GCN pt 14

The chart yesterday

The chart close of today

"AS the whole object of these studies is to learn to read what the tape says, I will now explain a point which should be known and understood before we proceed, otherwise the explanations cannot be made clear.

First of all, we must recognize that the market for any stock - at whatever level it may be - is composed of two sides, represented by the bid and the asking price. Remember that the "last sale" is something entirely different from the "market price." If Steel has just sold at 50, this figure represents what has happened. It's history. The market price of Steel is either 49 1/8@50 or 50@50 1/8. The bid and asked prices combined form the market price. This market price is like a pair of scales, and the volume of stock thrown out by sellers and reached for by purchasers, shows toward which side the preponderance of weight has momentarily shifted." RDW

The second test at .038 was ONE trade of 41,080  shares.

"This two-way auction process enables all market participants to express their opinions—no

matter how those opinions were obtained—with real money; the auctions

effectively establish a fair price where business can be conducted at any

given time. This expression of the market’s collective will results in a constant

flow of objective market-generated information."

"Auctions are made up of three fundamental elements: price, time, and volume.

As the market’s two-way auction process

unfolds, there is an ongoing search for information between buyers and

sellers"

How important to be very clear what the market reality IS

Now something to think about !

The markets is a TWO way AUCTION.

BUYING and SELLING waves.

That  gather FOLLOWINGS !

Why does a wave end ?

or - When does an auction end ?

What happens ?

The bidding or offering STOPS

Consider this answer

"An excess high or low occurs on light or low volume. Most of

the investing world, however, thinks the opposite is true. For example,

many investors believe that capitulation at the end of a downward

auction—when all the sellers finally sell—occurs on heavy volume. But

this would go against all the principles of auctions."

For example, a market may experience a period of healthy volume as the stragglers

(Gladwell’s “late majority” or “laggards”) get rid of their inventory, but the

final prices, manifest in the excess spike, are not made on heavy volume.

The volume most people incorrectly ascribe to capitulation is actually a

result of the action in the other direction, when buyers show up in force

and the price spike down is quickly rejected. Confusion occurs due to the

fact that after the excess high or low is in place, there is often a dramatic

pickup in volume as part of the counterauction."

"The most common true end to a trend—which also signals when a bracket

begins—occurs as a result of both a reduction in volume in the direction

of the trend and an excess high or low. The ending of an auction offers

the moment of greatest opportunity, as well as the moment of greatest

risk; both risk and reward are asymmetric at this pivotal point. If the trend

is downward and an auction low has been established, the investor who

correctly recognizes the low and buys has a low risk/high reward position." ( these quotes are from JAMES DALTON )

The Auction Ends when the Bidding is EXHAUSTED

RDW==>

"Every upward or downward swing in the market, whether it amounts to

many points, only a few points, or fractions of a point, consists of numerous buying

and selling waves. These have a certain duration; they run just so long as they

can attract a following. When this following is exhausted for the time being, that

wave comes to an end and a contrary wave sets in. The latter may attract more of

a following than the former. By studying the relationships between these upward

and downward waves, their duration, speed and extent, and comparing them with

each other, we are able to judge the relative strength of the bulls and bears as the

price movement progresses."

"Take your positions as close as you can to the

danger points, as shown on your charts or on the tape."

Now look at the chart again

Take note of the line of six 5s

The seven .043s

and now especially the double line of four .04s and four .039s

Notice the pattern.

"This gives the appearance of a wedge. 

The appearance of the wedge, apex, or dead center, is made very clear

 by drawing a line from the

(last top) and   from  the  (low). Past experience

tells us that the stock, as a result of having come to a dead center, is preparing

for an immediate sharp move which is likely to be (in the opposite direction in which  the) volume

shrinks"   ( adapted )  RDW.

Motorway