIA then systematically and steadily worked its way downward until about 3:10pm. That steady
decline ended with a vertical plunge to the level of prior support at 12,074. That plunge appeared climactic and also created
an oversold condition by overshooting the supporting parallel line of the down channel. The DJIA entered a Wyckoff oversold
condition that made it vulnerable to a rally. A bear-trader would have been alerted to exit for the day. But, the real clincher for
exiting was given by Elliott on the next and final rally of the day.

FIGURE 7: WYCKOFF ANALYSIS

Legend for interpreting the Wyckoff principle appearing in Figure 7

SOW: Sign of Weakness, which will usually occur on increased spread and volume, as compared to the preceding rally. Supply is showing dominance.
Fall through the Ice or breaking of support.
LPSY: Last Point of Supply: After a SOW, a feeble rally attempt on narrow spread shows us the difficulty the market is having in making a further rise.
Volume may be light or heavy, showing weak demand or substantial supply. At LPSYs the last waves of distribution are being unloaded before markdown
is to begin. LPSYs are good places to initiate a short position or to add to already profitable ones.
Climax = Selling Climax: The approaching exhaustion of supply or selling is evidenced in preliminary support (PS) and the selling climax (SC) where a
widening spread often climaxes and where heavy volume or panicky selling by the public is being absorbed by larger professional interests. Once these
intense selling pressures have been expressed, an automatic rally (AR) follows the selling climax. A successful secondary test on the downside shows less
selling than on the SC and with a narrowing of spread and decreased volume. A successful secondary test (ST) should stop around the same price level as
the selling climax. The lows of the SC and the ST and the high of the AR set the boundaries of the TR.
 RESEARCH
30

FIGURE 8: ELLIOTT ANALYSIS

In Figure 8, the Elliott Wave Principle revealed a clear five-stage C-wave down to the low at 12,074. Furthermore, the fifth wave
itself revealed a five-wave pattern with a classic tiny triangle in the fourth wave. Elliott was flashing warning signs to get out.
Finally, the Elliott pattern was reinforcing the forgoing Wyckoff interpretation. Together Wyckoff and Elliott were saying get out
to the trader near the bottom of the day.

The final rally of the day was a five-wave upward impulse wave that broke the downtrend line in Figure 7 while recovering 100%
of the preceding down wave. This powerful bullish indication warned the trader that more strength would follow; this bullish
impulse wave was warning the trader not to carry her short sale position overnight.

In conclusion, Wyckoff and Elliott conducted a command performance for the astute trader on 12th June 2008. WE are partners
in command!

Conclusion
This article presents the technical analyst and technical trader with the metaphor of the double-helix framework for grasping a
more profound look into a basic DNA structure of the stock market.

The double helix structure can be used to combine the independent powers of the Wyckoff Method and Elliott Wave Principle.
Together Wyckoff and Elliott forge a partnership that combine their strengths and offset each others weaknesses.

That powerful synergy of Wyckoff and Elliott was illustrated with the case-study of intraday market action. That action was first
explained with the Wyckoff Method, and then the Elliott Wave Principle. Together, Wyckoff and Elliott made a compelling case.
 The Society of Technical Analysts: www.sta-org.uk

RESEARCH
31

The Manifestation of Universal Law: Complexity,

Chaos and the Elliott Wave Principle: Part 1 of 2

Introduction
When R.N. Elliott published his monograph Natures Law - The Secret of the
Universe published in June, 1946, he began with this opening remark:
No truth meets more general acceptance than the universe is ruled by law.
Without law it is self-evident there would be chaos, and where chaos is, nothing is.
Navigation, chemistry, aeronautics, architecture, radio transmission, surgery, music
- the gamut, indeed of art and science - all work, in dealing with things animate
Peter Goodburn and things inanimate, under law
because nature herself works in this
Peter Goodburn is a member of way. Since the very character of law is
the Society of Chaos Theory in order, or constancy, it follows that all
Psychology and Life Sciences, that happens will repeat and can be
is leading Elliott Wave analyst at predicted if we know the law.
WaveTrack International and author
of the Institutional Elliott Wave
Navigator reports. The key phrase no truth meets more
general acceptance seems wildly
For more information/subscription misplaced in todays world of the early
services, please contact Peter using 21st century - in fact, things are quite
services@wavetrack.com or see the opposite. The majority mind-set
www.wavetrack.com help-desk. reveals a completely different belief
system that has gradually moved
away from the concept of the ancient
ideological awareness of natural laws
governing our existence. Instead,
the advent of global materialism has
been exacerbated by a new era of
data-access made available through
the internet and created a new generation of thinkers who rely on peripheral
information flows. That has resulted in something that goes mostly unquestioned,
the unconscious adoption of the concept of linearity, something alien to the
process of Natural or more profoundly, Universal Law which otherwise reveals the
opposite as truth.

In this article, we explore how a break-away from linear thinking can raise the
awareness of how financial market trends are developing far into the future. The
Elliott Wave Principle (EWP) is a perfect medium for examining this process and the
modern sciences of Complexity and Chaos Theory provide a starting point for this
understanding.

(Edited and additions from original article

published 18th October 2000;
Copyright 2017 Peter Goodburn,
CFTe, MSTA 9th January 2017.)
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32
The Beginning
Ever since man became a creature separate in thought from
the universe around him, able to question his environment
and to seek reasons for why he exists, or the way things work,
he has striven to find some order in a seemingly chaotic
world. That order was represented symbolically to what is
thought to be the essential structure of the universe such
as the four spatial directions, the four elements, the four
seasons, sometimes the twelve signs of the zodiac, even man
himself. But what is most consistently striking about these
symbols is that they express the notion of cosmos - that is of
reality conceived as an organised, unified whole.
The Law of Vibration
Existence in the material form conforms to certain universal
laws. These cannot be broken, but if they were, existence
would then cease. The first that is applicable is the Law of
Vibration, which states that creation is continually in motion.
It is striving to return to its original state of equilibrium or
motionless, a state of perfect order, but in doing so, it evolves
within incessant unrest. We can observe this when studying
the tiniest molecular structures to those in the opposite scale
such as large galaxy formations.
These laws also manifest in financial markets depicted by
the constant movement of price.
All energy, all the forces of the universe are movements
which emanate from one point - their own centre - and
radiate in circular waves in all directions, manifesting
themselves as vibrations or oscillations. The spiral represents
the development of creation and the separation from its
origin results in the necessity for dynamic growth to occur.
These manifestations of force cease only when the forces
that have got out of balance regain their primordial state
of equilibrium by returning to the origin of creation which
philosophy describes as Unity and scientists as Big Bang. of Elliott Wave Theory to market behaviour. It is the starting
The Law of Polarity
The second Universal Law is that of Polarity - this implies
the universe consists of positive and negative forces that
emanate from a singular origin. We often associate the
terms positive and negative with the idea of good and bad,
opposites in every way, but in reality they are identical
in many ways and their purpose is to balance creation
in a harmonic way. We can gain some understanding of
the general principles of polarity by studying the physics
of electromagnetism. The attraction or repulsion
between nuclear particles, atomic particles, molecules,
cells and ultimately all living things operate within this
law. In electromagnetism we find force fields, vibrations,
waves, resistance, attraction and repulsion. These
factors are constantly searching for balance or a state of
equilibrium, and this is a fundamental characteristic of any
electromagnetic system.
All things, including human beings are caught up in natures
constant search for equilibrium, but the nature of this law
becomes a paradox that man finds very difficult to exist with.
Man is attracted to the idea of constancy in existence, he
yearns for a state of balance, yet the universe is continuously
changing in form, and change is the polar opposite to
equilibrium. But in his endeavours man follows a basic
principle of the properties of electromagnetism - the path of
least resistance.
Natures pulse or heartbeat is considered to vibrate at
harmonic mathematical ratio relationships including that of
the golden ratio 0.618/1.618, which is its way of balancing
the effects of this constant change.
Thus we have two opposing forces of nature: one that is
searching for balance, harmonium and stability, the other
constantly altering that balance, causing instability and
unrest. We can observe polarity and the effects it creates in
the markets, where there is constant fluctuations in price,
sentiment, and of course the extremes of greed and fear that
create price peaks and troughs.
The Law of Compensation
The third essential law that manifests in the universe is that
of Compensation. Sir Isaac Newtons third law of motion
describes this phenomenon as for every action, there is an
equal and opposite reaction. This is an extremely famous
and well-known principle of physics, and nothing can escape
from its effects.
The consequences are like ripples: they endure sometimes
only briefly, sometimes for much longer. This action/
reaction process is again natures way of balancing creation
as it seeks equilibrium and harmony. The action/reaction
process of Compensation is probably the most important
universal law that is recognised when applying the concepts
point of understanding why price action unfolds into a
dynamic non-linear sequence of advances and declines.
Pattern and Form - The Language of Mathematics
Over two thousand years ago, man pursued his
understanding of the universe by studying the night sky
and by relating its rhythms geometrically. In these times,
there was no distinction between philosophy and science
- they were considered part of each other. But this changed
radically in the sixteenth century when science became
based on a new method of enquiry, which involved a
mathematical description of nature and an analytic method
of reasoning.
This scientific revolution began with Nicolas Copernicus and
later Johannes Kepler, but it was Galileo who first combined
scientific experimentation with the use of mathematical
language to formulate the laws of nature he discovered.
When Kepler and Galileo instituted their New Philosophy,

their aim was not the conquest of nature, but to be able
to understand it. Galileo said Philosophy is written in
that great book which ever lies before our eyes: but we
cannot understand it if we do not first learn the language
and characters in which it is written. This language is
mathematics and its symbols are triangles, circles and other
geometrical figures.
Form was held to be so fundamental that it was proper to
speak of formal causes, meaning that pattern itself has
causal properties to the extent that matter is constantly
striving to follow, or being driven to follow, some intangible,
immaterial form or proportion. Pythagoras developed a
true philosophy of number. He considered numbers as the
constituent elements of the universe. Numbers were thought
of as integers whose main role was to represent the measure
of geometric magnitudes. Thus the universe was viewed in
terms of mathematical relationships.
If pattern was causal, then how does it translate into the
formations found in the financial markets - can it explain the
mathematical relationships that exist in market data, and
FIGURE 1: THE DJIAS SECULAR BULL MARKET ENDED IN JANUARY 2000
The Society of Technical Analysts: www.sta-org.uk
33
does this philosophy contradict the dynamic, non-linear
predisposition for disorder recognised in complexity and
chaos theories?
Cause-Effect, Quantum Mechanics, Complexity and Chaos
The Elliott Wave Principle (EWP) is built around the
understanding that financial markets unfold into a
seamless-sequential, non-linear pattern development that
exhibits fractal attributes whilst conforming to geometric
measurement governed by the Fibonacci-Summation-Series.
If this is true, then the past, present and future are intimately
linked together in a cause-effect, recurring cycle. As many
scholars have quoted since time immemorial, know thy past
and the future will be revealed. The past (cause) creates the
impulse for the future (effect) as the effect also becomes
the cause for the next effect and so on. This can be easily
demonstrated in the following chart/forecast:
The 1980-90s secular bull market uptrend for the Dow Jones
30 Industrial Average (DJIA) came to a conclusion in January
2000 at 11750.30 - see Figure 1.
 RESEARCH
34

This represents cause - the balancing attribute, effect then manifests according to the law of compensation with a counter-
trend decline in the form of an Elliott Wave expanding flat pattern. Labelled into three distinct waves or price-sequences,
a-b-c, the initial price decline from the 11750.30 peak establishes the price-extremity of wave a into the October 2002 low
at 7197.50. This is far too short a time interval to complete the entirety of this counter-trend effect so in January 2004, this
forecast published a more complex development as the expanding flat pattern. That resulted in an upside projection for wave
b towards 14169.80 and afterwards, a downside projection for wave c towards 6411.30. The timing for completion was also
measured into the October 2008 time-zone. The reality of this forecast is shown in Figure 2 the index ended wave b at 14198.10
and later, the financial-crisis collapse occurred as wave c which ended at 6470.00 but later, in March 2009.

FIGURE 2: DJIA IN ELLIOTT WAVE EXPANDING FLAT PATTERN - THE FINANCIAL-CRISIS COLLAPSE OCCURRED AS WAVE C

From a mathematical basis, such a forecast proves the existence of an underlying law that governs price-development. This is
because the mathematical probability of forecasting exact price-peaks and troughs, also the exact pattern development in a
random system so many years in advance would be so large it would be deemed nigh-impossible.
The adherence of a seamless-sequential pattern that conforms to the guidance of R.N. Elliotts discoveries but also the
dimensions that we, ourselves have documented using Fibonacci-Price-Ratios combine in revealing the validity of cause and
effect.

Quantum Mechanics (QM)

Science has yet to embrace the Elliott Wave Principle as a defining model for other experiments in the natural sciences where
some transfer of flexibility is needed in its thought-process. The concept of chance entered into the equation during the
twentieth century in the form of quantum mechanics. This directly challenged the concept of cause and effect.

The forerunner of particle behaviour at the quantum level began with the study of cathode rays by Michael Faraday (1838),
radiation by Gustav Kirchhoff (1859) and the photoelectric effects by Heinrich Hertz (1887) was followed by the quantum
hypothesis of Max Planck (1900). Planck discovered that light is made of individual quantum particles.

The phrase quantum mechanics (QM) was termed by
a group of physicists including Werner Heisenberg (Zur
Quantenmechanik). His uncertainty principle published in
1927 postulated that the more precisely the position of some
particle is determined, the less precisely its momentum
can be known. In other words, there was an element
where cause/effect began to disintegrate especially at
the quantum level the smaller you observe a particle, the
more unpredictable it becomes quantum uncertainty.
The two same particle experiments often caused different
results. Later experiments revealed the observer effect
where measurements of a certain system cannot be made
without changing the system. It was later acknowledged that
the uncertainty principle is inherent in the properties of all
wave-like systems. Despite some uncertainty outcomes,
the results of QM experiments were all defined within larger
principles, they were confined within higher laws, i.e.
particles didnt jump out of the laboratory and dance in the
street!
These observations of Heisenberg are not dissimilar to
what we find developing in our financial laboratory. For
example, when applying the Elliott Wave Principle overlay to
historical data, we find that the larger/aggregate pattern in
current development will unfold without complication, to its
destination. But as this is a fractal system, there are several
pattern permutations that could develop in reaching that
final destination. Furthermore, the smaller data is examined,
from weekly bars to daily then intra-hourly at various degrees
of trend, the more pattern permutations are available within
ongoing price-development.
For example, did you know that there are exactly 800 pattern
permutations to a single ZIG ZAG pattern? And thats only at
1-degree status. The zig zag is labelled A-B-C - wave A can
unfold into 5 pattern permutations, wave B into 32 and wave
C into 5. Interchanging patterns means 5 x 32 x 5 = 800. If this
is traded -1 degree, it exponentially opens up another layer of
probabilities.
It seems that the smaller the wave examined, the more
sensitive, or perhaps the more flexible or responsive it is to
external or exogenous vibrations. This could mean that as
we look at Elliott Waves at quantum or minute intra-day
degrees of trend, the more capable it is of changing the
course of larger/aggregate wave development. Or are these
intra-day quantum data points/patterns subsumed into
the larger/aggregate pattern development?
Complexity and Chaos
Complexity Theory is an interdisciplinary theory that grew
out of the systems theory of the 1960s. It emphasises
the interactions and accompanying feedback loops that
constantly change systems. This is interesting from the
financial market place. For example, a larger/aggregate Elliott
Wave pattern is in progress and whilst its final destination
doesnt change, how it arrives there, in varying pattern
The Society of Technical Analysts: www.sta-org.uk
35
permutations, is influenced by the entrance of short-term
fundamental data, the equivalent of feedback loops. The
misunderstanding of feedback loops is where the 20th
century mind-set of external influence has driven market
participants into thinking, into believing fundamental data
information and/or events dictate direction of a trend. It
seems that way, but its not entirely true.
But whats so important to understand is that random
interactions between a multitude of local variables
generate deterministic qualities that are predictable
they create non-random structures or patterns of larger
scale. Think of this we have all experienced, at least from
time-to-time, pattern recurrence in financial markets like
head-and-shoulders, flags, pennants etc. We have even
measured retracements using Fibonacci retracement ratios,
38.2%, 50%, 61.8% per cent. But we seldom reason why such
patterns are recurring and repeating, or why price activity
should respond so well to Fibonacci ratios. Millions of people,
you and I included, are placing orders into the market every
moment, every day, quite in isolation from one other. We
are not communicating in such a way as to ensure markets
build into certain patterns, or to respond at predetermined
levels it just happens. This is how the complexity at a local-
scale somehow creates predictable form at the output stage.
From this we can say that the whole is greater than the
collective amount of its components.
If Complexity Theory is an interdisciplinary theory of systems
theory, then Chaos Theory is akin to complexity. The two
main components of chaos theory are that systems, no
matter how complex they may be, rely upon an underlying
order. Simple or small systems and events can cause very
complex behaviours or events. This concept is known
as sensitive dependence on initial conditions, a quality
discovered by Edward Lorenz, one of the early experimenters
in the area of chaos in the early 1960s. The perceived random
behaviours of a system is attributable to its non-linearity
at differing scales of observance the disproportionate
relationship between cause and effect manifests from
small beginnings to outlandish results but isnt this a good
example how financial markets operate? They too begin
with smaller pattern-build, the fractal nature of trading-day
activity that gradually increases momentum. But in this
seemingly random phase are the DNA blocks of something
evolving, something greater than itself. We can hypothesise
that price-expansion, so evident in (EW) 3rd wave progress
embodies the concept of Universal Law, one that expresses
the expansion-phase which only later, recedes. Out of chaos
comes order.
Attractors in Dynamic Systems
When we observe how Elliott Wave patterns develop and
how they build through market data, there seem to be
certain crossroads or inflexion-points that are reached
which determine directional change. What could cause
such changes?
 RESEARCH
36

Dynamic systems are entities in motion, primarily

mechanical or physical in nature and complex as defined
by chaos theory - financial markets are an excellent example.
In the study of dynamic systems, the condition known as an
attractor defines the equilibrium level of that system. It is a
region of phase space that attracts all nearby points as time
passes. If you watch a typical dynamical system and wait for
a while, it ends up as an attractor. Once the system reaches
the attractor, it is then repelled or dispersed. A strange
attractor is simply one that has a fractal structure and we
know this fits the profile of financial market data.
Did you know?
Lets hypothesise: market data is energised and in motion,
You may only use the designation MSTA after your
evolving from a singular origin of the past. But it is operating
name if you are a paid up member of the STA. This is
within the confines of certain laws that guide its onward
because MSTA stands for Member of the Society of
progress. The energy levels that propel it forward are finite
Technical Analysts.
but are moving towards a point of equilibrium - that point
of equilibrium is one of the crossroads or inflexion-points
Anyone (prospective or current employer etc.) can
mentioned earlier. In Elliott Wave terms, these represent
look up your name and membership number on the
price-peaks and price-troughs, reversal levels, support levels,
front page of the website.
projection levels at varying degrees of scale, of trend.

Taking five forward steps, then three

backwards, before repetition, there is progress
but there is one essential element that is
missing - that of expansive-dimension.

The universal law of compensation is manifested in Elliott

Wave terms as action/reaction processes, or archetypally,
five wave/three wave development. The metaphysical idea
behind fives versus threes is to comply with the expanding
universe. Taking five forward steps, then three backwards,
before repetition, there is progress but there is one essential
element that is missing - that of expansive-dimension.
Without expansive-dimension, even a five-versus-three set-
up could simply oscillate inside a fixed or limited dimension,
or in market terms, a continued sideways trading pattern.
This would look like a concentric spiral with no growth or
expansion. But a logarithmic spiral would conceptualise
expansion/contraction, the two opposing forces found
in financial market activity. The expansive-dimension
attribute can be found in any Elliott Wave impulse wave that
undergoes expansion whether this is a 1st, 3rd or 5th wave
sequence. When one of these impulse waves develops larger
than its other two counterparts, we term this as price-
expansion.

When prices are energised, whether this is unfolding into a

five wave trend or a three wave counter-trend is irrelevant,
the development of the pattern or the system is being
attracted to a certain, defined terminal location. This is
where the next inflexion point is expected to occur. Can we
predict such inflexion points?
 The Society of Technical Analysts: www.sta-org.uk

ANALYST FOCUS
37

The STA has been instrumental to my success

Introduction
Some people see technical analysis as a timing tool, which helps you know when
to trade. But in my opinion, that only scratches the surface of whats possible.
Technical analysis is the study of price and there is so much more that it can do.

Charles Morris
Charlie Morris is Head of Multi Asset
at Newscape where he manages
the Newscape Diversified Growth
Fund. He is also the editor of the
Fleet Street Letter, Britains oldest
financial newsletter that discusses
financial markets from a British
perspective.
There are medium-term trends, tendencies that are even more reliable than short-
term trends. In aggregate, they help to identify the key tactical investment themes
within markets and are particularly useful for trading high-growth stocks. Yet
long-term trends are the most reliable of all, although it takes time and experience
to truly appreciate this. They help you with the dividend-paying stocks that tend to
move more slowly. With these, it pays to be brave. The worlds greatest companies
are best bought when they are over-sold rather than on a breakout. The STA helped
me to understand that different strategies should be applied to different situations.
A one-size-fits-all approach to investment will only fail.

Until 2015, he spent 17 years at

HSBC Global Asset Management as
the Head of Absolute Return. There
he managed a $3 billion multi-asset
fund range which was active in the
gold market. He publishes Atlas
Pulse (www.atlaspulse.com free
sign up) on a monthly basis where
he analyses gold. Prior to fund
management, Charlie was an officer
in the Grenadier Guards,
British Army.

Then there are volatility, cycles and price comparisons. Within long-term trends,
you can seek out situations where the volatility is unusually low. When it starts to
rise, then pounce on the breakout, whether it be long or short. Some of the greatest
market moves in history have been identified this way. The Nasdaq breakout in
1994 was powerful, as was the collapse of oil in 2014. Technical analysis isnt just for
frequent traders; its also there for the patient ones.

The considered use of technical analysis has helped me to better understand

the market and, above all, to respect it. I sat my STA exams back in 1999 and
was delighted to pass with distinction. The lessons I have learned have been
instrumental to my success in fund management.
 ANALYST FOCUS
38

Head and Shoulders above

Its Humans that are the Problem: Reminiscences of a Veteran Investor

It is remarkable how technical analysts can adopt vastly different views and
interpretations of the same charts. I suspect this is due in part to a peculiar
psychological quirk called Pareidolia whereby humans see patterns in random
data and the mind perceives a familiar pattern of something, where none actually
exists. There are many famous examples of this, including a satellite photo of Mars,
revealing a face which was cited as evidence of extra-terrestrial inhabitation.
Philip Gray
This perceptual issue is particularly
Philip Gray is a Fellow and first relevant to some of the more esoteric
Chairman of the STA, and the technical tools such as Elliott Wave
leading figure in the change from Theory, which is highly dependent on
ACTA to STA in 1986. In addition individual interpretations.
he has been Chairman of the
Hong Kong Society of Investment Therefore, in my early days I veered
Analysts. Philip is also a Fellow of away from some of the esoteric
the Institute of Directors.
technical concepts and concentrated
on those founded on a sounder
intellectual and/or statistical basis.
In this regard, I fell in love with trend identification systems, the simplest being of
course moving averages. I developed some fairly sophisticated variants, including
the use of filters, tolerance bands, differential weightings and so on. In this regard,
I developed a very simple model on the Dollar/Mark, which, judging by my bank
balance, seemed to work.

However, to make sure that I did not interfere with the model or get tempted to
override it, I gave it to my broker to manage on my behalf and execute all decisions.
Well the basic premise was correct - humans are the problem, but I didnt know
how much! One Friday, as I was sitting in Amsterdam during a G8 conference being
held there, the Dollar suddenly lurched late afternoon which I knew would trigger a
reversal in my model and probably make me a lot of money over the weekend.
On Monday morning when I got back I calculated that I had indeed made a small
fortune and phoned up my broker in a state of euphoria. However, his response
was so muted that I asked him what was wrong. He then confessed that he had left
work after lunch on Friday to go to the South of France for a dirty weekend and that
he had not executed the reversal order. As I said, humans are the problem.

Of course in the last 10 to 20 years these models have been automated, presenting
a new set of problems, including the risk of a Black Swan or Fat Tail event, events
that seem to occur more frequently than your average investor would guess. The
Directors of LTCM, for example, are no doubt acutely conscious of this issue.

Many years later as I was busily learning the intricacies of the Indian stock markets,
I came across an amazing bond trader who was also the winner of the highly
prestigious Indian Maths Prize. We both shared a passion for the more advanced
components of technical analysis and over a few drinks, we discussed an obscure
academic paper which proved that there were periods in market cycles where the
risk/reward trade off would alter dramatically in favour of reward.

Based on this theoretical work, we developed a relatively simple but extremely


Even in recent years the problem of human interference in
sound models continues to haunt me.
sophisticated model and we both stuck in a small fortune
to test it. I was absolutely convinced of the soundness of
the intellectual model and therefore was very disappointed
that after our formal review six months later, the fund had
not lived up to my reasonable and valid expectations. After
some forensic work, it transpired that my Indian partner, who
was in charge of running the model, was subtly interfering
in many decisions by slipping in some complex option
strategies as in his (admittedly brilliant) mind, he knew
better!
On a slightly different tack, upon browsing through an
obscure bookshop in Amsterdam, I came across a thesis
written by a PhD candidate on the simple use of relative
strengths for portfolio construction. On my return to Hong
Kong, I tested this model on the Hong Kong stock market
and frankly was not surprised to see how it outperformed
all the unit trusts in this sector. One of the models strong
points was that it only required a few hours each quarter
to re-balance the portfolio and therein lay the problem. I
The Society of Technical Analysts: www.sta-org.uk
39
explained the model to a number of unit trust managers,
suggesting how they could significantly improve their
performance. However, they all pointed out that they could
not possibly adopt this model as their superiors would think
that they werent earning their pay if they only worked a few
hours a quarter - so they were condemned to continue their
mediocre performance.
Even in recent years the problem of human interference
in sound models continues to haunt me, much to my
professional annoyance. With the advances in artificial
intelligence and computerised trading, it should in theory go
away - but of course it never will. In the meantime, the market
will always remain the market, ever-changing, ever-shifting
and presenting new challenges on a regular basis.
 BOOK REVIEW
40
#TradingThought
Hoad, S. (2016)
Mind Medicine for Traders & Investors.
Book Review by Simon Gray
Stephen Hoad is an economics graduate and member
of the STA with 20 years experience in trading and risk
management in the City of London. On leaving the City in
2014, he founded his own company to provide training for
private investors and traders based on technical analysis,
risk management and behavioural psychology. While
communicating with his clients through THE STOP HUNTER,
he realised that his daily motivational quotes and proverbs
were circulated more widely (re-tweeted) than the market
news and technical charts they accompanied. These quotes
form the basis of this book.
Arguing that prowess in technical and fundamental analysis
is not sufficient for determining success or failure in financial
markets, Hoad suggests that the right psychological mind-
set is also required. He claims that his clients use of quotes
enhances their trading by inspiring them to think and act
differently to achieve better results. So, the central tenet of
this book is that the contemplation of motivational quotes
will assist traders to improve their mind-set, and that this
will, in turn, enhance their trading ability.
Along with quotes, Hoad also includes proverbs, sayings,
mottos and idioms. These are drawn from all available
sources: ancient and modern, eastern and western. So it
should come as no surprise that Herodotus is quoted on the
same page as Bruce Springsteen and Donald Trump, or that
quotes from Winston Churchill and George Orwell are found
sandwiched between the sayings of Confucius and Nicole
Elliott.
The book is organised into six sections starting with
#TradingJourney which emphasises the role of education,
knowledge and experience in creating a traders own
individual character and personality. A traders success will
largely depend on how well he understands himself and
his own motivation as this will affect his reaction to market
moves and to risk. Goldstein
(2016) makes a similar point when
emphasising the importance of
understanding ones risk personality (e.g. wary, excitable,
carefree etc.) and the benefits of aligning this with risk
attitude or the way in which one approaches trading.
A failure either to understand oneself or to match ones
personality to ones trading approach will result in a loss of
trading edge or advantage.
Even worse than a lack of self-understanding is the impact of
fear and greed which lead to self-inflicted account wipe-outs
or the #TradingDisaster. To avoid this, one needs to develop
the right mind-set for trading and to consider core attitudes
such as commitment, focus and discipline in conjunction
with personality traits like positivity, optimism, perseverance
and many others. This section, #TradingMindSet, represents
about one third of the book and, for me, contained the
most satisfying and productive quotes and ideas. As I am
not a natural trader, anything that helps me become more
patient, positive and focused has to be beneficial.
One niggle is that the numerical superscript series used to
identify entries in the Reference and Bibliography sections
are identical, so one doesnt know which section is being
cited, but this is a minor issue.
I found reading #TradingThought to be quite rewarding. As it
contains over a thousand quotes, it is probably a book best
dipped into rather than read cover-to-cover but one that I
recommend for regular use.
Goldstein, S. (2016) How Risk Personality can influence the performance of
trading and investment professionals. Market Technician (STA Journal) Issue 81.
September 2016.Stephen Hoad can be contacted at THE STOP HUNTER either
through his website: www.thestophunter.co.uk, email: info@thestophunter.co.uk
or telephone 01227 811731.
 The Society of Technical Analysts: www.sta-org.uk

41
Benefits of STA membership

The STA holds 11 monthly meetings in As a service to our members, many of The Society of Technical Analysts and
the City of London, including a summer whom are unable to attend all our monthly the Chartered Institute for Securities &
and Christmas party where canaps and meetings, we have been making videos of Investment (CISI) have formed a partnership
refreshments are served. meeting presentations for several years. to work together on areas of mutual interest
for our respective memberships.
Key benefits Key benefits
Chance to hear talks by leading Never miss the latest meeting. Key benefits
practitioners Browse our extensive video archive of CISI examination exemptions for STA
Networking previous meetings. Diploma Part 1 and 2 holders. MSTAs with
CPD (Continuous Professional three+ years experience can become full
Development) members (MCSI).

The STA has been running educational Student members have access to a question Endorsed by the Chartered Institute for
courses on technical analysis for 25 years. and answer forum which is available in the Securities & Investment (CISI), members of
members area of the website. the STA are entitled to receive continuing
Key benefits professional development points (CPD) for
Courses are taught by leading authorities Key benefits their attendance at monthly meetings and
in their field such as authors, highly Members can ask questions on technical taught course lectures.
regarded professionals and Fellows. analysis in the Technical Analysis Forum
The STA also offers a Home Study Course which a course lecturer, author or Fellow will
for self-study. answer. Key benefits
Remain compliant.
Be informed of all new industry
developments.

The STA Market Technician journal is
published online twice a year.
Key benefits
Members receive the latest issue of the
Market Technician via e-mail.
They are also able to access an archive of
past editions in the members area of the
website. Technical analysts from all over the
world contribute to the STA journal.
The STA has an extensive library of classic STA members benefit from significant
technical analysis texts. There are over discounts on technical analysis books,
1000 books in the collection. It is held at the magazines and software.
Barbican Library with a smaller selection
available at the City Library, a reference Key benefits
library in London. As a member you can now STA members currently enjoy discounts from:
browse which titles are available on-line. Your Trading Edge
The Technical Analyst Magazine
Key benefits MT Predictor
Members are encouraged to suggest new CQG
titles for the STA book collection and, where Tradermade and the Global Investor
possible, these are acquired for the library. bookshop.
The complete listing of books held can be
downloaded in Excel format from within the
members area.
42

STA Calendar 2017 More information about the STA events can be found here.

TUES 11 APRIL THURS 20 APRIL TUES 9 MAY TUES 13 JUNE

6.00pm 1.00pm 6.00pm 6.00pm

British Bankers Association London School of Economics British Bankers Association British Bankers Association
Paul McLaren STA Diploma Part 2 Exam Rajan Dhall, MSTA Malcolm Pryor MSTA

MON 3 JULY TUES 11 JULY MON 4 SEPTEMBER TUES 12 SEPTEMBER

10.00am 6.00pm 10.00am 6.00pm

StayAhead Training Centre British Bankers Association StayAhead Training Centre British Bankers Association
STA Diploma Part 1 Exam Summer Party & Awards STA Diploma Part 1 Exam Zaheer Anwari

WED 20 SEPTEMBER TUES 10 OCTOBER SAT 13 - MON 15 OCT. WED 11 OCTOBER

7.00pm 6.00pm Excelsior Hotel Gallia, Milan 6.00pm

National Liberal Club British Bankers Association IFTAs 30th Annual LSE, STA Diploma Part 1
STA Annual Dinner Conference Course commences (TBC)

THURS 19 OCTOBER TUES 14 NOVEMBER MON 4 DECEMBER TUES 12 DECEMBER

1.00pm 6.00pm 10.00am 6.00pm

Student Central British Bankers Association StayAhead Training Centre British Bankers Association
STA Diploma Part 2 Exam Lee Sandford STA Diploma Part 1 Exam Christmas Party
 The Society of Technical Analysts: www.sta-org.uk

43

STA education: the LSE courses, and the Diploma

in Technical Analysis
The Education Channel - Monthly meetings videos are available to members here.

January 2017 Stephanie Ames, Chris Clark, Zaheer Awari Panel discussion: Outlook for 2017.

December 2016 Russell Napier Technical Analysis in an Age of Financial Repression

November 2016 Nicole Elliott FX charting with candles and clouds

October 2016 Stephen M Barrett Ganns Master Time Cycle

September 2016 Lee Sandford High probability day trading strategies

June 2016 David Sneddon Multi-Asset & Macro Technical Analysis

May 2016 Thomas Anthony Systematic Trading based on Elliott-Fibonacci applications

April 2016 Steven Goldstein Risk Type - How your core risk personality impacts your trading
decisions and behaviours

March 2016 Tom De Mark DeMark Indicators

February 2016 Riccardo Ronco Trend Following

January 2016 Panel Panel discussion: Outlook for 2016

STA Library

The public library of the City of London at the Barbican Centre holds around 1500 books on Economics, Finance and Investing;
this includes the STA collection. UK STA members can obtain free membership of the library and are sent the relevant form in
their membership pack. A UK-wide postal service is also available to members. If you do not have an application form to hand
and would like to join, please contact STA Administrative Services (info@sta-uk.org) and they will send you one.

More information about the STA library services can be found here.
 THE EDUCATION CHANNEL
44
STA education: the LSE courses, and the Diploma in
Technical Analysis
Luise Kliem
Luise Kliem is a Fellow of the STA
and current STA chief examiner
and LSE Course Director. During a
20-year City career she worked first
as a commodity broker, then as a
stockbroker, before becoming a full-
time technical analyst.
She was Senior Technical Analyst
(Director of Global Securities
Research & Economics) at Merrill
Lynch from 1995 to 2000, then
joined Commerzbank Securities as
Head of Technical Analysis. Luise
specialised in equity research, and
was consistently highly rated in
surveys such as Thomson Reuters
Extel, until leaving the City in 2001.
STA education: the LSE courses, and the Diploma in Technical Analysis
Now more than a quarter of a century old, this formal part of the STA education
programme continues to flourish. Our well known courses at the LSE (London
School of Economics) are attended by fund managers, traders, research analysts
and private investors. They are taught by the top market technicians in their field,
offer a two-stage programme leading to the prestigious STA Diploma.
The Part 1 autumn course teaches the basics, rapidly enabling students to
incorporate a number of technical tools into their daily work. The Part 2 spring
course exposes students to a wider and much more complex syllabus, with the
emphasis on how experienced market professionals themselves employ the
more advanced techniques. This higher level course also offers sessions on risk
management and behavioural finance.
In essence, the autumn course prepares students for the Part 1 examination and
the spring course prepares for the advanced Part 2 - however, there is flexibility.
Market analysts who already have a good grounding in the technical analysis
basics may elect to go straight onto the Part 2 course, although they will of course
still need to sit the Part 1 examination. It is also worth noting that discounts are
available if the two courses are booked as a package.
Our timing of examinations seeks to fit in with busy lifestyles: Part 1 online
examination sittings are available at least four times a year, with some overseas
centres also an option. The narrative Part 2 examination sittings are held twice
a year.
Once a pass in both Part 1 and Part 2 has been gained, the student will be awarded
the prestigious STA Diploma in Technical Analysis, and benefit from the MSTA
designation. This is internationally recognised and accredited by IFTA (International
Federation of Technical Analysts). Holders of the STA Diploma are also entitled to
certain exemptions from CISI (Chartered Institute for Securities and Investment)
examinations. Details of these benefits, and any updates, can be found here.
 The Society of Technical Analysts: www.sta-org.uk

45

Videos of lectures can be made available. Also,

copies of all lecturers presentations are emailed
to students on the day following each session.

STA courses and exams: FAQs

1. How many course lecturers are there, and who are they?
The STA draws on the expertise of more than 15 experienced
and highly respected market professionals who work for
investment banks or run their own companies, authors,
consultants and Fellows of the Society. Their detailed
biographies can be found here.

2. I worry that I may sometimes have to miss a course

lecture. How can I catch up?
Videos of lectures can be made available. Also, copies of all
lecturers presentations are emailed to students on the day
following each session.

3. If I do not wish to sit the exams can I still attend

the courses?
Yes, certainly, although given the advantages the MSTA
designation brings, the vast majority of students attend
courses with the Diploma examinations in mind.
4. I want to study technical analysis and eventually sit the
STA examinations, but cannot attend the LSE courses.
Is there a distance learning course?
Yes. The STAs Home Study Course has proven to be a very
successful teaching tool over a number of years. Details can
be found here. There is, incidentally, nothing to prevent you
from simply doing your own reading and then registering for
the exams, although that is, of course, quite a tough option.
5. What is the difference between the Part 1 and Part 2
examinations?
Very broadly, Part 1 is about knowledge, while Part 2 is about
the professional application of knowledge - the need to show
the ability of someone who can give appropriate advice
based on their analysis. The capacity to discuss various
topics relating to technical analysis is also looked for.
In more detail: Part 1 is a 120-question online multiple
choice exam, requiring students to demonstrate thorough
knowledge of the core technical analysis subjects. The exam
is of two hours duration. The pass mark is 67%.
Part 2 is a higher level (written) exam, requiring candidates
to apply their knowledge and skills in a professional manner
to scenarios that are relevant to financial markets. This is
particularly the case in the first section of the paper, where
candidates analyse a set of charts and then write a report, as
if for a client, based on their technical analysis. The second
section of the paper usually involves an essay-style question,
while the third section consists of questions demanding
shorter factual answers, but with a demonstration of
interpretation/application also expected. The pass mark
is 60%. (A distinction is awarded for 85% and above). In
addition to the overall 60% pass mark, candidates must also
gain a minimum of 35 out of the 60 available points for the
section 1 client report.
Copies of past Part 2 question papers are available from
the STA shop.
6. Do I need to pass Part 1 before attempting Part?
No. If you do not pass Part 1 first time and a re-sit has to be
scheduled after Part 2, or if you are simply not able to sit the
exams for another reason, it is possible to sit Part 2 first.
7. Do I need to pass the examinations to be a member of
the STA, and to benefit from other areas of STA education?
If you opt for associate STA membership you do not have to
take the exams. You will still receive the STA newsletters, and
you can attend the highly respected monthly presentations
at the BBA (British Bankers Association). Attendance at these
also qualifies for CPD points.
For more information on STA education, please take a look
at our website.
 THE EDUCATION CHANNEL
46

Congratulations to the latest

STA Diploma MSTAs
Distinction
Jean-Regis Allard
Zoe Bancroft
Mohd Adzrul Afni Kadri
Marco Meola
Edward Rushton

Pass
Laszlo Bajtai
Theocharis Georgiou
Priyesh Halai
Halima Nuriah binti Ameer Hamza
Syed Hidayat bin Syed Hassan
Marion Houlet
Jazli Izzuddin Jamaludin
Cristie Parker
Mohd Shahril Nizam Ramli
Charalampos Shanios
Soon Hee Song
Fazida Suliman
Paul Tellwright
Kai Sheng Wong
Kyriaki Zeniou-Themistokleous
 The Society of Technical Analysts: www.sta-org.uk

47

The Bronwen Wood Memorial Prize
At the end of each year, examiners consider the high
distinction papers from all Part 2 examinations and may
award the Bronwen Wood Memorial Prize to the outstanding
paper for the year. We were delighted to have several
excellent papers to choose from in the 2016 cohort, and after
much deliberation the examiners made their choice.
We are pleased to announce that this years award goes to
Marco Meola. Congratulations Marco - you will join our hall
of fame!
The STA joint-sponsored 2016 UK University Trading
Challenge (UTC) was a resounding success.
This event marked the STAs first foray into sponsoring and
giving UK business schools undergraduates and post-
graduates a chance to test themselves in a situation that
is as close to real-world trading and investing conditions
as possible. It has been a huge success with the number
of participants being increased for 2017, and discussions
already taking place on expanding the competition into
Europe in the next two years.
The STAs Chairman, Axel Rudolph, opened the proceedings
together with Bryant Nielson, Chairman of CapitalWave (the
other main sponsor). Neilson explained that challenging the
students to analyse, strategise, make decisions, and give
presentations in this way gave them an invaluable glimpse
into the real world of the capital markets as well as a true
insight into themselves and their suitability to a finance
career. At the end of the day another STA director, Guido
Riolo of Bloomberg London, gave the excellent keynote
speech.
The whole day was so well received by both the students and
their lecturers that in the two months since the competition
the STA has already been invited to speak at five of the
universities which took part.

The competition ran from early November and culminated

with an intensive day of trading, portfolio challenges and
business case presentations at Cass Business School on 9th
December 2016.

The students had to compete both individually and within

teams of three in the following four components: The STA would like to congratulate the winning teams of
the 2016 University Trading Challenge:
A Trading Challenge, competing over a 21-day period.
The teams started with a base portfolio containing 1st: Kingston University, Londons Business School
equities, fixed income contracts, foreign exchange and 2nd: University of West Londons Claude Littner Business School
commodity positions, and index contract (values are based 3rd: University of East Londons School of Business and Law
on opening prices recorded by global exchanges), and were
allowed to modify their positions daily; We are also proud to have been invited to present the
winning prizes and Certificates of Achievement to the
A Portfolio Challenge. This intense half-day day simulation individuals at award ceremonies laid on by their respective
provided students with an opportunity to act as a Portfolio universities.
Management team for a Corporate Treasury Office;
To quote one winner
A Treasury Trading Challenge, another intense half-day the prizes are great, but above everything else this whole
simulation. Students were given the opportunity to act as a experience has taught me that to be successful in the future
Trader, simulating the management of the foreign exchange I have to know how to use all the trading and investment
hedging desk of a large corporate treasury department; and techniques available...

An Investment Banking Challenge. Each team was given Congratulations to all the participants, and thank you
a $325m fund-raising case-study and data set 30-days again for all your hard work which helped make the 2016 UK
prior to the competition, with the task of formulating a University Trading Challenge such a success.
financial strategy as a solution. As in the actual business
world, knowing the strengths and weaknesses of your team
was important as two members of the team had to give a
10-minute presentation outlining the solution, while the final
team member had to field questions from the judges.
 THE SOCIETY OF TECHNICAL ANALYSTS
48

The STA Executive Committee

Axel Rudolph Karen Jones Mark Tennyson dEyncourt

BSc (Hons) MSc FSTA MCSI BSc (Hons) FSTA FSTA
Chairman of the STA Head of Marketing Programmes

Charles Newsome Guido Riolo David Watts

MSTA FCSI BSc MBA MSTA BSc (Hons) CEng MICE MIWEM MSTA
Vice Chairman Marketing / Journal Systems and Website Specialist

Please keep the articles coming in

The success of the Journal depends on
its authors, and we would like to thank
Anne Whitby Clive Lambert all those who have supported us with
BA (Hons) FSTA MSTA their high standard of work.
Company Secretary Marketing
The aim is to make the Journal a
valuable showcase for members
research - as well as to inform and
entertain readers.

Keep up to date with the conversation

by joining us on:
Simon Warren Tom Hicks
FSTA MEng MSTA MSCI
Treasurer Head of Programmes
STA Advertising Rates 2017
The Society of Technical Analysts Journal The Market Technician is a bi-annual publication, published in pdf format only.
The STA will accept advertisements in this publication if the advertising does not interfere with its objectives.

The appearance of advertising in the Market Technician is neither a guarantee nor an endorsement by the STA.

Position Price Specification

Inside Cover 500.00 A4 Portrait, 210mm (w) x297mm (h), plus 3mm bleed.

Full Page 500.00 A4 Portrait, 210mm (w) x297mm (h), plus 3mm bleed.

Half Page 300.00 Landscape, 198mm (w) x 139.5mm (h).

Quarter Page 200.00 96mm (w) x 139.5mm (h).

Circulation Contact
The Market Technician has a circulation of approximately Contact Katie Abberton, Society of Technical Analysts
1300. Readership includes technical analysts, traders, on info@sta-uk.org or +44 (0) 207 125 0038 for more
brokers, dealers, fund managers, portfolio managers, market information.
analysts, other investment professionals, and
private investors.

Advertising policy
Advertising is subject to approval by the STA Journal
Committee. All advertisements must be non-discriminatory
and comply with all applicable laws and regulations.
The STA reserves the right to decline, withdraw and/or edit
at their discretion.

The Society is not responsible for any material published in The Market Technician and publication of any material or expression of opinions does not necessarily imply
that the Society agrees with them. The Society is not authorised to conduct investment business and does not provide investment advice or recommendations. Articles are
published without responsibility on the part of the Society, the editor or authors for loss occasioned by any person acting or refraining from action as a result of any view
expressed therein.
Society of Technical Analysts
Dean House
Vernham Dean
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tel: +44 (0) 20 7125 0038

info@sta-uk.org
www.@sta-uk.org

The Society of Technical Analysts (STA) is recognised worldwide as one of the largest and most widely respected not-for-profit organisations which trains and accredits members of
the investment community, from industry professionals to private individuals, interested in the study of technical analysis. We have been setting the standards in technical analysis
for nearly 50 years and have been teaching at several UK universities such as LSE, Kings College, Queen Mary etc. for nearly 25 years.

www.sta-uk.org
www.@sta-uk.org