Bryce Gilmore - Price Action Chronicles Volume 1 PDF

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PRICE ACTION CHRONICLES (Volume 1) - © Bryce Gilmore 2007
The
PRICE ACTION
Chronicles
Price Action in the S&P500 stock index futures
This volume covers a candid day by day

explanation of my trading method
between late April and late June of 2007.
One day it maybe seen to cover the last
stages of an amazing Bull market that
began in 2003.
[C] Bryce Gilmore 2007
All rights reserved:

Bryce Gilmore & Associates Pty Ltd.
Queensland. Australia.
1
PRICE ACTION CHRONICLES
PRICE ACTION METHOD:

Our price action method is an approach to short term trading
opportunity created out of the market money flow.
Our method is based on the continual and repeating habits employed

by “smart money” market participants.
It is amazing the way you can predict a lot of the shorter term
market moves with this method.
The price action method gives you the opportunity to trade at precise
levels with very tight stop losses.
CONTENTS:
Cover, Contents and disclaimers 1-4
Chapters:
1 One Day at a Time 5-10
2 Each day is a new day 11-14
3 Pre Opening - Monday 23rd 15-25

April, 2007
4 Tues 24th – Fri 27th April, 2007 26-42
5 A New Week Ahead 43-55
6 Federal Reserve Meeting week 56-71
7 After the FED announcement 72-83
2
8 Day after ES Larger degree 1:1 84-89

And 61.8 return.
9. What is the RISK on any trade? 90-93
10. Back in the RANGE AGAIN 94-115
11. The Beat goes on 116-136
12. Has the Trend Reversed? 137-157
13. Contract Rollover Approaching 158-172
14. Contract Expiry Week 173-189
15. Think what you like but 190-194

Trade what you see!
16. The Finale 195-208
Those who want to find a way will; those who don’t will find
an excuse.
3
This communication has been authored by Bryce Gilmore certain proprietary terms and routines are
subject to personal copyright: Some rights extend back to 1987.
Bryce T. Gilmore [C] 2007
It is illegal to transmit, copy, print or pass any portion of this book to any party without the permission of
the author. - please read all of our disclaimers below.
Price Action Chronicles – One day at a time – Edition – [c]2007
DISCLAIMER : Edited by Bryce Gilmore (C) 2007
Conditions of supply : read this
This communication has not been prepared by taking into account the financial circumstances and
investment needs of any particular investor; and investors using this book as advice should therefore assess
whether it is really suitable to their own circumstances and investment plans; and before acting on any
educational investment advice contained in this book, you should contact your own licensed investment
adviser to consider whether the advice is appropriate in light of your particular investment needs.
Technical education is a hypothetical study of markets and because it may have worked in the past there is
no guarantee it will work in the future. You must understand that trading approaches using technical
analysis is a matter of probabilities, as is every avenue of speculation.
The author is not a Broker or registered Investment Adviser and therefore is not licensed to give trading
advice of any sort or make specific trading recommendations.
All charts and comments are offered for educational purposes and are the personal opinion of the author.
The author's opinion is not meant to be construed as an invitation or solicitation to trade, for trading advice
consult your broker or licensed investment advisor.
Notice read this - To comply with the ASIC IDS guidelines (Internet Communication of security
information)
ASIC recommends before acting on the basis of what is said in this communication you should review:-
(1) Asic's web site at www.asic.gov.au has a list of licensed advisors.
(2) Visit Asic's consumer website www.watchdog.asic.gov.au for general guidance about investing.
For a further overview of the purchase terms and conditions see :
http://www.wavetrader2004.com/
PUBLISHED BY:
Bryce Gilmore & Associates Pty Ltd
Bryce Gilmore - Proprietor
Inc. 1983 - ABN 63 006 187 686
6 Heywood Place, Helensvale. QLD 4212.
Australia
Phone/Fax 61-7-5573 5510 - Mobile 0419-576 923 - Email: bbg144@bigpond.net.au
4
Chapter 1
One Day at a Time:
It is absolutely amazing how perceptions of the market can change from one day
to another.
It was only a day back when the ES fell from a new high; it did this overnight
under the influence of some bad market activity in China. In fact the ES reached
a 1:1 support in the Globex session prior to opening in New York.
The day session opening on Thursday had left a gap on the day chart and
proceeded to fill the gap, albeit it took a few hours. I did say to the WTL room
members the gap fill was the best play at the beginning of the day as nothing
fundamentally had changed with the US stock market overnight.
Presently the US market is moving along with Q1 profit reporting releases each
day and to be honest the reports are coming out with good news, more to the
disbelief of the bears than anyone else.
Chapter 1 5
Let’s look back a few days and then I will continue on from there.
Friday the ES traded back to a dual 38.2/50 retrace level on a return to retest
the previous highest high 1484.50 and then to everyone’s surprise proceeded to
rally for the rest of the day with only two corrections of 1.75 points apiece.
Chapter 1 6
By the end of the day the high had extended to a 1:1 Double Drive target of
larger degree.
The scene is now set for Monday’s trading session.
The interesting thing right now in the big picture, is that we have the Dow Jones
Industrials, Dow Utilities and Dow Transports all trading to new highs. If you
were to take any notice of DOW Theory then the market is in a fully fledged bull
market.
You have little choice but to only believe what you see in this business
irrespective of the recent news.
Sub Prime loans and even quality loans on real estate are failing at an alarming
rate right now, yet the consumer is still spending, even gasoline prices at
extremely high prices don’t seem to be causing any halt to the stock market
advances.
The old saying is that the stock market climbs a wall of worry and that certainly
looks to be the case right now.
Chapter 1 7
The only two major US stock market indices yet to reach and surpass their
year 2000 highs are the SPX and the OEX.
The OEX and SPX charts are progressing with higher lows and higher highs
indicating a bull trend in progress.
Chapter 1 8
There are two possible views one could have: 1st. The major stocks still have
plenty of room to move up to catch up to everything else or 2nd. These stocks
are not moving up as quickly due to a perception they are already fully valued.
Nevertheless whichever you believe there is no denying that the market is

steadily going up, and so far does not look like falling down outside of some
scary corrections we are experiencing from time to time.
The trend in stock markets is not restricted to the USA alone as stock markets
world wide are trading at historic levels across the board; from Europe to
Australia and every possible major financial center in between.
These are interesting times we are living in to say the least; nevertheless as time
passes by and I progress with these daily chronicles you will see the advantage
in trading the markets ONE DAY AT A TIME using our PRICE ACTION METHOD.
There is no point holding an opinion of where the market will trade outside of
the current trading day if all you are interested in is making money.
The market will go up and down along the way to wherever it is heading no
matter what you think it will do long term.
Each day offers OPPORTUNITY to profit using our method and that is all I care
about. As we move along it will become apparent to you that believing what you
see and not what you think is the safest way to stay consistently profitable.
Chapter 1 9
As we move forward I will demonstrate to you the continuing repetitions that

present themselves day in and day out with unrelenting consistency.
When you get the idea it will change your approach to trading in the future.
All one needs to do to make money in futures trading is to trade with the money
flow and forget everything else.
There will be days where the market is influenced by news events and there will
be other days where the technical traders control the market action. In most
cases even when the news events are predominately influencing the market
place the technical signals will still tell you where to enter or exit short term
positions.
To win all you have to do is enter positions with very tight stop losses and if you
are proven wrong accept the fact quickly and exit.
When the next opportunity presents itself you start all over again and over time
you just keep doing the same thing.
Trading profitably can be a very boring occupation if you do it correctly by

following certain unbendable rules.
Trading is only a job just like anything else but it is a fascinating occupation
seeing things unfold the way they do.
All you need to do is to learn a bunch of standard set ups that you can have
confidence in and take them consistently every time they present themselves.
In between you can take a week off here and there and spend some of your
spoils while you unwind. The market will still be here doing the same old things
when you come back.
I recommend you take a week off every 3 weeks to go and enjoy yourself. That
week off will rejuvenate you mentally and give you a chance to think about what
you have been doing right and wrong over your last trading stint.
You will learn over time that as you become more familiar with the market due
to the hours you spend at it that the same old things will keep repeating over
and over. When you have the experience to realize this is the way things work
you will be able to deal with the market day in and day out without any
reservations. You can only consider yourself a professional trader when you are
taking trades for the right reasons and are making profits day after day.
Chapter 1 10
Chapter 2
Each day is a new day:
Before we begin each day there has to be a preparation period, usually an hour
is all you need to spend looking at the current market position and the relevant
news or report schedule for the day and week ahead.
I find Bloomberg provides more than enough fundamental and psychological

information to give you an idea of what to expect once the day begins in
earnest.
By the time Wall Street opens the European market will have been trading for
four hours and you will see from the GLOBEX market in ES futures how the
market has perceived the latest news it is confronted with.
For our purposes market swings can be broken down into smaller, small,
medium, large and larger degree swings. Depending on market volatility the
small and smaller degree swings will normally be less than 8 points on the ES.
Medium degree swings will usually be between 10 and 15 points with large and
larger degree swings some where greater than 20 points.
We already know from the daily ES #F chart that the market has just
reached a 1:1 DD level of 75.50 x 75.75 in the current rally from early March.
Chapter 2 11
Before Monday 23rd April, 2007:
Now before we go anywhere else we already know 4 things about this markets
position.
1. The trend is up in all swing degrees from small to larger degree.
2. The medium degree would take a greater correction than -16.75 to
overbalance.
3. The larger degree would take a greater correction than -33 to
overbalance.
4. The LARGER degree is technically in a position for a reversal at the 1:1DD
of 75.50 up as the logical possibility is wave [5] = [3].
Now if we move down a level to the small degree we can see what needs to
happen to start to make our assumptions more real.
First off the small degree would overbalance if -8 down was exceeded and then
below that supports would be in order at…
1. the 38.2 at 1483.75
2. the 50 at 1481
3. the 61.8 at 1478
4. the 1:1 MEDIUM DEGREE at 1477
Of course if the market moves higher initially all these levels would move
upwards. This preparation is just to get us started for the day and as we get new
information we can adjust for it.
My first priority in this case is to calculate what would need to happen to have
the bigger players start to think the uptrend in progress is in doubt and that they
should begin to unload some long positions they have going.
Chapter 2 12
The KEY (MOB) support for day traders is currently between 1485 and 1484;
which means they would likely BUY it on weakness if it came back down to there
at the moment. In between now and the 1484.50 there are some smaller degree
levels that could prove to be attractive buy or sell areas if the shorter term
indicators were in agreement.
GETTING YOUR MIND RIGHT:
Now all the initial preparation is done all that remains is to see where the money
flow goes when the MONDAY trading session begins in earnest.
For this we can revert to other indicators such as our TREND WAVE
INDICATORS, the SLOW STOCHASTIC and the VOLUME & ON BALANCE
VOLUME.
ESPECIALLY IMPORTANT will be the behavior of the OEX and the DJIA stocks.
There is no point in making a forecast; it is more than enough to know what has
to happen to think the market is exhausted at these levels and what has to
happen to start attracting selling from the larger players. If there is no heavy
selling from the larger players the market should continue to go up in jumps and
hops with only some minor set backs along the way.
Only time will tell; but we will find out soon enough. In any case you should
follow a similar procedure each and every day before you start trading; it won’t
take you long on a day to day basis unless you have just taken a week away.
If you have your eSignal chart pages set up correctly all the information will
be close at hand anyway.
Chapter 2 13
FRIDAY:
Now when you look back at it Friday was an N day upwards with an unfilled gap
or you could categorize it as a V day with a slightly higher finish.
Friday took the market to new highs and has dampened the spirits of the bears
once again.
The odds of a strong down day on Monday are extremely diminished as long as
the market is not hit with some unsuspecting news. The only indication that
Monday could move to the downside rests with the number of people or traders
who will consider the 75.75 x 75.50 DOUBLE DRIVE high on the ES #F contract
as a reversal point.
Monday has all the potential right now to either continue on up or take on a
sideways action so that is what I will be working on to start with. One way or the
other the market will confirm or negate my thoughts and give me reason to go
with my present thinking or revise it as we see more.
One point I would like you to know now before the market opens on Monday is
that I am placing no emphasis on any indicators. I will not give them any
consideration until such time as some PRICE LEVEL is reached that requires their
consideration for a trade confirmation.
Chapter 2 14
Chapter 3
Pre Opening - Monday 23rd April, 2007:
These are just some examples of what you can work out as you move along. The
WT III does all the work and ensures you don’t miss anything, as long as you
load eSignal charts to define the swings in their various time frames it will
provide the answers.
Chapter 3 15
The WT III 1:1 targets will be tracked in relative swing degree automatically no
matter what swing value you have selected on your chart and will locate many
more not seen on the displayed data that you would otherwise miss.
These features alone are worth the total cost of the WT III; when you get to
work with it you will understand completely.
NOW IF YOU CAN UNDERSTAND THE POSSIBILITIES I HAVE EXPLAINED SO

FAR………
You will understand why it is essential to select your trade entries at the best
support and resistance levels where everyone every one else who is playing the
same game as you understands.
There are a lot of smart people out there who we are dealing with, but at the
same time there are 90% of people trading who have no idea what the smart
money traders are involved in.
When you can understand this approach to PRICE LEVELS you will have a chance
to be successful at trading; if you don’t then you are only going to be cannon
fodder for the professionals.
So which do you want to be?
A smart trader or cannon fodder? Dealing with the on going market manipulation
of the day to day.
You work it out; as this isn’t to hard a question to answer if you want to WIN.
GLOBEX SESSION – Pre Monday day session:
7:10am Monday: price trading at 1493

So far overnight from the Sunday Globex open the ES #F has had a range of
4.50 points between 1494.50 (1 point higher than Friday) and 1490 which was
down 4.50 (overbalancing the 1.75 1:1’s from Friday’s smaller degree uptrend).
Presently the market is trading back around 1493.
This price action if it does not alter before 9:30am brings the LIS support at
1484.50 into line with the 38.2 of medium degree; this will become the support
of last resort for the day traders today.
Chapter 3 16
Some HC transcripts from the open today:
09:23:42 {BBG} It is still valid in that range

09:23:52 {mark} Thanks !
09:54:08 {BBG} Weekly SPX 1:1 DD is gone now
09:54:26 {BBG} So is the ES 76 1:1
09:54:54 {BBG} Market is showing strength and should continue up
09:56:25 {BBG} You would have to be extremely bearish right now to sell
it and I can't see any reason for that idea
09:58:00 {BBG} Especially with all this take over stuff that is still going on
09:58:43 {BBG} Money is still buying out companies and as long as that
continues the stocks will rise
10:03:32 {Nathan_W} bryce u say there needs to be 3 reasons to put a
trade on - if we use other indicators, how much weight do we
give them ?? this is Paul D
10:04:14 {BBG} Depends which indicators you are talking about.
10:04:25 {BBG} The 1st priority is the OEX
10:04:35 {Nathan_W}
10:05:40 {sangli} BBG, there are couple of geometry @681.26 on the OEX,
including daily chart.
10:06:09 {BBG} Any sell at the moment is a scalp sell
10:06:22 {sangli} Thanks !
10:08:57 {Nathan_W} can you use Stochastic or a similar indicator as a
reason - as in the Stochastic was just in over bought territory.
10:09:14 {BBG} The pro's will buy any weakness above the open right now
10:10:22 {BBG} 15 minute Stoch is trending up
10:11:14 {BBG} 15 minute OBV is up
10:12:02 {BBG} 15 minute TWS is nowhere
10:13:12 {BBG} OEX has been to a new high
10:13:33 {BBG} Mid to new high
10:14:00 {BBG} SPX of course to new high
10:14:00 {sangli} Mid has not made the 1:1 of larger degree...is doing the
catch up?
10:14:51 {BBG} OEX went thru 1:1DD
10:15:10 {BBG} so did SPX
10:16:51 {BBG} Thing is if you thought it was an easy sell you might as
well walk up the freeway against the traffic for an occupation
10:22:05 {Gary52} 23/04/2007 (Private): positioned for a pullback to
1491.00 now then a blast off would just be a BBG classic.
10:23:30 {BBG} Well I never entered today thinking anything but
sideways or up.
10:24:11 {BBG} It would have to collapse below 1484.50 to change my
mind
Chapter 3 17
10:25:16 {BBG} Anyway all this transcript is going into the chronicles so
watch what you say!
10:27:02 {BBG} You will make history Nat I haven't sworn on the script
10:27:15 {sangli} That is Paul...
10:27:31 {Nathan_W} no it isn't sangli
10:27:33 {Nathan_W} or is it?
10:27:39 {BBG} The whale
10:28:00 {BBG} The twins
10:28:18 {BBG} Change your handle to the twins
Snap at 10:35am ET
Chapter 3 18
10:49:59 {BBG} I bet you guys don't say much now

10:57:05 {BBG} Just what I thought
10:57:08 {BBG} .
10:57:09 {BBG} .
10:57:37 {BBG} Well the earnings are holding up as we move forward
11:15 am
11:15:24 {BBG} Now lets see how this works out.

11:18:29 {DCrowther} yea I had a limit there, SAR under the 50?
11:19:11 {DCrowther} or would you just go for a normal stop
11:22:29 {BBG} Normal stop
11:23:18 {BBG} It could be a sell again at a +2
11:24:04 {BBG} So it is a scalp only at this stage
Chapter 3 19
11:27am:
11:29:16 {BBG} You wouldn't want to lose any money on it now so

Breakeven is the best play and hold.
11:35:49 {BBG} Just a word of advice Dan you don't want to be selling any
breakouts in this sideways stuff unless it breaks the morning
low.
11:36:25 {DCrowther} yea that's why I was asking about the SAR under the
50/low
11:37:48 {DCrowther} Figure it could reasonably go back to the LIS at that
point?
11:39:05 {BBG} It could and there is plenty of room for a profit if it does
11:43:06 {BBG} It could go anyway now and it will sooner or later

11:52:34 {BBG} OEX is on a support so if it breaks........
12:07:09 {BBG} This sideways stuff into midday doesn't really get you
excited that anything major is going to happen for a while.
12:07:32 {Wayne_R} <<Yawn>>
12:08:14 {BBG} Nevertheless the TWS is showing a chance of turning up
Chapter 3 20
MORNING SESSION: Not exactly the ideal trading conditions, much better to stay
sidelined in this type of market. Screen below is a little later at 12:39pm.
Chapter 3 21
12:38:51 {BBG} So far today if you were biased to the long side there was
a hook the open scalp and a 3x3 1:1DD that looked like a buy
chance but didn't go up more than 2.50 after that the trend has
turned down with these 1.75 1:1's controlling the upside.
12:54:13 {BBG} A BUY sign now would be a break above the two 1.75
rebounds and greater than 2.50 up from the low of 1490.25 so
say a break above 1493
13:06:36 {sangli} no volume...

13:06:51 {BBG} No nothing
13:07:33 {BBG} It is true when they say never go short in a quiet market
13:08:07 {BBG} TWS 3 is turning up
13:08:52 {sangli} 1490.75 needs to hold for it to go higher?
13:13:43 {Nick_S} why do they say never short in a quiet mkt?
13:14:40 {BBG} That's what they say on the floor so they must have a
good reason.
13:15:41 {Nick_S} thanks, so obviously those guys are looking for places to
buy today.
13:16:22 {sangli} does it work in reverse?
13:18:23 {BBG} Don't do anything in a quiet market.............
Chapter 3 22
4:35pm Globex is rallying:
TODAY:
7.75 point range today, backwards and forwards.
The OEX was down 0.47% against the SPX being down 0.23% which
means the Lower cap stocks were up and the blue chips were down.
This sort of price action has bearish connotations.
Today was not an ideal trading day, although there were a few
occasions where a trade came into focus. The big problem was the
small ranges and low volume and the fact that the blue chips were
staggering and the market was being held up by the mid caps and
small caps. These traded to new highs today and closed above the old
high whereas the blue chips did not.
Except for the fact I thought it might go sideways in the preparation

there is nothing else I could really say came out of today; other than a
few price action reversals that you may or may not have traded unless
you were really keen to trade.
So now we have a look at the ES 60 minute chart for tomorrow and

review the SPX and the OEX cash charts for today.
Chapter 3 23
SPX: 60 Minute
The break back of Friday’s high is a negative, the only saving grace for bulls
Tuesday is the 1:1 correction support. Nevertheless this is now subject to
debate.
Chapter 3 24
OEX 10 Minute:
This OEX chart has overbalanced the SMALL Degree and the only thing between
it and a further fall is the B pivot at 677.34; it could rally out of here but the
negatives have built up over yesterdays trading.
Chapter 3 25
Chapter 4
Tuesday 24th – Friday 27th April, 2007:
Two reports due at 10:00am.
Consumer Confidence & Existing Home Sales:
What will be interesting today is to see what the initial trader reaction is to the
release of these two economic reports.
Chapter 4 26
11:00am:
Potentially there was a sell on the open basis the Globex chart. Then there was
an early entry sell from 1485.50 (Break of the 1:1 level and the Globex low) , but
as a last resort the break of 1484.50 LIS on the 10:00am bar was a confirmation
sell. That bar retreated to the fill of a prior gap from Friday at 1480.25 on a
medium degree 61.8 retrace before staging a recovery.
The 10:00am reports came in as follows:
At the present time the ES is back to the RETEST level of 1484.50 and is
potentially setting up for another sell. The only problem with that though is there
is a prior correction from the high 5.50 now from the Globex chart which gives a
potential target back up of 1485.75 – as I have not been here whilst all this went
on I am only relating what has happened to date. Now it is at 1486 on a 1:1
38.2 and 50 retrace from the Globex chart.
Chapter 4 27
Chapter 4 28
The only issue with the sell here at 1486 is the SLOW TREND WAVE on the 5
minute chart is still heading up strongly.
Now we are at the 50 and stalling so I would take the small profit as it recovers
the loss on the sell and we can regroup. It may go higher but we are back in the
area we started at around 10:00am and there is another 61.8 just ahead.
The area from 10:00am represents a type of balance point which squares up the
traders who were around the wrong way earlier, so I figure it will congest for a
while at these levels.
We will find out in time but a few people will be rushing off to lunch about now.
Chapter 4 29
Now a question you may want to ask is why I did not mention the buy off the
61.8 on the day session chart?
The reason is threefold:

1. The Globex chart did not line up with it.
2. The fall from the high of 1494.75 was only down 14.50 and there was a
possibility to go a little more down to tie in with the medium degree 1:1’s
of 16.25 which would have been a 61.8 on the Globex chart.
3. The OEX had exceeded its 61.8 at the time of the low.
Now that the OEX has made 1:1 it will probably start moving back down.
I have to retire for the day right now so I will post a chart after the close today
and review what transpires from here.
This 1:1 on the OEX was made at 12:25 and the ES reversed direction at
1489.75 and corrected 5.25 points down back to test the 1484.50 (the original
LIS support level in the morning session break down). There was no real
standout geometry there at the time to say buy it, although it did rally to a new
high for the day just short of the Globex morning high. A 3.75 correction
followed and the TWS began to turn down. The next mini rally up to 1489.75
was a small 61.8 and the price went sideways for 35 minutes. This gave one
more opportunity to short before the end of the day.
Chapter 4 30
At the time of the ES reaching the high for the day 1491.25 the OEX was making
a 61.8 retrace.
You should be learning by now how important the OEX can be to ES futures
traders, I mean the ones who know of such things.
Chapter 4 31
Wednesday 25th April, 2007:

On account of the fact I didn’t attend the day session I am only going to point
out a couple of relevant technical events that went on during the trading day.
These are the things you should have recognized at the time from the PRICE
ACTION manual.
Whether I was around at the time should not make any difference as the same
old things keep repeating day after day and you should become familiar with
them.
In the short term the two charts that are important are the 5 minute and the 15
minute. The bigger picture for day traders is the 60 minute.
If a market is making new highs and higher lows it has the propensity to keep
going up until it starts making lower highs and lower lows. This being the case
there is not much point making a big deal out of Elliott Wave.
Why read anything else into the trend unless you are scalping counter trend
movements. I guess you will see it for what it is worth one day if you manage to
stay around long enough. It’s only an idea of mine for everyone to follow if you
want to get a feel for the market. Feel has more to do with it than anything else.
Chapter 4 32
The 2:00pm breakout buy came as the Beige Book report as released: Each time
the market reaches a decision point you only have to treat it like a poker hand
and play what you have to go on. It will work straight away or it won’t. You have
to invest something to find out for sure but a max of 6 ticks gives you the best
chance if you know what you are doing.
Have you ever won a large poker hand without betting against the opposition? I
don’t think so. In poker you bet your hand against the other players because you
believe you have the winning hand. That is what trading is all about, betting to
win.
If you can’t do it and you wimp out at the moment of truth you lose all the
advantage and in the end you will fail. You will fail because you lack the self
belief that is required to be a winner and that is all.
Anyway you should be able to work it out in the long run if you see it happen
often enough. If you can’t then you shouldn’t be trading and my advice is not to
go to a casino as well as they will skin you a lot easier.
Knowledge and discipline is extremely important to any game involving

speculation, I don’t care what anyone says. There are only the thoughtful quick
and the dead in the futures business.
Chapter 4 33
Thursday 26th April, 2007:
A sideways day: Globex made a new high overnight at 1505 negating the 1:1 DD
from the days high on Wednesday. The days low came in at 10:20am -7.75
down at 1497.25, just short of 1:1 with the -8.50 from Wednesday and slightly
short of the 50 retrace.
As you can see it was a mish mash trading day, but as the day wore on it was
fairly clear we were trading in a range and a couple of opportunities appeared.
The break back from the afternoon low at 1498.25 (1:45pm) was followed by a
mini 50 and then a movement higher, this was probably the clearest trade on a
rising TWS. The SS and the OBV were also in agreement for the buy trade at the
time. There were a couple of scalps available from the 1504.50 high as well.
Chapter 4 34
The OEX today:
The same or similar patterns repeat over and over in all markets. The number of
points traveled may vary but the ratios remain constant.
This is the classic ENZO pattern; we call it this because it took Enzo 2 weeks to
remember what it is after I had pointed it out to him 20 or more times.
Chapter 4 35
Friday 27th April, 2007:
09:28:31 {BBG} Ok there is a slight overbalance in the wave structure now

so if it breaks the Globex low it is a sell for 16 down again
09:37:10 {BBG} Always remember one thing - when I say it is a sell at a
break I mean also that until it breaks it is a buy
09:38:18 {BBG} Or if I say it is a buy on a break I also mean until it does it
is still a sell.
09:39:32 {BBG} At the moment it is a sell on break of Globex low - actually
it is a hook open sell right now
09:40:03 {BBG} but that is not such a good bet for the risk
09:40:35 {Nathan} OEX would have to break this little DB
09:41:11 {BBG} Good point Nat
09:42:36 {BBG} So it was a buy chance down there before the break
09:43:00 {BBG} If you wanted it
09:43:33 {BBG} Depends how fast you can keep up with the dealer
09:44:57 {BBG} The gap fill is a better objective
09:46:50 {BBG} OEX is not buckling
09:47:18 {Nathan} PPT is also low
09:49:18 {BBG} It's still a buy
09:49:41 {BBG} Now a sell
09:50:37 {BBG} No it is a buy but any lower and it is a sell
10:00:16 {BBG} I think I will go and watch the next movie in case I
influence you the wrong way
10:01:31 {BBG} Sell on the gap fill or the break of low is what I would do
and buy for the gap fill.
10:02:14 {BBG} That gives you plenty to think about
10:08:09 {BBG} Now gap is filled onto the next chapter
10:08:11 {Richard_To} Gap filled on 61.8
10:15:50 {BBG} how we looking so far?
10:37:24 {BBG} I drew those arrows on my chart 45 minutes ago didn't I?
10:37:51 {Richard_To} yep
10:38:47 {BBG} Well when you guys can do that in advance you will have
made it.
10:39:17 {Richard_To} knowledge and experience are required
10:39:46 {BBG} It is possible for all of you
10:40:26 {BBG} That is what this software teaches you
10:42:10 {DCrowther} sell at the gap was only solid because the fib there
also, correct?
10:42:40 {BBG} I didn't look at the Fib but it helps it was there
10:44:47 {Tony_B} speaking of software Bryce, I’ve lost my GAP glbx hi and
lo indicators they are switched on have reloaded wt and the chart
but can’t get them back up any ideas??
Chapter 4 36
10:43:55 {Richard_To} Tony just reload and the gap line indicator will
come up again
10:48:01 {BBG} That was Globex low and big hammer reversal bar
10:48:22 {Tony_B} I’ve put in the 3 lines
10:48:56 {BBG} Can't you see my chart it is all automatic
10:51:41 {BBG} Mine works and yours should do the same if you follow
instructions
10:52:28 {Richard_To} Is there any effect if he came late after the market
has opened?
10:52:56 {BBG} No but after the close they will not come up
10:53:45 {BBG} So if his start end times are wrong might be a problem
with his time clock on the computer
10:54:08 {Tony_B} I’ll check that Bryce it was all working but disappeared
after a reload
10:59:22 {BBG} I hope you guys realize that the only reason I am here is
to help
11:02:28 {BBG} Your main priority in this business is to look for
opportunities that have a good chance of working
11:03:00 {BBG} You will learn from experience when these opportunities
come along
11:03:41 {BBG} so if you want to make money only trade when you are
sure you can recognize the opportunity
11:03:57 {BBG} That is not a big call
11:06:08 {BBG} It's all a matter of understanding what will frighten the
other players
11:07:24 {BBG} When you learn what will scare them you will know what
to do
11:09:47 {BBG} See that reversal hammer on the low Sangli?
11:09:57 {sangli} Yes...
11:10:09 {BBG} That means something
11:10:14 {sangli} testing the MOB
11:19:21 {BBG} It's all there if you look hard enough
11:24:58 {BBG} That's it for me now
11:25:11 {Wayne_R<EN>} CU
11:25:27 {sangli} thanks for keeping us on our toes
11:26:29 {BBG} Sangli it does not matter what the market is going to do I
can run with it all you need to do is do the same.
11:26:57 {sangli} working hard on it!
11:27:22 {sangli} But I do disagree with your sell at this level
11:27:38 {sangli} got to be a small size for testing though
11:27:45 {BBG} Well if it breaks 50 SAR long
11:27:54 {sangli} O.K
11:29:49 {BBG} How often am I wrong Sangli at least at the testing areas
11:30:09 {sangli} Not very often....
Chapter 4 37
11:30:11 {BBG} If I am wrong I SAR

11:30:40 {sangli} But I do agree that it would come down to test the MOB
again...at least they will try!
11:31:44 {BBG} They are going to walk this dog around the park all day
unless they can bust it below S2 today
11:31:46 {sangli} Generally, the mkt does come down to test the reversal
hammer
11:32:16 {BBG} generally or always?
11:32:25 {sangli} 99%
11:32:34 {BBG} That was buying on the hammer
11:33:23 {BBG} That means it is a strong point
11:33:49 {BBG} What we might get now is a 50 or 61.8 to go up
11:34:09 {sangli} But to be a solid low, there should be a lower vol bar to
confirm the sellings are drying up around the level
11:34:30 {BBG} wait and see then
11:36:39 {BBG} There's my choices
11:37:03 {sangli} Are u recomendating us to exit the short positions now?
11:37:42 {BBG} Shorts were only a scalp anyway
11:38:16 {BBG} Can you see the TWS
11:38:27 {sangli} I thought you're teaching us not to scalp!
11:38:46 {BBG} Not today I am in my element here
11:39:09 {BBG} This is the shit I did for years
11:39:16 {sangli} I thought you're in your element when Enzo is around...
11:39:27 {DCrowther} haha
11:39:32 {BBG} Well that also
11:40:54 {BBG} You have to be adaptable in this business
11:41:28 {BBG} All the things I teach you about ratio etc are only 50% of
the equation
11:42:24 {BBG} you will get it when you understand how to play poker -
go and get some lessons
11:43:07 {sangli} There are lots of Poker competition T.V shows here
11:43:09 {BBG} The reason poker is important is because the cards are
random
11:43:48 {BBG} This is not random most of the time and the edge you get
is enormous
11:44:44 {BBG} When what you think will work and it doesn't you just
reverse the other way.
11:45:22 {BBG} Now that is a bit deep for novices but if you ever rise to
the top of the heap you will agree with me.
11:46:12 {DCrowther} I'm not even proficient with your methods yet and
I'm doing better this week than I have in a while
11:46:43 {DCrowther} not that I did great this week of course
11:47:03 {BBG} It's just a way of life Dan and you need to have a comfort
zone to be in it long term
Chapter 4 38
11:47:29 {DCrowther} just need to find a trading style that fits, I like this
one a lot
11:47:49 {DCrowther} I did terrible with momentum
11:48:16 {Gary52} one of the key beauties BBG teaches, Dan . . . keep the
loses small, it does not take much to learn if you are right .. don't
let it bleed you to death.
11:49:16 {BBG} You won't get better than this and if someone says you
will for a $10k fee tell me and I will bet them $20k they can't
beat me over 2 days in a public forum. But I reserve the right to
sell the tickets.
11:49:30 {DCrowther} haha
11:53:23 {BBG} I don't know anyone who could beat me other than maybe
Aaron now
11:54:00 {BBG} And I taught him
11:54:34 {DCrowther} who's that
11:55:07 {sangli} the nicest instructor you would ever meet
11:55:08 {BBG} Some of these guys know and they can tell you.
11:55:45 {BBG} Aaron's moved on to bigger things now
11:56:04 {sangli} too nice that he drives me crazy....he doesn't know
where to draw the line
11:56:25 {BBG} Aaron is to nice
11:57:01 {BBG} But underneath he ………………………………………..
11:58:13 {BBG} His attitude is to skin them Sangli and not give a sucker
an even break
11:58:21 {BBG} Like I taught him
11:59:01 {sangli} What language are you talking?
11:59:14 {BBG} Trader language
11:59:43 {sangli} Beyond my comprehension
12:00:09 {BBG} Well go down to the pit in Chicago and get it first hand
12:00:58 {BBG} Where's the market now Sangli?
12:01:46 {sangli} So......this is the original target that I was looking to go
short!
12:02:06 {BBG} well if you like it sell it
12:02:09 {sangli} if 1499.25 holds then I'm wrong
12:02:21 {BBG} don't let my influence stop you
12:03:16 {sangli} Anyway, BBG, go and join Helen before she falls asleep!
You've done enough for us already...and always grateful
12:03:23 {BBG} But 4.75 up now is a target
12:03:36 {DCrowther} small enzo in to a pivot
12:03:39 {DCrowther} ftp
12:04:32 {sangli} Dan, that is a 1:1 DD to a pivot
12:04:43 {BBG} Arrows are on my chart way ahead of what I am saying
now
12:05:46 {BBG} he's looking at 1500.50 Sangli
Chapter 4 39
12:06:34 {sangli} 1501.5

12:06:37 {BBG} Now if it corrects here a buy on -2.50 is a good bet
12:07:34 {BBG} Can you see the chart and the flow?
12:07:55 {Wayne_R<EN>} Yes
12:08:02 {sangli} y
12:08:40 {Tony_B} y
12:08:57 {BBG} Do you see the OEX at DT trying to work its way up?
12:09:11 {sangli} y
12:09:24 {BBG} If you don't then you are not following what I teach
12:09:28 {Wayne_R<EN>} Y
12:09:49 {Tony_B} y
12:10:32 {BBG} So can I leave it to you now as I really do need to go to
bed
12:10:51 {sangli} Yes..do go to bed...

12:10:59 {Wayne_R<EN>} Thanks Coach
12:11:03 {sangli} We have Richard taking care of us
12:11:13 {Tony_B} thanks
12:11:14 {sangli} and of course Nathan
12:11:19 {Mietek<PL>} Thanks
12:11:22 {Paul_C<EN>} Thanks BBG
12:11:38 {DCrowther} so long
12:16:01 {sangli} The TWF on the 5 min chart is rolling over now
12:31:03 {BBG} I am going now but before I go
Chapter 4 40
12:31:23 {BBG} The buy side is the hardest side for most now
12:31:42 {BBG} but it is the side with the opportunity
12:32:18 {BBG} Unless the -2.50 1:1 comes out
12:32:58 {BBG} 1497.50 is the Bulls savior
12:34:04 {BBG} Below 1497 it could come apart in a hurry
12:34:37 {BBG} But until that happens it is a buyers market
12:35:24 {BBG} Anyway that is how I see it and it is short term so it won't
mean anything in a few hours.
12:35:37 {BBG} Good nite for the final time.
12:35:54 {Gary52} Thanks again.
12:42:57 {sangli} Oex broke the DT
13:37:04 {sangli} Oex is at yester day...high, and now exceeding it
Chapter 4 41
The past 6 weeks:
Now we know all we need to know and we can move forward, “One day at a
time”.
Chapter 4 42
Chapter 5
A New Week Ahead:
Here is something to think about before the new week begins:

The majority of the time the ongoing market patterns will unfold with some kind
of recognizable geometric structure. Nevertheless at least 25% of the time the
market swings will not relate as you may expect them to; at times like this there
will be no exact geometric structure present to make assumptions of where the
next swing has a big chance of terminating.
When you are in situations like this in the smaller and small degree it pays to
look at larger time frames for any medium and large degree swing geometry and
see if you can find the answers there.
Now what I am going to suggest to you to do may come as a surprise but if you
do it you will remember where you were when the market opened and then later
when you have readjusted to what is actually going on.
What you will need is a flow sheet or day meter that you can adjust your
thinking as the day goes by. It will need five things on it.
1. 30 minute time frames.

2. Buy mode.
3. Stay out or scalp mode.
4. Sell mode.
5. Was I right or wrong?
Tick the boxes and after the time period is up write (right or wrong) in the lower
box.
Chapter 5 43
All you need to do is take a screen print of this table and tick the boxes as the
day goes by. After a week or two of doing this you will find out if you are on the
ball or not.
One point I would like to make as we go along is that most people get distracted
after they make a profit or a loss on a short term trade. It distracts their sense of
value in the market. It often becomes a personal thing and this is not good. You
need to wash all that type of thinking away immediately. The whole basis of the
futures markets is to pit sellers against buyers and let them fight it out. No one
cares who wins or looses, I don’t as I am just glad they are there to wager.
Just remember the professionals in the market are always playing and this will
continue until the close. You have no control over what they will do but often
when they get a decent move in one direction or the other and capture a good
profit the smart traders will take a break. If they think the time has come for a
reversal they will stay in and punt the opposite way.
When the guys who actually trade size take a break the market won’t get any
significant direction so it is a good time to stand aside. You need to watch for the
signs, especially between 1200 and 1400 ET.
The basic scenario I have about the futures business is that it is a gambling
game with a difference. The difference is that you can find more things to give
yourself an advantage in futures trading than you could ever do playing
Blackjack or Poker. Even with Backgammon where I was a respected tournament
player, I would often make huge side bets to try to intimidate the other player,
nevertheless the futures still offers the best opportunity for short term
profiteering in my view.
As you move along just think about this:-

Q. Do we really need to know where the market will be next month to make a
profit on a day by day basis?
A. NO
So why on Earth do we waste our time trying to forecast where the market price
will be in a month from now?
The only reason this goes on is because brokers and others are trying to run
forecasting services or provide news services with information that will make
people invest more money so they can enjoy the commissions.
It works for them and they make huge fees but at the end of the day the jokers
who follow those advices are generally to slow to get out with a profit or they
are to dumb to take a small loss and always end up with a large one.
Chapter 5 44
The people who win are the smart money who knows when to get in and out
and on the whole these guys can be very efficient, then there are a bunch of
super traders who know the ropes backwards as well as forwards who can really
start pushing the little guys around.
THE THING IS THIS:
You can make money in the futures markets simply with a couple of standard set
ups.
You can also do a lot better when you know 10 reliable set ups. There are
probably about 30 reliable trading set ups I could name.
But, there is no need to know anymore than 10 set ups if you are basically a
technician and you have no personal reason for why the market should go up or
down.
Personally I don’t care if the market goes up or down – it can go anywhere for all
I care. I have the right approaches and set ups that can deal with every option;
in any particular market activity.
It is just business to me and money management that is important in the long

run.
You will eventually realize my point of view in time if you practice the Price
Action Method religiously. Don’t give up on it until you find out whether it works
for you or if you are just plain stupid and nothing you did would ever work.
One thing you must always remember is when the NEWS is pushing the market,
the NEWS is more important than any technical method. Once the news has run
its course the market will get back to a technical flow which influences the smart
traders most of the time.
Only screen time and experience with the market input can educate you with the
market habits and the fundamental influences. I can’t explain why one day the
market will have good news and go down and another day it will go up. But I
can tell you when a move influenced by news is going to run out of steam and
reverse back the other way. This is why it is important to know ratio and
patterns that come out of them as the market moves from one swing action to
another.
It is not a matter of why most of the time, it is only a matter of it has to do with
what is doing because the money acts and reacts on pattern structure, ratio and
indicators, such as volume at the time; for decisions to buy or sell.
Chapter 5 45
Most of the things that happen in the market today are computer driven events
based on past learning from similar events. You would be surprised at how much
time and expense has been spent on back testing past market data to try and
predict the future; billions I would imagine.
So you have to give some credence to why things work the way they do in the
markets when money flows into it based only on past repetitions of similar
events. Today many money managers have computer buying and selling
programs based only on the way the market reacted in similar circumstances in
the past with no due regard to any of the fundamentals.
These programs work much better with the short term market movement as the
market is usually balanced on a day to day basis and moves in a confined range.
As long as the market does not venture out of a predetermined range the
programs will happily buy and sell within that range all day long.
Basically the bottom line theory to market movement, on a day to day basis, is
that it will move from one value area to another, or it will stay within the current
value area until something comes along to propel it into a new value area either
up or down from where it is. If you watch the market a day at a time you will
see that this is what it does most of the time, it is only when severe changes in
market sentiment come to past that the market actually moves in one direction
consistently for more than two days at a time.
Chapter 5 46
This weeks reports:
Also the Chinese markets are closed for 4 days this week. There is some political
influences affecting investor confidence in Turkey with a huge 8% slump coming
into the Turkish market this week. Not that either of these things should have
any bearing on how the US markets perform this week, they are merely a
psychological aspect that the news services are trying to make some mileage out
of.
Chapter 5 47
It wasn’t to hard today if you were prepared to work all day:
Funny how so many people went home today by 1PM as they saw it was a non
event.
Nevertheless the core traders went out after the weakness and ultimately got the
Bulls to run away.
Before the shake out, there were heaps of signals you could have used to pick
the turnaround.
All you needed to do today was to stay focused on the OEX and to see where the
money flow was coming from.
In any case what ever you did and I have already heard from a few others to
convince me that your only road to success is to do a full days work.
If you don’t do the work and approach the market with a little knowledge you
will never know when the best time to buy or sell is. All the easy trading set ups
are fully explained in the Price Action Manual, all you have to do to become a
successful trader is learn what they are and follow the market.
Chapter 5 48
Tuesday 1st May, 2007:
Today the ES started a bit higher from yesterdays close and broke down to a
new low -22.75 from the 1505 high. This move has broken the -16.75 (April’s
largest correction). The next largest correction from the 6th March low was a -33
decline late March. The -33 is our larger degree 1:1 now.
The day session ES chart had a sideways W type day today and managed a 50
retrace of the declines so far.
This is a good place for the decline to continue, but given the closing price it may
go to the 61.8 at 1496 before reversing. If it goes above 1496 then we have to
accept the fact that the decline we have just seen was a one day wonder.
Chapter 5 49
9:30am Wednesday 2nd May:
By 9:30am the Globex session had been to 1498 above the 61.8 and the ES
opened at 1494.50, immediately filled the gap to 1492.75 and reversed back up.
Once the ES broke above the Globex high 1498 it was indicating it had a chance
to attack the prior highs. The previous highest high on the ES had been 1505 a
couple of days back. Although the going was slow as ES approached the highs it
did not overbalance the -3.50 1:1 in play so there was no real reason to sell until
the high of 1505 had been tested.
Chapter 5 50
Looking ahead there still is no reason to think this market has actually made a
final top at this time. It looked a little shaky a couple of days back but now that
the correction was so brief we have to think of more upside unless the current
60 minute lows are broken.
One day at a time is the only way to go right now. Here are a few transcripts
from the WTL room yesterday.
This was prior to the opening of Wall Street.

05:20:01 {BBG} Looks like Globex blew the bear trend by coming back
more than 61.8
05:20:38 {BBG} Now there is a geometric dilemna
05:21:29 {BBG} What do we call this low 1482 - a (4) or an A
05:25:12 {BBG} If you want to entertain this count then you would have
to admit that [3] extended
05:26:44 {BBG} So that the deep correction back to 1368 was a bigger 4
05:43:11 {BBG} Funny thing about this move up from last July it reminds
me of something in the past
Chapter 5 51
05:48:01 {BBG} Back in 1986 the market in Aussie had a deep correction
which had everyone thinking it had topped and it went on for
about another 12 more months upwards on takeover activity
05:48:53 {BBG} that was when Bond bought out Channel 9 for 900 million
05:49:19 {BBG} and later on Packer bought it back for 300 million
05:50:05 {BBG} this has exactly the same feel about it.
05:51:20 {BBG} So without forecasting just remember the market went
upwards for 5 years from 1982-87 and then crashed
05:51:57 {BBG} This market in S&P has really been going up since July
2002
05:52:30 {BBG} So somewhere this year it will be about the same time
period.
05:53:02 {BBG} whether it means anything or not I cannot say but it is
similar
05:54:30 {BBG} if we go back to June or July last year and count off 360
degrees or 1 year that would be important if it kept going up
05:55:37 {BBG} the real point is that this market has extended itself into
the world of make believe
05:56:01 {BBG} and it is heading for a smash
05:56:26 {BBG} but when I have no idea
05:56:51 {BBG} but that does not matter to me as it will tell us when it is
there
05:57:18 {BBG} It just seems to me we arn't there just yet
05:58:01 {BBG} Too many loose gooses on the ground at the moment
07:12:22 {BBG} I expect it will go up there and break above the high so
how does that fit with your thinking?
07:15:43 {BBG} Enzo right now you should stick to simple break out
trades with a confirmation from the OEX
07:16:44 {BBG} Most of the people in here should do the same
07:17:16 {BBG} But they won't
07:30:10 {BBG} Day session has to open below yesterday

close to spell any weakness today
07:30:58 {BBG} But how can I expect any of you to know that!
08:33:36 {sangli} Beating up on Enzo at this point is like beating up on a

puppy
08:33:54 {sangli} what did you have for dinner? All fired up this morning
08:34:34 {BBG} You have to beat him up a little to get him thinking of my
way other than the shit he learnt elsewhere
Here are some comments after the 9:30 open
09:34:18 {BBG} this eSignal is not reloading
09:37:39 {BBG} Open with a gap fill and off on the up
Chapter 5 52
09:38:47 {BBG} It's not a lay down buy until it is above the globex high
09:39:42 {BBG} I can hear a few people saying right now what is the
Globex high?
09:40:13 {BBG} I wonder how many of you would admit to not knowing
09:41:19 {BBG} not any so I will assume you know
09:54:45 {BBG} 1498 was Globex high until it gets higher it is a potential
sell
10:00:10 {Paul} looking to work with any 1:1s up from yesterdays low after
the globex high comes out
10:00:17 {Paul_D} if it comes out
10:00:52 {BBG} Well you are being conservative and I suppose that is OK
10:03:36 {Paul} well I strapped both balls to my leg for the next couple of
weeks, less mistakes the better for me at the moment
10:05:26 {BBG} it is definite buy now (break above Globex high)
07:34:52 {BBG} Some of the players will be having a bad hair day today
07:35:08 {enzo} hahahaha
10:45:37 {enzo} bryce is a bad hair day like you say this morning
11:11:15 {enzo} paul are you here may I ask you a question /
11:13:13 {Paul_D} let me guess, you want to know why bryce is so unkind?
11:13:25 {enzo} wrong
11:13:50 {Paul_D} just kidding go ahead paizano
It is always interesting having the WTL room as no matter what the discussion it
helps pass the time away in between trading opportunities.
Now all we need to do is to wait until tomorrow and go through the same
processes all over again.
Thursday:
I didn’t come in until about 11.00am ET so I missed the early hours.
Nevertheless the day went on and as it did the market got tied up in a range.
As it went on the technical traders just kept hitting the 1:1’s when they signaled
possible support. It points towards an overall upward bias still in progress.
Tomorrow is Friday and the bears are in a real predicament.
Chapter 5 53
Comments on the chart show the obvious for all to see. It wasn’t very hard to
work out as it unfolded but it was a congested day overall with a new high.
Unless there is some bad news between now and tomorrow this market is set to
go a lot higher. All I know right now is to wait until 9:30am Friday and then work
out what one needs to do to skin a few bears or get on the bandwagon with
them.
Only time will tell but the Bull move is still intact technically no matter what you
think the market will do.
Friday 4th May, 2007:
The employment situation report at 8:30am caused some gyrations in the early
morning trading session when it was misreported by one agency to be 188,000
rather than the actual 88,000 it turned out to be.
Chapter 5 54
Because of the confusion over the employment report it is probably better to just
not comment on today’s price action; although at the end of the day there was a
rush towards the door that rallied the ES up 5 extra points after the cash indices
closed at 4pm.
Nevertheless the market did move higher on the day right across a broad
spectrum. The S&P500, OEX, DJIA, Compq, MID and the Russell all made new
weekly and yearly highs. The SPX is currently less than 45 points away from the
all time high made in March 2000.
Chapter 5 55
Chapter 6
Federal Reserve Meeting Week:
The Federal Reserve Announcement on Wednesday 2:15 ET will probably be the

economic highlight of the week ahead.
Chapter 6 56
Usually in the past Fed Announcement days generate short term volatility in the
stock market and futures irrespective of whether the Fed raises, reduces or
leaves the rate unchanged. You only have to watch the news services to see how
much interest is taken by forecasters and longer term investors in the result.
This month the consensus is that the Fed Rate will remain unchanged and will
not be changed for another 3 to 6 months. They base their forecasts on
comments made by Fed chairman Ben Benanke regarding US inflation risks.
There are a few underlying risks involved in a rate rise whilst the US property
market is in a slump and consumer debt is at insane levels to GDP. Nevertheless
none of this should be of a concern to us unless you are a long term investor and
that I am not.
Company profits for Q1 continued to outperform estimates and are the

underlying reason for the up moving stock market; also major company buyouts
have continued at a relentless pace with the fees that can be earned and whilst
new takeover bids continue to be funded by investors the bullish mood is likely
to continue for a couple more months at this stage. The only issue one might
have with the bullish trend in stocks is how high is too high?
Chapter 6 57
That is a question we have no reason to be concerned with as intraday traders!

If the market says it is going up you buy it, if it says it is going down you sell it;
it is as simple as that.
Some history on FED Announcement days:

Mostly just right on 2:15 ET as the report is announced there will be a flood of
orders hit the market, it could go anyway at the time but by 2:20 ET the impact
of buyers versus sellers should be obvious. From then on one side, either buyers
or sellers will gain the edge and you usually get a run in one direction or the
other with a mini correct along the way but the overall impact will normally last
for 30 minutes or longer.
It is probably due to the fact that many of the system traders in the market are
unaware of the report time or even the report release at all, and their systems
get caught around the wrong way and have to close out or reverse direction.
Commonly after a big move in ES after a FED report the market will gravitate
back to where it was over the next day or so.
Another thing to remember is to watch the volume from the morning session and
once it drops off it is better to stay sidelined until the report is released.
In March the announcement was for no change yet it had the effect of moving
the ES up over 25 handles in an hour.
It is hard not to realize that you should be aware of when these reports or
announcements are close at hand.
If you don’t you could end mimicking the words of the mayor of Hiroshima in
1945 when he said, “what the fluck was that?”
Chapter 6 58
March ES with the FOMC announcement and the subsequent price action.
Monday 7th May, 2007:
As we head into Monday there is lots of talk about whether or not the China
share market is heading into a bubble or not? Now at this time it must be, but it
has been like this for a year with its rapid rise. So what has changed?
Nevertheless the entire world stock markets have been going vertical for a few
years and we know that it is impossible for anything to go up or down
indefinitely. The majority of long term operators have been recently moving back
into “blue chips” as they still believe they have further to go.
Fact is, we are heading into an area where it will pay to be diligent and follow
the PRICE ACTION carefully, as even if we trend (or bump and jump) the market
is not ready to fall down and stay down for any sustained period at this time); it
is maybe close, but it needs to go higher first. When the time comes for it to turn
down in a sustained way I will know it and so will all the professional traders (the
10% of knowledgeable people in the market place); that’s enough for me.
In the mean time all you need do, is take a view that it is better to trade what
you see and not what you think; mind over matter. You will last a lot longer in
this business if you don’t take positions where you are trying to force your own
opinion (will) on what the market will do.
If you take each day one at a time and follow the price action signals correctly,
the market action will direct you better than any forecasting service ever will.
If you are still subscribing to market letters written by Bob Precther or Bob Miner
you had better think twice about them. I remember in late 2003 when I was
writing TTW how those guys were so far off the mark it was a joke. I wonder
where they are trying to position everyone today; And if you are following
planetary guys you might as well cut your wrists.
Chapter 6 59
It’s a funny thing, but I have said it before, people who take some Gann and
Elliott things to seriously will end up with the ass out of their pants. But Gann
was a realist in most ways, it was just that people like Billy Jones got hold of his
garage full of papers and charts after he died made them into something else
that did not really project Gann’s sentiments correctly; It was Billy Jones’s
version as a promoter who recreated Gann.
I also knew a guy from Melbourne, Steve Barrett, a real estate agent, who
visited Billy Jones after Billy acquired the Gann papers and personally studied
them for 2 weeks. Steve managed to recognize the geometry that Gann was
applying to market movement and would always walk around with a scientific
calculator trying to work out the possibilities of the Gann approach.
He came back from the USA and was applying the method in a big way with
daily and weekly charts, hand drawn and pasted all over the walls of his house;
but I never knew him to make any great trades outside of some big plunges
when it would have been obvious using any technical method that the market
was going to have a huge change in direction. His best trade, in those days, was
when the stock market crashed in 1987 and he made about $500k on some put
options over 3 weeks, but if you look back a blind man with a seeing eye dog
could have recognized the possibility for that one. Looking back he never really
got the top to the day; he just knew it was a high probability market sell at the
time.
I know from my personal inquiries that Gann was a realist and would research
fundamentals for his crop reports by flying over the growing fields to confirm the
crop conditions. He also tried to invent a winning lotteries system but probably
never got that far as it was all random events. Gann was also a ladies man so it
seems to me that he wasn’t the guy that Billy Jones painted him out to be.
If you don’t already know you should, there was an article written in the early
20’s by the TICKER MAGAZINE that followed Gann’s trading over a 2 week
period. During this time he was reported to have made up to 400 day trades on
stocks. Gann was quoted as often saying the price will go no higher or lower
than a certain level by a tick until it has a correction. So he would go long or
short at the level; He had a 90% success rate of being right and compounded a
small stake into a massive % return over the 2 weeks he was being interviewed.
When you weigh it up it is not that much different to what we are doing these
days, although the information and execution process is far much better for us
these days.
5:30 am Monday ET: London markets are closed for the May holiday today.
Chapter 6 60
OEX last week:
As we head into Monday the chances are better for a down day than an up day,
there is nothing important to be released today and London is closed for the day.
Monday 6:30am ET: The Globex ES has been sideways since it opened Sunday
evening so there is no bias one way or the other at this stage.
Then what did we get? A 4 POINT

I was ready were you?
RANGE on ES today! The market opened and traded within 1 tick of
Friday’s Globex high and after that went sideways in a contracting range which
was down to a 1.75 range in the afternoon session. This action is known as a
“coiling trading range”, i.e., the market compresses like a spring.
Chapter 6 61
There is not much you can say about today other than it was a non-event on
mostly low volume. Maybe the UK holiday had something to do with it but there
was no news of any description to get the ES heading in any direction.
The OEX also went to a slightly higher high and then stalled for the day.
Tuesday we have a few minor things early in the day, but now it is looking like
being a quiet ES market until the FOMC announcement is out of the way.
Chapter 6 62
In any case we have a double top resistance in place at 1517 to break if the
coiling action is accumulation or a base at 1513 as support if the price action is
distribution and we are heading down. The ES certainly won’t stay in a 4 point
range for very long, you can be sure of that.
I guess all things come out in the wash even if it takes a little more time. It may
of not been advantageous yesterday but today my opinion would have kept you
from a demise of sorts had you been in overnight positions.
9:29am ET Tuesday:
Seems yesterday I had the right idea but it did not materialize in the day trading
session. This is something you will need to learn to live with if you want to
remain in this business for 25 years or more.
Tuesday 8th, Day Session:

The market opened on 1510.25 at 9:30am with a gap down from yesterday’s
close, dropped down quickly to test the Globex low at 1508.50 for a buy and
then rallied back to 1510.75 for a Globex mini double top, from there on it was
downhill and broke the Globex low. There was a strong reversal bar at 10:20am
after the 1505.75 low for the day, an area where we were making a lot of tops a
week ago. After a rally of 3 points the market went sideways in a 2 point range
for an hour and a half forming a RECTANGLE pattern. The breakout of the
rectangle was a price action buy setup with the TWS in upward mode.
The gap fill was a target after this although a pullback of 2 points for a 1:1 re-
entry buy at 2pm was another price action buy set up.
Chapter 6 63
It is now 2:20pm and just a few minutes ago the ES halted for a few minutes on
the 61.8 retrace but has since moved above it putting the gap fill in reach.
It is now 2:30pm and as far as I am concerned this is good enough to satisfy the
gap fill. In the past 2 hours there have been 2 trades which could have made
you a minimum net of 4 points and potentially 5. Just prior to the Rectangle
breakout there was also a buy on the lower end of the rectangle where a 61.8
pullback had been registered. The snap below was taken at 2:42pm.
Chapter 6 64
4:00pm and back to where we left it yesterday.
Well tomorrow is the FOMC day and we have not gained or lost anything since
the Friday close.
Today was a complete contrast to Monday, there were some good set ups to
trade today, only small profit opportunities but certainly clear cut PRICE ACTION
entries.
From the beginning of today the GAP FILL was always going to be a target for
day traders once the trend reversed upwards.
Chapter 6 65
This was what the market looked like just prior to the FED
announcement:
Chapter 6 66
TWO MINUTES after the FED announcement: prices dive
Chapter 6 67
EIGHT MINUTES after the FED announcement: prices rebound
Chapter 6 68
2:58pm above & below 3:07pm:
Chapter 6 69
RULE NUMBER 9.
Chapter 6 70
4:00pm the Bell’s a Ringing:
I wonder how many new traders were able to handle what went on today from
the FED announcement? I wonder how many didn’t even know about the
importance of the FED announcement.
Well they will now if they didn’t before this.
The interesting thing that happened on the announcement release was that the
market fell so fast in the first minute or so that sell orders were still being
executed into the 2nd minute, these were probably from stop orders at much
higher levels. Once all those traders with bad fills realized they were not in
where they wanted to be they began closing out by buying back. This set off a
chain reaction back the other way. Resident sell orders at the triple top level
stopped the rally in its tracks and then it took a few minutes to sort the mess
out.
Ce la vie! Look at the volume in the first 8 minutes. Now we have 6 weeks to
wait for the next one.
Chapter 6 71
Chapter 7
After the FED Announcement:
The S&P 500 has been putting in one of its best performances in years; in the
past 5 weeks the largest correction has only been -22.25 and the corrections
have not been longer than 2 days. The DJIA has also out performed as well.
Chapter 7 72
Let’s get back to reality:
Probably the most amazing aspect of the past 2 months is the pace that the
market has been going up after the heavy shake out in late February early
March. Nevertheless as long as you believe what you see and don’t get trigger
happy on the short side until the corrections start over balancing you should be
able to stay on the right side of the market until the inevitable happens.
Overbought is not really a problem either as all it means under the current
circumstances is that the market is trending up.
The inevitable is, if you don’t already know it, at least a 38.2% retracement of all
the gains made since 2003. If the bulls are lucky, at best a correction will only
come back to the vicinity of the 200 day moving average.
Time will only tell when, but at the present time one has to assume it will begin
sometime within the next 6 to 8 weeks if not sooner. Never confuse brains with a
bull market and that is what we are in at the moment. Once the present buyers
have bought up all they can handle they will be at the mercy of the professional
traders again. Until then the policy is if you can’t beat them join then.
Essentially greed is good as it gets a lot of market participants to load up and

then keep loading up at the wrong time. Then when things change they just
hand their money over to the “smart players” without a fight as they have
nothing left in the gun powder barrel to shoot back with.
Believe it or not another one of these situations is close at hand once again, this
time the bulls are going to be stretched out to the limit. Once the margin calls
begin they will really have a chance of going under big time.
I always think it is funny when the bulls get cornered because most new entrants
into any market don’t have any experience with short selling and the techniques
bear traders employ. By the time the market turns down they are usually
strapped up to the gills and can’t do anything about it.
If you want to think about it seriously, the bull side of stocks has had nearly 5
years to attract into it even the most conservative of investors, and right now
their opinion is that things as they know them are going to continue on as they
are forever.
But alas they will not, and heaps of people are going to get burnt in the
necessary adjustment coming. If I am wrong save the criticism for about 9
months because it might take a bit of time to really hurt the bulls and get them
on their knees; but it will happen and after it is over I will be retiring from
trading forever.
Chapter 7 73
I am now just going to wait until I see if I am right about this and make sure I
participate when I get confirmation the writing is on the wall.
As far as I can see it, this next downturn in stocks is going to be one of the best
trading opportunities to make fast profits since the declines from 2000 – 2002. I
hardly expect it to last as long but I do expect it is coming.
As they say in the classics, nothing is going to last forever but the fat lady has to
sing first.
Just remember afterwards that when the bears have had their day the whole
process will start all over again, without fail.
Nevertheless onwards and upwards for now until we know where we stop, as
this is all our job entails right now. One day at a time.
Thursday 10th May, 2007: Globex 9:00am
The overnight Globex session has moved the market down and presently it is
holding support at a medium degree 61.8 retrace as we move towards the day
session opening. This will be our 1st lower MOB for the start of the day, below
this -11.25 at 1507.75 is a critical support, which is also a prior pivot level.
Chapter 7 74
10:00am:
The market opened with a gap as we knew it would and broke the 61.8 MOB
almost immediately. That is a sign of weakness as the move down from the high
yesterday also overbalanced the -7.75 leg after the FOMC report. The choices
are these technically; 1. We need to break above a 3.75 1:1 at 1512.75 to break
the small degree down trend or 2. We need to hold at the 1507.75 swing low
pivot which is also a 1:1 in medium degree. If neither of these actions are
fulfilled then the only thing to do right now is be a seller.
On account that we break above 1512.75 the target for the buy is a gap fill at
the 61.8 return level 1515.25 where it would become a possible sell level.
Chapter 7 75
This snap above was taken at 10:48am: After the low at 1509 the market rallied
3 points and corrected 2 for a 61.8 and the 5 minute TWS began to turn up. We
made it up to 1513.25 breaking the 3.75 1:1 but running into resistance on a 1:1
DD. We then corrected -2 for a small 1:1 which at this time is indicating further
upside. As long as the -2’s stay intact the upside target is the gap fill.
11:15am: The 50 at 1513.75 has proven a solid resistance as we are down 4.50
from there now, nearly back to the low for the day so far. So it is back to plan 2.
11:24am: 1507.75 has been broken by 2 ticks indicating further downside as the
medium degree 1:1 of 11pts (shown on page 72) has been overbalanced.
Chapter 7 76
11:59am: This is how the mop flops.
12:25pm: at 12:03pm we hit a large degree 50 return which so far has halted
the decline. The Big Enzo 1:1 DD failed yet there was a smaller degree 1:1DD
coinciding with the large 50.
This chart is a 15 minute; can you see the hammer reversal bar on the low?
That is a sign that this low may have some substance, at least to make a rally
back up 4.75 for a 1:1 correction to 1505. The break of 1505.75 (3 day low) is
the next higher resistance to the upside.
Chapter 7 77
12:37pm: Currently we have rallied 1 tick short of the 4.75 1:1 which is now in
play. This is a sell level with a 3 tick SAR if you figure you are a trader.
You will see the full picture of the day so far on the 5 minute chart below.
The rally up from the BIG 50 reversal into this 1:1 area has been on low and
declining volume. This usually signifies a lack of conviction, but it is also lunch
period and many traders will be off as most of the good ones would have made
money of the slide away in the morning session.
Also you should note on the chart below that the 3 day swing has turned
negative on the OEX and the SPX with the SPX having traded below the
psychological 1500 level.
We are due for a one way day so there is still a good chance we can continue
down for the rest of the day.
Chapter 7 78
1:19pm: 1:1 sell has been effective but the BIG 50 is still support so it is time to
step back for a moment and only re-sell if we break the days low to date.
The large degree target on the downside is -22.25 which would take us to
1496.75 and if that does not hold we have only a 61.8 at 1496.25 to stand in the
way of a new target of -33 down from 1519 high.
Chapter 7 79
1:52pm: We had the break of 1500.25 but no follow through so that turned into
a scratch. The next sell chance is at the 1:1 up of 4.50-4.75 and can be taken
with a 3 tick stop. If it does not work it is time to pack it in for the day.
1:55pm: If this SELL does not work then it is goodbye from me today.
Chapter 7 80
2:01pm: GOOD BYE for me now ES did not hold the 1:1
14:04:19 {BBG} Well it is anyone’s guess how high it can climb back as far
as I am concerned so it is rack the cue time.
14:10:42 {BBG} something you should consider before I go is that we

never made it to the targets so they are still valid.
2:20pm: Back to Basics
15:23:43 {BBG} you know it is a pity when we have a day like today that
all the members are not here.
15:24:07 {BBG} I wonder where they are?
15:24:38 {BBG} Maybe they have gone broke breaking the rules
15:24:53 {Gary52} LOL
Well it all worked out in the end and it wasn’t that hard to follow. One
foot in front of the other and always watch the market flow.
Each day is a new day, I didn’t leave after I reviewed what I thought was
possible and it all came to pass; beginner’s luck I guess!
Chapter 7 81
You should go over and over what I have written today and you will
eventually see how I think and how I use our price action rules as the
market moves forward. I am continually adjusting for the market flow
as it changes from one thing to another.
Chapter 7 82
Each smaller degree reversal or correction leads us along the way as

we move either above or below the medium or larger degree “pressure
points”.
Working along in smaller, small and medium degree to the larger

degree is the only way to play the game.
Today should be a good example of it and the power of the PRICE

ACTION METHOD.
As all the WTL room members know all my calls were made either in
advance or at the critical times today nothing has been written in
retrospect. Every decision to trade at the levels I mention was totally
according to the methods I published in the PRICE ACTION MANUAL.
Just for interest have a look at the time between X and D and you will see it is
exactly 1 year. Also the Wave from C to D is 61.8 the length of A to B.
The MOB for tomorrow is today’s low.
Chapter 7 83
Chapter 8
Day after ES Larger Degree 1:1 on 61.8:
This is the technical picture on the ES #F, nevertheless the SPX and the OEX are
not confirming a similar picture.
SPX has overbalanced the 1:1 and under balanced the 61.8 at this time.
The OEX has over balanced its 1:1 and also overbalanced its 61.8 and has
actually been down to 70.7 in the same time frame.
Chapter 8 84
Now if all of you were watching and trading off was the ES #F you would think
the ES 1:1 and 61.8 was a guilt edge support that is now written in stone.
But, when you look into the CASH SPX and OEX the picture painted is entirely
different.
My policy is to confirm ES futures with the CASH charts. The CASH market is in a
weaker technical position to the ES and although the market could rally or have
an inside day today the CASH side of things does not support the same larger
degree outlook. Only time will tell, nevertheless we have what we have.
Friday 10:20am May 11.
Chapter 8 85
11:05am:
11:50am
Chapter 8 86
12:05pm:
12:30pm:
Chapter 8 87
Rest of the day:
I left after midday but as you can see the market kept finding support at the
1505.50 level and in the last hour and a half moved upwards testing the R1 and
61.8 at 1510.25, it fell back 2 pts for a mini 1:1 and then with a final burst it
went up into the close.
Basically the day unfolded in scalp moves, regaining most of the losses from
yesterday and basically back where it was prior to the FOMC announcement.
The technical situation now in the medium degree, with the ES back above the
rally 61.8 MOB is healthy for the bulls going into the new week. Basically 1505
ES would have to be broken to the downside to get the bulls wrong footed again.
The LARGER DEGREE ES#F MOB’s are now 1496 on the downside and 1519 on
the upside. This is the trading range now until we break out one way or the
other; whilst we are above the 3 day Balance point of 1507.50 the market has
upside potential and below it downside potential intraday.
The way to go is with the small & smaller degree structure until we see any
bigger and larger swings unfold.
Chapter 8 88
One of the things a market student could learn out of this week is how fickle the
market action can be at times.
1. Before the FOMC most analysts were calling the market up.
2. After the down day following the FOMC many analysts were calling the
market down.
3. By the end of the week the market was back exactly to where it started.
Just the same if you count the ES swings of 4 points or more throughout the
week they added up to about 114 points with all the ups and downs.
Now if you could have traded the ES day session market on price action
methodology alone it was not out of the question that you could have secured a
net 15 points or more over the week taking into account any losses you may
have had on bad entries.
Now after the event it sounds easy for me to say, why didn’t you make 15 points
net or more for the week when the opportunity was a lot more. Well it is pretty
simple if you didn’t do it or you are now saying it was impossible to do it.
It means you are an amateur and need to improve your thinking and approach
where it comes to profitable trading opportunities.
You need to learn rules and follow them with a “blind” faith, if you don’t and
think you know better than the market you are dreaming, believe me.
Very few people can second guess what the market will do. But what you can do
is second guess what the players will do under given circumstances and
conditions.
The 1:1 corrections, the 1:1 DD targets, the breakouts of strong prior technical
levels on volume are working the majority of the time. When you combine your
pattern reading ability with the volume, OBV, stochastic readings and some other
trend indicators you should be confident with any potential trade set up using
the price action.
If you are not then you are not ready to trade with the expectation to win
consistently, and if you do trade without confidence your chances of being a
winner are not good.
What I am trying to say may not make a lot of sense to some, but it would to a
seasoned gambler who has experience in these matters. The point is unless you
have some gambling instinct in you, you are not going to get very far in the
trading business. Another point also is if you gamble too much the end result will
not be good either; so every risk must be a calculated one if you want to win.
Chapter 8 89
Chapter 9
What is the risk on any trade?
It could be anything up to 6 ticks if you can get in at or near the right entry
point. Sometimes it can even be as low as a 3 tick risk.
Your future success will depend on your ability to execute trades when the right
levels are reached; where you can adhere to these limits.
What you need to understand is that if you get in a trade at the right level and it
is the correct place your stop will never get hit. If it is not the correct place at
the time then you should be happy to have your stop hit and take you out before
you do any damage to yourself.
My point of view is you are either going to be right or wrong and if the trade
does not go in your favor almost immediately you are wrong and the trade needs
to be scratched.
It’s basic thinking in lots of ways.
Try and think realistically each time you take a trade. Did I take this trade to
make money? or did I take it to just sit here and hope I was right.
That’s not hard to answer.

If it is the latter then you are an idiot and you will just get what you deserve in
life; nothing.
Another thing you need to ask yourself each time you take a trade is, did you
have 3 good reasons for the trade. If you didn’t then you are not looking after
your risk. This business is all about reading the players and not guessing.
If you can find 3 good price action rules that agree with your trade and you get
in at the right level then it should work to some degree in your favor at least 8
out of 10 times in the initial stages, then you will have time to reassess the
position over several to 10 minutes.
Your experienced judgment of the new position in the 1st 5 to 10 minutes of

entry will tell you to give it more time or not. If you procrastinate and begin to
hope it will work without a good reason, then you should know you shouldn’t be
in the position and if so you should cut it immediately and select a new entry
level to work from. The market will never save you, you have to save yourself.
Chapter 9 90
Something lots of people will disagree with me on:
It is alright to cut a trade that is in a profit position if you feel it is going slowly.
Once you are out of it, it gives you time to rethink the situation without any
pressure.
The other point is you will never go broke taking a profit as there will be plenty
of times if you hang in when things are not moving the trade will go back to a
scratch before you know it.
With ES trading, any position you are in needs to get at least 3 points in profit
before you can get comfortable with a hold and see attitude.
You should also understand that in congested markets it takes the market to
clear itself away from the congestion area before it has any chance of moving in
leaps and bounds of more than 5 points average before it will have a correction.
Once a move has broken away from a congestion area it is more likely only going
to have small corrections until such time as it arrives at a larger degree technical
support or resistance level. These levels when broken will indicate a continuation
so you can always re-enter in the direction of the current trend.
Everything I am saying is only commonsense and if you don’t have any you will
lose or at best only break even.
So believe me when I say this business is a thinking persons business and it is

not done by mirrors. Each situation has it owns merits and it is up to you to learn
to get a feel for them. You won’t get a feel if you are not monitoring the news
items and the 5 minute bar colors together with the current volume, that is for
sure.
If you think you can do it another way be my guest, but I don’t think you will be
able to make consistent money trading anyway other than the way I am teaching
you.
You be the judge, try anything you like and then come back and read what I
have said and see if I am right or not.
If you think you have a better way and want to challenge me to a contest I am
available if it is in a public forum and you can get enough paying customers to
come along and pay to watch.
I’ve made this same offer for over 7 years or more and I have yet to get one
taker for it. I get my fair share of smart asses but in the end they all run away.
Chapter 9 91
There are varying degrees of trading that you can be involved with in the futures
markets and I am aware of all of them.
Nevertheless in the past 7 or so years I have been an advocate of intraday

trading if you want to be consistent.
I may have written manuals on longer term perspectives in the past and I still
follow those principles at large, but I don’t think today that one should take
those risks any more when it is so easy to hit and run intraday.
The longer you plan to hold any position the more jumps and bumps you have to
navigate and if you get caught the wrong way around on any of them you only
end up giving back whatever you have gained.
Giving back is not part of my game plan anymore I did enough of that in the old
days.
I don’t even believe anymore that you need to get a complete move in one hit. I
think as long as you get what you set out to get short term the future will look
after itself.
You could say I am now gun shy but I equate it more to flying, where you take
off in fair weather where you know all the variables in play and then all of a
sudden they change; like having to fly through a rain storm where you cannot
see anything and you are wishing you were back on the ground rather than up
there in it when you have no choice.
At least with futures trading you can pull the plug anytime you like and go sit on
the fence until better weather arrives.
Thing is if the flight plan does not go according to what you envisaged at the
outset you can bail out quickly without an airways clearance to land.
It’s pretty hard to get out of a plane at 6000 feet in a thunderstorm with no
visibility.
Another thought maybe some of you will have certainly experienced, as I have,
is driving down the turnpike in Florida at 70 mph in a Lincoln with family on
board and it rains cats and dogs so hard you can only see about 40 meters in
front of you. You have no choice but to keep going even if you slow down
because your worst fear is if you go to slow someone will run up your ass. By the
time you see some overpass where it would be smart to pull over it is too late as
you have gone by it. So you press on and hope for the best. Long as the car was
a rental as mine was the choice is easy. But the risk is greater than you need.
Chapter 9 92
The more risk you take should only be commensurate with the stakes available
and in most cases trading day to day the risks can be contained.
So my view is, ONE DAY AT A TIME, and control the risks if you want to stay at
the top of the game.
Because if you don’t you will blow your account to pieces; I have seen this
happen countless times in the past with other “so called professionals”.
If you don’t believe me just throw caution to the wind and try it.
You will either make a million out of luck or you will end up in the poor house.
The poor house has a 100 to 1 ON chance of beating you.
So I hope this little aside is worth the trouble of me writing it as I don’t want to
see anyone crucify themselves for no reason.
If you want to succeed you need to understand a few things and work with them
until you get them right. If you don’t then you might just as well have one foot
nailed to the floor and continue to walk around in circles.
That is really the nature of this business anyway and a lot of people are used to
it.
I am not.
So please take what I say genuinely and think about it or accept your fate as
best you can because I won’t lose any sleep over it.
I don’t care one way or the other if you make it or not. It is not my
responsibility, it is yours.
But I do care about one thing and that is that I have told you how to do it and
where the pitfalls lie, that is my only responsibility.
This way I can have a completely clear conscience if you have paid me money to
use our software and method and it didn’t work for you.
People have a way of painting anything the color they choose, white, black or
grey, at the end of the day they will end up with the color they have chosen.
I can’t make it much clearer than this, even if I had resorted to profanity.
Don’t SHOOT THE MESSENGER?
Chapter 9 93
Chapter 10
Back in the RANGE AGAIN:
Here we are again, another Monday ahead with only our chart to
keep us company until we find out more.
Over the week-end there were quite a lot of analysts remarking on

the US RETAIL SALES figures released on Friday of last week and
although they were down severely the market basically ignored them.
This is something we should keep in the back of our minds going
forward.
Monday is a quiet day for economic data, but from Tuesday to Friday
we have a few things coming that normally interest investors.
CPI at 8:30 am Tuesday is the first of them, with Housing Starts and
Industrial Production on Wednesday.
Chapter 10 94
If you want to find out more about the possible implication of these
reports you can get all the information from Econoday by visiting
their web site.
http://mam.econoday.com/calendar/US/EN/New_York/year/2007/mo
nth/05/day/14/daily/index.html
Chapter 10 95
USD – EURO:
The fall in the USD over the past 5 years (US$1 was worth EU1.21
and now it is only buying EU 0.73) or so is rather alarming. One
positive aspect of it has been the extra profits US multinational
companies have been able to accumulate with operations outside of
the USA.
Somewhere down the track if this trend of a lower USD continues it

will have far reaching implications, especially for all the 1st world
economies funding US Federal Reserve backed debt. It also raises
the cost of imports into the USA at the same time making the cost of
goods to domestic consumers more expensive.
Eventually rising domestic prices will lead to increased inflation and

curtail retail spending or at the least slow it down. This will then have
the effect of lowering domestic company earnings and consequently
lead to lower demand for stock at high prices. If you think it will be
different then I don’t know how.
Chapter 10 96
I suppose if you didn’t figure the American consumer was

overburdened with credit card debt and the US government was also
free to keep running massive deficits and borrow into the future
there would be no reason to be concerned.
Nevertheless this is not how it stacks up if you have a realistic look at

it.
In any case it is not going to bother me; all I am interested in is

whether the ES goes up or down and if I can identify an underlying
reason behind the actions of the “smart money” traders to justify
such action. To date as far as I can see the punters are ignoring the
risks ahead and as long as we just take it one day at a time so can
we.
I will say one thing here that I have noticed recently in an area I
have an extreme interest in and it is this. About six months ago I was
trying to buy a particular boat and ran some ads in the paper for a
month. I had an ad to buy for cash a 38’ Mustang sports cruiser,
2003, low hours, fully loaded, and would pay up to $200k. There
were plenty around for $225 to $250k at the time. But there were
none available where I could “steal” one for something like $180k
which was my aim at the time. So I put the scheme on hold as I have
been busy most of this year with other things. Now we are coming
into winter and I have been watching the ads each week I see that
most of the boats that were available 6 months ago, many are still
available for sale and the asking prices have dropped about $25k.
Just this weekend I see an ad by Ron Phillips who is an extremely
active trader in boats and cars advertise a 2003, 38’ Mustang, 250
hours for $195k full price. Now Ron runs ads each week in all
national papers to buy for cash, immediate payment so he is starting
to cut through the ice a little now. It means he would have had to
buy that 38’ he has on sale now for $170-175k the way he works.
But the biggest favor he has done me and I guess he is trying to do
the same himself is to SCARE all the other sellers into dropping their
prices. It will work believe me. Once he gets a few sellers down
below the $200k level it will set a new resistance line for any other
buyers. Then all we need is a stock market dive…………………
Chapter 10 97
BTW for those regulars who have been around for a while that boat
that I liked and couldn’t buy at the right price 6 months ago has
come back onto the market. He is still holding out for his $225k but
things might change soon and I will make him a lower offer and see
where he is at. He has to be bleeding a bit by now and he is overseas
and can’t use it for another couple of years.
Chapter 10 98
In any case if I can get something similar from somewhere else in

the future I will be happy with it. I have decided that this is all I need
to go fishing again.
At the end of the day it will be no trouble sitting around at the

marina or putting it deck cargo to go to Vanuatu for a few months.
Here is a question…………
Who has the lowest IQ on a special test used for this purpose?
1. Moron
2. Imbecile
3. Idiot
A contestant with an IQ of 150 answered IMBECILE tonight on 1 vs

100 for a loss of the $130,000 he was ahead.
A women with a 10th grade education answered IDIOT and won the
$130,000.
It was interesting because before the answer was divulged I grabbed

the dictionary and quickly looked up all words.
A moron is someone considered to have the average thought process

of an 8 to 10 year old.
An imbecile is someone considered to have the thought process of a

3 to 7 year old.
And you can guess! An idiot is someone who is just a fool and has no
thought process whatsoever.
If that is all you will learn here you are way in front of the game now.
Just the same it is time to get back to the job at hand, I often pass
my time away going off at a tangent for a time and it helps me get
back to where I want to be.
Chapter 10 99
Monday 14th May, 2007:
8:00am:
The ES rallied from here into 9:40am to a high of 1516.25 and then it was
downhill, sideways, downhill and finally back up.
There were quite a few trading opportunities today if you were aware of them.
The easiest PRICE ACTION trade of the day was the break down out of the 2 and
a half hour distribution and it was good for 5 points before it looked exhausted.
There was no excuse for missing the opportunity as even Blind Freddy or a
moron could have recognized this one. The break came on a downward sloping 5
minute TWS and OBV line and did not require any second guessing to be
involved.
The high volume spike in the area of the 61.8 followed by a drop in volume on
the next 5 minute bar was the signal to exit the trade.
Chapter 10 100
The low for the day came in on an OEX 61.8 return. If you are not watching the
OEX you will miss a lot of opportunities. The OEX confirmed the distribution
breakdown and then confirmed the reversal at the low for the day.
Chapter 10 101
The low for the day:
Here is another good example of the things I point out in the PRICE ACTION
MANUAL that is often overlooked by students of the method.
Have a closer look at the signs before the DISTRIBUTION SELL TRADE. As I said
earlier even Blind Freddy wouldn’t have missed this set up.
Chapter 10 102
Tuesday 15th May, 2007:
A late start for me today, already the CPI report helped move the market
upwards, nevertheless the house of cards could not break above 1519 for more
than two minutes. This is a very bad sign for bulls. The OEX and S&P both did
the same thing.
2:15pm
4:00pm:
Chapter 10 103
4:14pm:
The false break to the upside above the old 1519 high was a give away today for
the bears. As Gann used to say if the 4th attempt at new highs fails then it is all
over red rover.
I don’t have much to say other than the 1:1 correction SELL at 1514 with the
TWS negative was a lay down today.
The only thing still holding this market from a huge shakeout is the sellers
placing profit taking stops at 61.8 levels and letting the market off the hook.
It is pretty clear now that anytime the market attempts to make a new high they
are going to come in and sell it.
All you need to do to make profitable trades is follow the PRICE ACTION sign
posts. Anyway if you don’t know that by now there is not much hope for you.
The current uptrend from Thursday is now overbalanced. Tomorrow we have

1504.75 as the lower MOB and the 38.2 correction level as nearby resistance at
1510.50, so now we will have to wait and see what happens overnight.
Chapter 10 104
Supports to break are 1504.75, 1502.75 and the big one 1496.
These charts hold our guidelines for tomorrow.
Chapter 10 105
Wednesday 16th May, 2007:
13:54:44 {BBG} it looks like it can go higher but it is going to slow here
13:55:54 {BBG} You should be thinking short till it gets above 1514.50
now
14:02:38 {BBG} now you have a choice or two
14:04:05 {BBG} it has to break a 1:1 to get back below 1511.75
14:04:17 {BBG} so it is now a buy again
14:04:39 {BBG} but needs to get above 1514.50 to keep going
Chapter 10 106
14:40:03 {BBG} If you had got a sell on after the morning reversal on the
near 61.8 you should still be in good shape for the day
14:41:27 {Wayne_R} :-))
15:27:13 {BBG} it is starting to look like a waste of time now
15:27:28 {Wayne_R} Y
15:27:54 {BBG} who is going to give up first? buyers or the sellers
15:28:36 {BBG} did you see the OEX creeping up?
15:28:53 {Wayne_R} Y
15:32:18 {Paul_T} technology and financials sectors stronger
15:36:26 {BBG} Well the geometry never said it was a sell
15:38:59 {BBG} Even I don't believe it sometimes!!!!!!!!!!!!!!!!!
Tomorrow we have JOBLESS CLAIMS at 8:30am which could or could not set the
tone for the morning session.
The biggest risk to this uptrend is sellers hitting it again and if the OEX breaks
back at the beginning of the day the tone will be down for at least a few hours.
Chapter 10 107
Thursday 17th May, 2007:
A gap opening on ES and down with the OEX and the DJIA breaking back below
yesterday’s new highs. It is not a pleasant start for the bulls today.
Five significant things happened today:

1. The market open down with agap and went back to yesterdays smaller
degree support where we had a smaller degree W4 on a 1:1.
2. Correction of -3.50 began exactly at the gap fill.
3. Market made a false break high at 1519.25 on a 1:1 DD to a prior larger
degree double top at 11:45am and reversed. It was expected to be sold at
the top of the range by most pundits in any case.
Chapter 10 108
4. Support held on the 1:1 correction of -5.25 down against a -5.50 earlier
and it was against a prior pivot low. This was perhaps a surprise to me
but then I have said before to expect the unexpected.
5. The market reversed exactly at 3:00pm on a large 1:1 DD (17x17). This
was no surprise as I was looking for it to turn down going into the last
hour of trading. 3:00pm is historically a critical time where program
traders will reverse position for a run into the close.
1:1 Double Drive high at 3:00pm:
All of these PRICE ACTION things are fully explained in our Price Action
manual so they are not at all uncommon events. In fact they are so common
that anyone who ignores them does so out of pure ignorance.
Now the futures has overbalanced the small degree again going into the close
but it did finish on a 1:1 DD (4x4) down -6.75 and still above the pivot
support line. At 1514 we have a -7.75 1:1 and a natural support zone and
just below as a last resort we have the 1513 which I would rate as a W4 in
Elliott terms so if it breaks the sellers should move in with some force.
Chapter 10 109
Only time will tell but this is how it looks on a 15 minute chart going into
Friday.
6:50 am and Globex has bounced off the 1:1 at 1514 and stalled.
What does that tell us? Basically the buyers are still heavily involved! Are they
in charge that is the real issue now being a Friday.
Chapter 10 110
As much as I would like to be a seller in this market the bulls keep exerting
their strength as we move from bounce to bounce.
They are not done yet as you can see but as soon as they get out of step the
bears are going to have a go, you can be sure of that.
The 1513 level is the key for bulls to pack overnight bags now, outside of that
we have to see if they can take it higher today, Nevertheless somewhere
along the way there is going to be a good sell opportunity and that is all I am
interested in at the moment. If it goes up it can do so without me.
The main reason why I say this is because we have been getting sell downs
at every new high in recent times and I can’t fathom out when this can
change in the near future so there is no point buying unless you can get a
good entry on a pull back and these always appear to be dangerous to me;
albeit they are working, so there is not an argument with that yet.
One day at a time and follow the price action rules if you want to stay on the
right side. Right now the market is forming some very repetitive habits and
until it breaks them we have to watch it very closely. The 1:1 correction rule
will tell us when it is out of step.
2.45pm Friday:
I decided to take the day off and only arrived 15 minutes ago – this is what I
saw.
14:45:06 {BBG} 1:1 will it go back up?
14:49:25 {BBG} Odds are it will get sold off between now and the close
14:50:24 {BBG} but this 1:1 will give them a chance to buy it one more
time
Chapter 10 111
SPX:
So far today’s high on SPX was on a 1:1 DD with a triple 1:1 correction on
the run up. That is powerful stuff and indicates the high for the day should be
in. But the -4.85 is still in play before there is any confirmation.
OEX:
It has made a new high but double topped on the attempt to go higher.
Nevertheless it would still have to overbalance the -2.25 1:1’s to confirm a
turnaround.
15:00:59 {BBG} Bloomberg - ONLY AN HOUR TO GET IN ON THIS BULL

RUN TODAY
Chapter 10 112
Dow Jones:
This is interesting as it made high on a 1:1DD as well and has since made a
double top.
4:15pm: ES Futures:
A couple of new highs throughout the day and now a recovery on the 1:1 -
4.25 correction. Trend is still up and the market closed on new high with bulls
totally in control and bears in tatters. Right on 4:00pm when the cash closed
the futures had its highest 5 minute volume bar for the day with the price
rising.
It does not seem to want to stop, but as everyday passes it is only telling me
that the higher it goes the further it has to fall when the time comes.
Chapter 10 113
Don’t argue, don’t argue, Hutton’s is best………….
The 1550 level double top with cash SPX 2000 is now looking like a real
possibility before the month ends. That having been said I better not raise
my hopes of forecasting what the market will do as it will do whatever it
takes to upset the most people.
All the market strength is now coming from the blue chip sectors. The DJIA
went to a new record high today of 13558.48 intraday and closed at 13556, a
1:1 DD target for it is just above 14000. The OEX high today was 699.80 and
that was where it closed. The SPX closed on its high today at 1522.75 as
well.
The under performers this week were the MID, Nasdaq composite and the
Russell 2000 as neither made new highs over the previous week.
There’s an old saying in the market, “sell in May and go away”. I wonder if
there is any truth to it? Fundamentally the only real danger of a retreat right
now is the OVERBOUGHT NATURE of the market. It would really need some
bad news to cause anything more than a correction, something like a rate
rise and some bad earnings reports; these won’t come until July.
Chapter 10 114
The 10:00am consumer sentiment report today:
This report did not cause any problems for the bulls today and the sentiment
is likely to flow over into early next week as well. We can have a look at what
is coming up next week when I begin the next chapter.
Chapter 10 115
Chapter 11
The beat goes on:
There’s not much on the horizon this coming week until Thursday and that does
not look like it will be anything earth shattering.
The market should trade mostly on “technical’s” in the coming week so it might
be a good idea to have a look at what the others maybe seeing ahead. Most of
the bigger trading funds will be eyeing over the Elliott Wave count right now so
that is a good place to begin.
Chapter 11 116
My Elliott Wave opinion:
I say my opinion because from experience if you put 20 Elliottician’s in a room

together you will get at least 5 to 10 different opinions.
The best place to start is with the OEX weekly chart, monthly is for perspective.
Chapter 11 117
If you are unfamiliar with EW then I should explain a few things first.
From the beginning of the bull market in progress, i.e., in the case of the OEX
we made low in July 2002 and then went up and down into October 2002 with a
slightly higher low. The S&P actually made a slightly lower low in October but the
OEX didn’t. Now for the purposes of EW I have labeled these up and down
swings between July and October as larger degree [1] and [2]. There is an
alternative to just label these swings as an A and B which Elliott mentions in his
thesis on phenomena that can occur at the end of major bear markets and
between the beginnings of a new bull market.
For our purposes the beginning of the change in trend from down to up actually
begins from October 2002 with an up and down swing between then and March
2003, these I have labeled a lesser degree (1) & (2). Then the OEX market went
up clearly in 5 waves of lesser again degree to (3) in January 2004. The S&P
actually did not terminate until March 2004.
The wave (4) was a corrective phase we went through between March 2004 and
August 2004 where the price decline actually terminated as 62.5 of wave (2) and
took twice the time in days. From memory W(2) was 100 days and W(4) was
200 days.
From the W(4) low the wave count becomes a little subjective although one
thing for sure is that the OEX is going up and it does not seem unreasonable to
call it an EW 5th wave in progress. How we ultimately label the waves from W(4)
will depend on the final outcome.
This chart shows the relationships between the W(2) and W(4) as I have labeled
them on the current chart. Just for the record I have had this wave count going
all the way from the October 2002 low day. Now if you believe all this up to 2004
we can go on.
Chapter 11 118
There are several general ways a 5th wave should terminate.

1. W5 will be equal to W1.
2. W5 will be equal to 61.8 of W3
3. W5 will be equal to W3
4. W5 will be equal to 1.618 of W3
5. W5 will terminate when the distance from start to W(3) is equal when
measured from W(4)
6. W5 will terminate when the distance from start to W(3) is a level of half
the total, i.e., when W(5) terminates, W(3) will be at 50% of the total
distance from zero.
7. W5 will terminate when distance from W(4) lies at 61.8 of the total
distance from zero.
W(5) has now gone up 181.13 from W(4) start so it is greater than W(1), it is
also greater than W(3).
Also if you look closely you will see that we exceeded the 61.8 retrace of 2000-
2002 when we broke above the previous weekly high labeled W3 so that
eliminates the possible correction theory and tells us this current wave series is a
completely new wave set from 2002.
As it turns out we have 2 targets close at hand where the first is 704
and wave W(5) would equal the same amplitude of [2]-(3), the second
is 707 where W(5) would equal July 2002 to (3).
Now we need to move down a peg or two and examine what has been
happening within the recent upward trend.
The last correction terminated in March with a drop of 46.66 points and has since
rallied 74.99 to Friday’s high. Less than half a point ahead we have a 1.618 of
the downward correction, above that the 1:1 is up at 737.
Chapter 11 119
I bet right now there are plenty of Elliott Wave followers scratching their heads
trying to work out where this bull trend is going to terminate! The more you go
into it the more difficult it becomes and that is something we don’t need as
traders.
Elliott Wave is at best a guessing game for forecasting, nevertheless with so

many people using it; it does have a psychological hold over the players
involved.
At the end of the day none of this really matters to an intraday trader as the
price action will always be your short term guide. It was just interesting to go
through the exercise so you could see how many technical analysts waste their
time each day.
Chapter 11 120
To be honest this is where we need to focus for intraday trading. It is all very
well trying to work out where the current LARGER DEGREE move up from March
will terminate. But if the smaller degree swings begin to overbalance, for
instance the -3 (little w2) correction is small degree and the -6.28 (bigger w2) is
medium degree then the warning signs are out in clear sight, so we might as
well just let the market tell us.
The SPX (S&P500 Cash):
Chapter 11 121
It is a lot easier to see where the next MAJOR SPX resistance level lies. It has to
be the double top area with the 2000 highs. Even Blind Freddy would know this.
The big puzzle right now is how does a high in the OEX fit in with a high on the
S&P. Because if the OEX only goes to say 707, that is only 7 more points higher
and it would only add about 10 more points to the S&P index, this would get it to
1532 plus any other contribution it could get from the balance of the S&P stocks.
This does not get it to 1552 for a double top. The point is that the S&P runs a
risk of falling short of the 2000 high if we are currently just a small way away
from an important high. It won’t really matter until we see what the OEX does in
any case; all the guessing in the world is not going to make us any money, all it
is doing is conditioning me for the possibility of a top near at hand.
Something else you can think on is what if the OEX goes higher than 707? If it
does there are no longer term technical levels until we get to 735 and this would
add about 50 points to the S&P index which would put it way over 1552.
If you look at the last 60 minute chart I have displayed of the OEX you can see it
is only in the early stages of a medium degree W5 if the Elliott Wave is the main
consideration; so it seems feasible that an early end to this expansion is not a
HIGH risk at the moment.
Something else that is pushing this market up right now is all the takeover
activity still in progress, so we shouldn’t lose sight of that either.
SOMETHING ELSE WE WILL TRACK THIS WEEK:
Reversal times of the day: My favorite is 3:00pm but we regularly have reversals
in intraday price at some on the hour periods like 11:00am, 1:00pm and 2:00pm.
Chapter 11 122
Monday 21st May, 2007:
I am only looking back on today as I wasn’t around for very long and when I did
come back for a look around 3:00pm my cable was disconnected. That is another
story in itself.
If the -7.75(1:1) comes out the lower chart shows a target of 1519.50 which is
-14.50 from the high, this would be as far down as you would expect it to come
if the uptrend is to remain intact from the 1504.75 low. Nevertheless 1516, the
61.8 is still in the area of the Wiv of lesser degree I have marked so that is the
maximum allowed. Nevertheless the 7.75 down is support right now.
Chapter 11 123
OEX today:
Well none of our EW targets were reached today so I still have to assume we
can go higher this week unless the market overbalances the W2 1:1 which will
be 696 as you can see on this chart.
INTERESTING THING TODAY:

I received a free handout from that peanut brain Robert Miner; you might
remember him from my mention of him in the TTW course. He is at it again,
forecasting the DJIA to reach a multi year high soon and then collapse 50%
before 2010. He has made a practice of calling tops for years in the stock market
prior to them actually occurring so he has to get it right sometime.
The amusing part of his SPECIAL REPORT is:-
I’ve Been Wrong Before

I’ve made a lot of “forecasts” in the past 21 years I’ve been trading and writing market reports.
Some have been dead on. Some have not.
If there is any major weakness I’ve had identifying major market trend reversals in the past 20
years, it has been to be too early. Once a market trend is dominated by speculators with little
underlying fundamentals to justify the extremes, whether it is the stock market or soybeans, it
often reaches extremes not anticipated by any sort of traditional technical or fundamental
analysis. But all trends end. And being aware of excessive trend conditions and the potential for
reversal can help you be prepared to make important financial decisions.
In the fall of 1997, I began warning that the stock market was in the final speculative phase which
was near an end and the outcome was not going to be pretty. It was almost two and a half years
before the final top was reached. In the fall of 2004, I described how the conditions were in place
to complete a corrective high to the 2000-2002 decline. A bit early on that one also!
It is now a little over two and a half years later and the stock indexes are up about 30% from the
fall (is this the season he is referring to? Or W4) of 2004.
Chapter 11 124
What makes it so funny though is that he is touting for new subscribers to his
newsletters. I guess he needs them as anyone following his advice to get short
stocks over the past three years or so would be broke by now.
I think in future I might call him “Dartboard BOB” because the biggest flaw in
his assumptions is that the DJIA will fall 50% in value to 7000+. It might fall but
he is saying it will fall for 3 years like he knows the future, as if he was ever right
before as he has been calling the US stock market down right from the beginning
of this bull market. 2004 was when he sent out a free 50 page report to everyone
and he can’t side step that bungle up he made.
You have to laugh because for someone who pretends he has an expert
knowledge of EW he seems to just make wild guesses. “Dartboard” must just get
behind his keyboard each day and disengage his pea brain before he starts
typing. I remember back in 1987 when Robert Prechter (another relation to
Dartboard) kept saying after the crash that the DJIA would go down to 400. He
is a similar pea brain as well. But funny thing about Prechter is he claims he is a
member of Mensa and he does not trade either.
If there is anything you can learn from modern history it is that bull trends can
go on for more than 5 years, maybe with corrections, but never collapses. Like
1974 to 1987 and 1987 to 2000, these were 13 years apiece. It is amazing what
the public will subscribe to when you look at all the morons out there writing
newsletters for imbeciles. All the public does is waste their money in 90% of
cases; that will never change I’m afraid. As Gann said, “there is nothing new
under the Sun”.
Chapter 11 125
Tuesday 22nd May, 2007:
Today started off looking like a DOWN day that should have kept breaking down
after the -7.75 overbalancing in the swing series. This did not eventuate and the
ES went back up for a retest of the 1534 high and then went into a failure
pattern. The late afternoon saw a lack of buyers and a close at 1525.
Today’s pattern gave a lot of non confirming PRICE ACTION signals with false
break lows to start with and then a break back up through 1529.50, these are
things we have no control over but if you protect your entries with close stops
you will always walk away with a small loss rather than a big one.
The late afternoon decline retraced all of the gains made after 12:00pm so in the
end the analysis of a potential downtrend change was confirmed.
As we go into tomorrow the scene for the bulls is fragile. The downward target is
a 1:1 of -15 or a 50 retrace from 1504.75 which lies at 1519.
The only point in front of 1519 will be the 1524.50 1:1 of -8.75 so we have to
get some more input from the buyers and sellers to make a decision whether to
buy or sell right now.
But we will most likely start the new day in a weak position considering the bulls
could not get the market above the 1534 high yesterday when they had the
opportunity.
Chapter 11 126
Wednesday 23rd May 2007:
Took a while today to get the rabbits rounded up but it got them in the end. The
break of support on 1532 came at 1:55pm.
12:26:38 {DCrowther} kamahl?

13:03:09 {Paul_D} .
13:06:02 {Richard_To<ZH>} hi
13:06:05 {BBG} Looks like a Kamahl is setting up
13:07:11 {BBG} I've been asleep for about 6 hours
13:08:52 {sangli} Hi everyone! How's trading?
BBG} It is not normal behavior up at these levels

13:30:33 {BBG} keeps overbalancing yet makes new highs
13:31:09 {sangli} The bulls could be trying the 732 level
13:31:12 {sangli} OEX
13:31:16 {BBG} It is going to fall down sooner rather than later it is just
bagging a few more rabbits first
13:32:00 {BBG} apparently the closing high in 2000 was 1527 SPX so we
have been there already
13:32:09 {Paul_D} run for cover kids the big bear is here!!!
13:32:12 {Paul_D} :))
Chapter 11 127
13:33:36 {BBG} have a look how many times it has broken up a couple of
points and fell back
13:52:14 {BBG} If we break 1532 just sell today

13:53:21 {BBG} There is still a gap to fill today
14:06:34 {BBG} Here's the bounce

14:06:46 {BBG} to get short on again
14:48:00 {BBG} I think while they have them down they should try and go
on with it
14:49:19 {BBG} This burst up is short covering
14:49:47 {BBG} from people who sold at the lows already
14:56:22 {BBG} the guys who were playing the break back won the day
16:09:14 {BBG} Outside reversal day coming up

16:11:21 {BBG} Now I have the Tiler coming in an hour or so, so I can
write a couple of pages for today in the mean time
16:11:43 {BBG} Today is a good day to remember
Well all I can say is that if you didn’t make money today you better give it away.
After the break back from new highs the buyers were rooted.
Basically this is close to an outside reversal day and another down day should
follow. It is what you would call a V reversal day.
Chapter 11 128
The best thing about today is where the OEX finished after getting very close to
a target we had worked out before the week began. It is now on a last resort
SUPPORT LEVEL so if that holds it is a BUY but if it fails you can go SHORT with
complete faith that a lot of idiots are going to hand over their money.
If they are going to save this they have to buy it from the opening bell, if it gaps
down it is a big break of faith. Any retests of a break would become sell signals.
So that is where the opportunity lies tomorrow and all you have to do is be here
for it.
By the way AC Milan won the cup final against Liverpool today so the afternoon
day session would have had a lot of the punters watching the TV. Maybe they
just dropped their guard today but we will find out for sure tomorrow.
18:00:50 {enzo} I am going over with what happen today to study, the
more I study the more I become a believer - amazing
18:01:29 {BBG} Well it is something I became a believer of 20 years ago
18:02:35 {BBG} I don't see a flaw in my plan as long as you sit back and
wait for the right opportunities
18:02:39 {enzo} I now understand when you have been saying is going up
and over balance the wave prior correction
18:03:10 {BBG} Well Enzo that is a bad news ahead signal
Chapter 11 129
Well the news never ceases………….
Alan Greenspan (retired FED Chairman) came out today saying that the Chinese
share market rise, which is up 50% in the past year is unsustainable. I wonder
when he will mention the US share market.
It is things like this that infect the thinking of people who make the investment
decisions and right now the market is placed in a precarious position.
Thursday 24th May, 2007:

6:30am:
The Globex session already went down to very near the 1:1 of -15 in the waves
of similar degree.
Currently it has not exactly reached any solid geometric levels that would
indicate a rally back to new highs at this time.
Nevertheless if we get a break back above 1525 then it is possible this shakeout
has ended.
But, before I would accept this is the case I would be a seller even up at the
1525 break level with a close stop. It might even be a buy above 1525 but I am
not buying as a personal decision. With the way the market is behaving lately it
is far easier to identify the short trades that are easy winners. But, you please
yourself what you decide to do.
Chapter 11 130
10:15am: The ES opened at 1525.50 and in the 1st 10 minutes dropped 3

handles to 1523 and then began a rally up to 1532.50. By 10:15 it was apparent
something was going amiss with the rally.
10:44am:
Morning low is penetrated. This was the beginning of the end.
If you were not thinking DOWN by now then you have no place in this business!
11:14:09 {BBG} I only think of when it is advisable to trade

11:15:13 {Richard_To<ZH>} might not be the case....but 1512.75 is -
22.75/-23.00
11:15:33 {BBG} that is a good target now Richard
Chapter 11 131
11:27:10 {BBG} I am going to bed shortly but I bet we see 1513 today
11:28:00 {BBG} you see you only needed the balls to be on this
11:28:41 {BBG} if you don't have the balls then just watch
11:29:34 {BBG} this sort of shit is not for the faint hearted
11:30:14 {BBG} 1513 is like a magnet now
1513 was HIT at 12:38pm
This 1:1 was a highlight of the day:
13:24:21 {BBG} Here is the cross roads

13:24:31 {BBG} SELL
13:24:42 {BBG} SAR 1519.25
13:27:03 {BBG} are you in tune with me
Chapter 11 132
This was the entire day; I went to bed at 2:00pm ET.
13:34:26 {BBG} this needs a double bottom to confirm a reversal up

13:34:49 {BBG} because it is a big decision point
13:38:09 {BBG} See the TWS rolling now
13:38:35 {BBG} I don't reckon that low (1513) so far is safe
13:38:56 {BBG} 1512.75 would be a false break
13:41:15 {BBG} you may not get it yet but you can see how the price
action works in the aftermath
13:42:00 {BBG} One day years away
13:42:41 {BBG} you might get close to reading the market like I do
13:42:52 {BBG} and I am losing it these days
13:44:29 {BBG} I am going to bed CU all sometime tomorrow
Basically the day went to plan but it had a few interruptions with reckless
gamblers getting in along the way. If you look back up at the 60 minute chart
showing the larger 1:1 at 1513 you can see that we are now below it
considerably and the next supports are prior lows and a -33 1:1 that goes back a
fair while to charts I showed back in April.
The -33 is a bench mark now and if it comes out it will keep confirming a
downtrend of Larger Degree is in motion.
The -23 1:1 @ 1513 came out today mainly because technically it was not as
strong after being support once before in run up. I always find that on the 3rd
attempt the 1:1’s are a 50/50 bet for a reversal, on the 4th attempt they are a
huge risk. But you can always have a SAR chance to get back in the right way if
they don’t work.
Chapter 11 133
The bigger picture from March low:
If you want to bring EW into it we are working in a W4 of large degree and if we

break -33 down the degree goes up to larger and the 1:1 after that is -49. With
the SPX the picture is different because at the time of the -49 ES we were in
rollover with a 13 point premium and the SPX made a new low in real terms
whereas the ES made a higher low. The -49 ES is probably not relevant in this
case so once we pass -33, if we do, the next supports are 38.2, 50 and 61.8
levels.
Chapter 11 134
Memorial Day holiday on Monday so beware of low volume after yesterdays

shake out. That reminds me I have to watch the Indy 500 on Sunday.
One thing you can be sure about is that yesterday would have cut a few throats
and some of them won’t be back today or ever.
The outside reversal is very clear to everyone now but usually after two days like
we have had it is likely to be a sideways day ahead.
We will see but I am most likely taking the day off and making a long weekend
of it.
After market review:
The day started with a rally back to the 50% level on the OEX, then a decline of
61.8 of the rally. The ES filled a morning GAP when the OEX reached and
reversed on the 61.8 setting the support for the upward drift which went on for
the rest of the day.
There was a small 1:1 in play at the low and as soon as it was overbalanced the
warning of an upward movement of similar degree to the downward move was
signaled.
Today turned into an N day with an 8.50 point range on the ES.
Chapter 11 135
As you can see there were quite a few PRICE ACTION trades possible during the
day if you wanted to take them.
I was talking to Yigit when the days high came in at 10:50am and said to him…..
10:50:52 {BBG} I am continually looking at reports saves me heaps of

time
10:52:06 {BBG} OK if you want some spending money for the weekend get
short now
12:37:55 {BBG} Time for bed gap filled and 1:1 failure
If anyone did not know the reason for the low Richard told the WTL room in any
case.
12:38:24 {Richard_To} OEX on 61.8 while ES filled the gap
Well there’s another week over and as I have shown, plenty of trades available if
you wanted to do the work.
Chapter 11 136
Chapter 12
Has the Trend Reversed?
So far the trend has reversed to down in the intra-day and is presently only
questionable in daily degree; the weekly degree trend is still unquestionably up.
The point right now is the market has only had two down days so far since the
high. It would need to make a lower low below Thursday’s low to change the
perspective in the daily degree.
It would take either a downdraft of huge proportion in one or two days or even a
week to actually declare that the WEEKLY TREND has turned down and was
going to continue down for some weeks or months in the future.
Most important market highs normally will give the punters a chance to get out
or get short before the pain really begins to become a clear reality.
Something you should not lose sight of at the moment; there is still an equal
opportunity on the long side as there is on the short side; although breakouts to
new highs should be avoided in the near future. Breakouts up from lower ranges
could still produce good trading opportunities in the near term.
Personally I think we have until late June or early July to make more new highs.
But just to clarify that point, if certain things were to happen I would
immediately lose that view.
1. OEX would have to decline in excess of 45 points from the latest high.
2. DJIA would have to decline more than 1000 points from the latest high.
3. SPX would have to decline more than 100 points from the latest high.
I know that such declines are not things we need to worry about for intraday
trading but they are certainly the larger degree benchmarks for investors.
The other thing that will be weighing high in astute investors minds at this time
is the distance the S&P has risen above the 200 day moving average in the past
three months.
Index Recent High Recent Close 200 Day MA Points above

S&P500 1532.43 1515.73 1,400 115
OEX 703.33 693.88 648 45
DJIA 13624 13507 12,300 1,200
Chapter 12 137
MID 400 912.84 896.28 815 81

COMPQ 2600.94 2557.19 2395 162
RUSSELL 2000 845.94 829.93 779 50
DOW TRANS 5250 5147 4760 390
DOW UTIL 537 512 467 45
You can see from these rough tables that before anyone is going to declare a
fully fledged bear market in progress the stock market has plenty of room to
adjust downwards.
A decline from the S&P high back to the 200 day moving average would be a
little over 8% at the moment. I don’t think that would be a big ask; but I
certainly don’t think it would necessarily indicate a new bear market of major
proportion unless we continued on lower below it.
Realistically at the moment longer term stock holders are facing a risk to capital
of around -10% versus a possibility of a further +5% gain in the next month or
maybe more. As long as we don’t overbalance they have a positive chance.
Of course there are some underlying fundamentals in the pipeline at the moment
to justify why many analysts are worried about ongoing company earnings
growth ahead. Nevertheless until they become a reality there is no reason one
could have to suspect the market has the potential to collapse. Maybe it will,
maybe it won’t; I can deal with that on a day to day basis already so why should
I worry about it.
Chapter 12 138
Reports ahead this week:
As you can see MONDAY is a holiday so it follows to me anyway that on Tuesday

the floor traders will be intent on getting some action going. Their big hope will
be the CONSUMER CONFIDENCE report at 10:00am so that will be a focus of
discussion when we get to see the activity.
At this stage I have no preconceived ideas outside of the fact that the consensus
figure is 105 and we need to see what the report comes out with. When it does
let’s see what it does to fuel some buying or selling pressure. Basically speaking
normally a lower figure is bearish and a figure higher is bullish.
Chapter 12 139
In any case the main reason I am mentioning these things that cause us to
question the PRICE ACTION method of trading is to just prove that over time
they will never really matter.
Reports will, due to their nature create short term opportunity, but the bigger
picture stuff will look after itself as the market moves from day to day.
For instance the high day last week resulted in an OUTSIDE REVERSAL DAY so
the expectation for the next day was in the direction to the close of the prior
day. Well that was what we got; another down day with a larger range than we
had been getting of late.
Before Friday traded I said it would most likely end up being a non directional
day, mostly sideways; that was what we got.
As each day passes the PRICE ACTION from the prior two to four days should be
enough to give us a reasonable opinion of where the next day will go. The only
thing most likely to change your opinion is if some unexpected news gets into
the equation.
The best way to know if a current influence is working the market is

when you see the market moving along adhering to the 1:1 principles.
This same analogy can be applied to all degree of wave swings.
Whatever the market happens to do I will follow the 1:1’s, 50’s and 61.8’s no
matter what! They will tell me when things are likely to be changing the other
way.
Each day I approach the market with the following criteria in mind:
1. Are there any influential economic reports due to be released?

2. What seems to be the current mood from the existing information we
have already been informed of?
3. Which are the current 1:1 levels we have in play?
4. Where is the market opening in relationship to nearby 50 return level?
5. Is the market in a weak or a strong position?
After I know this basic information the rest will fall into place as the traders exert
their respective pressures on the market price.
All the day becomes is a series of adjustments to what is going on at the time. It
does not really matter what your longer term view is if you are a PRICE ACTION
TRADER and follow the unfolding patterns for guidance. Anyway this is
something you will have to work out for yourselves.
Chapter 12 140
Tuesday 29th May, 2007:
Remember that the next 3 days are the last in the month. Fund managers will be
determined to window dress this market if they can.
9:55am: The market has opened with a gap. Report in 5 minutes!
10:00am: Consumer Sentiment 108 +3 above consensus a great figure for

bulls. But the market is at 1524.50 on the technical resistance of a 1:1 DD and a
large degree 61.8 at the moment and attracting technical sellers. SPX and OEX
made 61.8 as well.
Chapter 12 141
11:25am: My read of things at the moment. R2 is at 1525 today also.
I am leaving for the day so I will do a review after the market closes. For the
present time as long as we stay below 1525 I would only be a seller.
Chapter 12 142
End of the day:
13:45:50 {DCrowther} 12.25 points not a bad day
It must have been a reasonable trading day as Dan did OK up to the low for the
day. It could have been better if you had taken the buy side after it was obvious.
Chapter 12 143
Whatever you did today there was a good lesson in it as at the 10:00am high for
the day, when the Consumer Report came out the market halted the upwards
move on the 1:1 DD and the Large Degree 61.8 it showed that the technical
people were more in charge of proceedings and the short side was a very good
option for the next couple of hours or more. The sideways upward movement off
a prior (down 3.50x3.75) 1:1 was not very convincing as it was on declining
volume and when the market ran into trouble close to the earlier high. After 3
red 5 minute candles it became clear who was in charge. After the gap was filled
the next 1:1 up of 3.50 was on a 50 and they started it down again, this time
with very little nearby support.
It took until we went back to a bigger 61.8 on the downside with OEX and SPX in
tandem to get the short players out of the game. Even when they sold the
market down 3 points from the 3rd 1:1 after the low it wasn’t convincing as the
low was still intact and the TWS had rolled long by then. As the day went on you
could see the market was going up again so what should you have been doing?
Well buying of course.
How many times do you see the market go up, down and then up over a day?
You need to get used to this sort of activity and then you won’t worry about
forecasting in future because at least 3 days out of five it will do exactly that.
After today you would have to think that if they played the 61.8 off the 1535.75
high the way they did today they will really be sweating on that high at 1524.50
for a big play either up of down as we go forward. That’s just something to keep
in the back of your mind. If that high at 1524.50 holds as a high of large degree
the downside target would be an ENZO which would get us back to the 1496
support.
I don’t know what will happen but I do know they will be thinking about it right
now and that is all I need to know. The bottom line in this business is not where
the market goes; it is all about trying to read the best plays when things pan out.
Chapter 12 144
Wednesday 30th May, 2007:
2:30am ET: Not a nice day to wake up in the Northern Hemisphere if you are
long stock futures. Chinese market took a dump today, down by their daily limit.
We should name today the China Effect:

Now these are things I used to prey upon when it came to trading. Find an
incident that will spook half the market and just give it to them wholesale until
they burst their bottle.
3:00am ET: All European indices are down at around -1% after the open.
By the time we get to the US open the news and media will be coming up with
all sorts of scenarios and maybe they can incite some panic into the wood ducks
who know no better.
At this stage of the night a small amount of fear is working its way into the
S&P500 futures in the Globex session.
As we get closer to the US open we will see how the psychological factors are
working on a market that is trading at major highs right now.
You don’t need to be a brains trust to work out that long is not a very attractive
option right now. Especially if you think the China effect is a worry.
But just work around the technical as it stands right now and it will tell you when
the market is in a buy or a sell position as we go forward; when the market
makes ground on the bears side SELL, if it makes ground on the bulls side then
BUY. That is a strategy that works all the time. What you must not do is take a
Kamikaze position and hold it hoping you are going to hit a home run. If you do
you may be right, but if not you could end up out of the game forever.
Chapter 12 145
9:45am: ES opened with a 1:1 DD and set off a rally.
10:25am:
It’s a funny thing but situations like what we had overnight create a mindset for
some traders that this is a good buying opportunity to get back into S&P stocks
at a discount. They might be right for a while but the technical picture will sort
the wheat from the chaff.
10:40am:
Chapter 12 146
11:25am: Situation so far.

The rally from the open has run into the doldrums. The gap has just been filled
on a 1:1. In any case if it does not turn back down now it is a stand aside deal
until it can get above 1525.
1:30pm: ES got back to 1525 which is big time MOB now.
The FOMC minutes from the last meeting are due for release at 2:00pm and if
there is any hint of an upcoming rate rise in the future the market will most likely
sell off. Nevertheless if they read it as bullish the market will take off again so
there is an each way bet at this juncture.
13:35:09 {BBG} Well if it gets above 1525 there will be lots of buyers and
that is why I would SAR it there.
Chapter 12 147
13:36:20 {Nick_S} thanks

13:36:45 {BBG} Underline this passage.
13:36:47 {BBG} I don’t know what will happen but I do know they will be
thinking about it right now and that is all I need to know. The
bottom line in this business is not where the market goes; it is all
about trying to read the best plays when things pan out.
13:38:23 {BBG} Nevertheless Nick I prefer the SELL
13:39:15 {Nick_S} that logic in that statement you just posted is good, it
helps me out
1:45pm:
1:53pm:
14:02:52 {BBG} It's turned into a DUD

14:04:25 {BBG} I reckon down my view is intact still
Chapter 12 148
3:47pm:
14:08:57 {BBG} This is amazing

14:14:06 {Nick_S} it is great to watch the technicals out do the
fundamentals like the 38.2 just hit, it keeps one on their toes
14:14:35 {BBG} It's not over yet
14:15:15 {Paul_D} it is for me, i'm taking my bat and ball
14:15:25 {BBG} It's a sell below 1525 that is the benchmark
14:15:33 {Paul_D} good night and good luck to you all
14:16:27 {BBG} Well if you didn't play the 1525 that was where it all lined
up you missed the boat
14:17:35 {BBG} To run away now is a big mistake
14:18:18 {BBG} There's a two point risk to sell it
14:18:55 {BBG} with the option to go long and retrieve any losses
14:19:08 {Paul_D} ok
14:19:29 {Paul_D} i'm short
14:25:59 {BBG} It looks like Rocky IV
14:26:16 {Paul_D} well after my nuff nuff day yesterday, i'm happy with my
pot today.
14:26:17 {BBG} Bears have the best chance of winning
14:26:51 {BBG} anyone could have made money yesterday
14:29:04 {BBG} This will be a test for any trader
14:29:23 {BBG} but you have to buy it now (This was on the break of
1525)
14:55:57 {BBG} If it breaks up from here it will go up into the close
15:10:06 {BBG} well it is too late but it would need to break back under
1525 now for me to want to sell
15:10:30 {BBG} if we got a smaller 1:1 back I would be a buyer
Chapter 12 149
15:44:42 {BBG} Now you may think I take the wrong side at times but do
you realize it is all calculated ahead of what I would do next if it
does not work.
4:00pm:
The day finished within range for making a new high tomorrow at the end of the
month.
Chapter 12 150
The cash SPX S&P is still confirming it is in an uptrend on a daily basis, but then
I have been saying that all along. If you were counting waves from the 1364 low
then the pattern implies we have completed a W4 and a W5 is about to confirm
if we break above the 1532 high. It still could go sideways at this time inasmuch
as we are running into distribution at these levels, but as long as the -27.25 does
not over balance greater than -30, I would consider new highs ahead before this
market gives up. We are definitely in the tail end of a bubble that is for sure but
there is no point not being involved while the fat lady is waiting to sing. When
she does I am sure Kamahl will be joining in.
Thursday 31st May, 2007: Last day of the month coming up.
Chinese stocks are down for a second day but no one is worrying about it too
much from the look of things.
The ES opened with a 1 point gap and went to a new high of 1538 at 10:00am
this morning. From there it went down 5 up 3.75 and down 5 for a 1:1 DD to
1531.75 just 0.50 short of a larger degree 1:1 correction.
This behavior was indicative of previous recent breakouts to new highs which
broke back after only going into new ground by 1 to 3 points.
The OEX chart had a similar pattern so now the morning low is the benchmark
for the bears this afternoon.
Chapter 12 151
An interesting comment I heard today. “The market believes that Murphy’s Law
has been suspended”.
Leverage is at an all time high right now. That’s a recipe for disaster if the
market starts coming down soon.
12:35pm:
The ES reversed down from here for an hour and I did expect it to find support
on a -6.75 1:1 at 1531.25 or break through and keep going down.
Chapter 12 152
Something else happened that I had considered a possibility that you will see
from the 1:30pm chart below.
1:30pm: 1:1 DD on a 38.2 just 1 point below the -6.75 1:1 that was in play.
The resistance level on the upside from this low should have been a maximum of
4.75 up to 1535 which was also going to be a 61.8 of the -7.75. As it turned out
the market went up and started to reverse at 1534.75 but then went through the
1535 to 1535.75 which wasn’t in the plan. At this point with the market not
acting the way I had expected I called it a day.
There is still a day to go to finish the week off so it is onwards and upwards by
the look of things, although if 1530 comes out now I would be selling.
Chapter 12 153
What was interesting with the low today was how they ignored the 1:1 of -6.75
in favor of the 1:1 DD of 6.25x6.25 on the 38.2, these are exceptions to my rules
that keep bugging me every so often.
Friday 1st June, 2007:
New highs again today with ES hitting 1543 before breaking back under
yesterday’s high again. The opening price had left a gap to be filled at 1534.50,
the gap has just been filled and could turn into a support of small degree
If you refer back to page 117 you can refresh yourself with an Elliott Wave target
I had for the OEX of 707. Well this morning’s high on the OEX was 706.62 when
things turned down. I have to take this high seriously for the time being.
Chapter 12 154
2:30pm:
One thing to note is that the GAP FILL today caused the ES to overbalance the
7.75 correction from yesterday. The next 1:1 down the scale is -12.00 and that is
just above the swing low from yesterday at 1530. The conclusion from this of
course is it will take a break of 1530 to get the bears back into control.
14:38:40 {Nick_S} Bryce, being a Friday arvo, is it more likely to go up into

the close?
14:39:13 {BBG} I wouldn't bet on it going up into the close at this stage.
14:39:30 {Nick_S} the pattern does look rooted
14:39:47 {BBG} I be thinking more likely a test of 1531 or 1530
14:40:36 {Nick_S} if they want to take the market up that is where they will
do it I suppose with the 38.2 as well
14:45:09 {Nick_S} thats the beauty of the PA rules, you always know which
side you should be trading on, or whether to sit and wait for a
juicy set up, it beats walking around like a headless chicken
14:57:44 {Gary52} This looks a lot like yesterday . . overbalances, lower
highs and lower lows
14:58:41 {BBG} We should find out shortly which way it is going to go!
Nick_S} for sure Gary,its strange the market has been like this with all
the reports the last few days
14:58:52 {Gary52} I was noting the time too
15:38:29 {Gary52} 1/06/2007 (Private): Patience is one thing I am learning
from you, waiting for setups and staying in trade while
profitable. I got a good fill and my risk is only 3 ticks, at
1537.50 for now... I am hanging on and targeting the LOD at this
point. I am going to tighten up stop soon though.
15:43:15 {BBG} doesn't look like it is going down now
15:44:08 {BBG} Last chance to go down now
Chapter 12 155
Sooner or later you will learn that when you think the market should be going
down and it doesn’t reverse on a level which is technically sound, then it will
most likely continue on up. This situation today more than likely caught a lot of
day traders covering as we went into the Friday close.
End of the day:
Next week we are coming into ROLLOVER. The ES front month of JUNE expiry
will roll forward to the September contract expiry on Thursday of next week. The
issue for several days and up to a week or so after this event will be the
additional premium the ES continuous chart will take on.
The premium jump on the futures over and above the SPX cash S&P500 will
expand from the present 2 points out to about 14 points. This will have an effect
on the medium term futures geometry in the initial stages of the rollover week.
The June contract is ES M7 and the September is ES U7. There is practically no

volume in the U7 contract at this time so it suffers from some lost motion at the
existing swing points. So for about a week during the rollover period we will
need to monitor both the M7 for geometry and the U7 for trading purposes. This
is where it comes in handy once again to monitor the CASH charts of the SPX
and the OEX as they do not suffer from premium changes.
Chapter 12 156
Here’s an example of the U7 September ES for today so you can see the
differences when you don’t have the volume.
You can see some reasonable volume bars on the chart and these are traders
rolling forward positions essentially from June contract to September contract.
The futures charts are essentially best for intraday trading and very short term
trading because sometimes important longer term swings are camouflaged due
to the rollover effect. If you are trying to work with geometric methods over
longer time frames the CASH charts like the SPX and the OEX are much better.
In any case I am going to continue the Chronicles throughout this rollover week
coming up so you will get the point once I have documented the progress. I had
hoped to complete this text by this time but considering the nature and position
of the market I am keeping it going as it could be great information to have
documented for students we are likely to get in the future.
There are 3 things in life I am positively certain of:-

The 1st two are Death and Taxes and the 3rd is there will always be new students
wanting to learn how to WIN.
Chapter 12 157
Chapter 13
Contract Rollover Approaching:
Future market contracts rollover forward front months a minimum of 4 times a

year; some other complexes rollover front month trading more often.
The ES though has four front month contracts per year.
NOTE: ES has a Forced rollover at the exchange 8 days before the 3rd Friday of the
expiration month (Thursday).
The rollover procedure for ES is this, on either the 1st or 2nd Thursday
(depending on the rule) of the contract expiry month, March, June, September
and December the new active trading contract becomes the next forward month.
For instance this week we will be trading June contract up until Wednesday’s day
session settlement and then on the next day all the volume will move into the
September contract. Notwithstanding the June contract is still tradable for one
more week until it settles on the 3rd Friday of the month and goes completely off
the board.
The rollover week can be become very active because at the end of it there is
not only settlements between stock hedgers that need to be accounted for but
there is also an options expiry settlement that ties in with the futures contract
expiry as well.
The last two weeks and especially the last week of trading on the current futures
month allows for some popular strategies to be attempted that are tied in with
the options markets.
For instance if you understand options pricing you will know that you have to pay
a premium over the strike price the further out from expiry you buy or sell the
option. This premium over the strike price reduces the further away the strike
price is to the current market price. Nevertheless as you get closer to expiry and
in the last few days of trading before contract and options expiry the Strike price
at or near the current market price has little to no premium.
The effect this can have is simple, because it is possible to buy or sell large
quantities of futures contracts and hedge that position using options for a
defined and usually small risk. It is a very short term play but it is available and
the participants sometimes try to out gun one side or the other with massive
plunges in one direction or the other and many times they may even reverse
their plays several times within the rollover week.
Chapter 13 158
It is important you should be aware of this because if you are one of the faint
hearted it is best to go for a short holiday during rollover week. It will become
more apparent to you after we go past this Thursday and into ROLLOVER.
The best approach I know for trading during rollover week is to simply keep your
focus on the medium degree PRICE ACTION levels and forget the scalp type
trades.
Whatever you decide to do the ROLLOVER experience is one you should

continually keep in mind as it repeats 4 times every year.
Thursday coming will be a revelation to you as all the new comers to the market
place will all of a sudden think something is wrong with their data as they will
not know that it is rollover. The rollover actually starts with the Globex session
that begins after Wednesday’s day session close.
On rollover day the ES #F and the ES #F=2 charts from eSignal will have a big
gap most likely only due to the premium change between the new futures front
month and the cash SPX. Presently the June contract has a premium over cash
of 2 points but this should decrease to 1 or less before expiry. The September
contract though should come on with a premium above cash of around 13 to 14
points. By early July the September premium should drop back to 10 or less
above cash. Just keep this in mind as there are players who will try and exploit
this situation if they get the chance.
PREMIUM on futures prices above cash is meant to represent the expected

carrying charges between the cash value of the contract and the margin applied
to the futures contract. This is known as FAIR VALUE and it is widely accepted
that the futures contracts will trade at a premium to the cash. If the premium
fluctuates up or down too much it creates an opportunity for program traders to
arbitrage between futures and the cash market.
There are times when the futures market price will trade at a DISCOUNT to the
CASH INDEX. This usually only happens when the greater expectation is for
falling prices and that is not the case right now. The fair value assumption mostly
is that futures traders will have to pay a surcharge on the cash price against the
expectations of the current market direction. What seems to be fair value may or
may not be so sometimes, but it is a benchmark we normally work with.
What you always need to remember in this business is that if you can read the
market the right way you can always find a winning trade each day. So think
about it because this is where you can improve your skills in the future without
my help. It is all up to you to work it out at the time and that poses a question
for you. Can you do it or can’t you?
Chapter 13 159
Monday 4th June, 2007:
I took the day off today but there was one medium degree reversal that anyone
could have recognized at 2:31pm when on high volume the ES 5 minute bar (in
fact it all happened on the 1 minute bar – see below) swooped down and turned
around abruptly leaving a spike reversal bar off a 1:1 DD and a 61.8 retrace. If
you had been short at the time it would have given you good reason to reverse
back long immediately. Also there was the gap to be filled from the beginning of
the day to trade for after the double bottom on the opening bar.
Chapter 13 160
The longer you follow the things I am writing about the sooner you will realize
that they are not random events at all; they keep repeating in one form or
another time after time.
The obvious road to success with my method is you will have to become a
believer. If not, then where do you think you will go to in the future? I won’t be
here holding your hand so it is only going to be up to you.
A smart person with the screen time should be able to work out when a trade is
a potential set up and when it isn’t. Even if you do take a trade for a reversal
and it does not work that leaves you the opportunity to reverse with the direction
of the current move. Either way you will stand to break even or make some
profit.
Tuesday 5th June, 2007:
Another day with a gap opening down today but it didn’t turn out so good for the
bulls until late in the afternoon.
There’s really no point going over it the chart explains everything. At first the
market was confused and after the gap did not fill weakness set in and supports
started to come out.
Chapter 13 161
The whole thing came to a halt when we hit a 50 of a larger degree level in SPX
in conjunction with a 1:1 DD.
The only problem with the rally that ensued from the low of the day was the fact
that it did not keep going down after the +6.00 1:1 correction rally at the 38.2
level. All it did after that was correct 4 points to a prior swing level.
This was a WARNING sign that the trend for the day had changed to a balanced
bias. If we had been in a bear trend it would have continued down because of
the overbalance to the 1:1 in a larger degree. Nevertheless we had no trouble
dealing with the situation as it was predictable at the time and didn’t cause any
problems in the diagnosis. We knew the 1:1 3.50 back was a potential support.
Looking ahead the structure to the upside has shown weakness today with the
deep correction overbalancing and as long as the market does not rally above
1537 (61.8) or better still 1535 (50) between now and the early morning session
we should be looking at a down day into the rollover. This may or may not occur
but this is how it should go given the price action today.
Chapter 13 162
Basically you will learn from days like today that you must remain on your toes
and be ready to adjust yourself to the rules of 1:1 that I continually teach you.
Wednesday 6th June, 2007: D-day in 1944.
A down day as we thought. The trigger for the shorts was a break below the
previous day’s low which had fallen on a 50 and 38.2 retracement combination.
Chapter 13 163
At the close of business today the SPX was still holding above the larger degree
technical support. Although we have had two strong down days there is still four
chances left for a reversal to turn this market back up to try for new highs.
1. Today’s low.
2. The 1:1 level at 1513.31
3. The next 1:1 level at 1510.57
4. A double bottom with the B pivot at 1505.18
Now that we are in ROLLOVER phase the easiest way to work out how these
levels relate to the new September contract is to just add the PREMIUM of the
ES U7 contract over SPX onto them.
Below we have the 60 minute chart of the continuous June contract and you will
see how the low came in perfectly at 1:1 with the prior Larger degree correction
in the price action. I didn’t actually see what the premium to cash was when the
first decline terminated but you can be sure it was a lot more than today so that
should explain why the CASH SPX fell short of its 1:1. The reason I am pointing
this out to you is so you will know that all these geometric methods we use are
people induced and not some amazing esoteric phenomena.
Now for a week the June M7 contract will still be trading but the volume will shift
into the September U7 contract.
Chapter 13 164
There are three things you need to do today so you can get through the
ROLLOVER week with all the information you need at your fingertips.
1. Set your eSignal up to plot the ES U7 contract price series in Globex and
day session formats. These will be ES U7=2 and ES U7 tickers, the U7=2
is the day session.
2. Set up another window on eSignal to monitor the June contract ES M7
during the expiry week.
3. Calculate the FAIR VALUE between the SPX and the U7 futures.
The easy way to get an accurate figure for FAIR VALUE (FV) is to take
yesterday’s prices on SPX and the U7 and deduct the difference when they made
a high or low at the same time. U7 low was 1530.25 and the SPX low was
1514.13 so the difference is 16 points.
This is the highest rollover FV I have seen since the market began the bull run in
2003; it sort of hints at an expectation for higher highs to come at this stage of
the game.
There is still plenty of opportunity for the market to make another run up if this
correction holds at the low today. If it doesn’t well we may be close to a
sideways to down move for some weeks. Nevertheless I am still of the opinion
that a new high is still to come and I don’t want to give up on that idea just yet.
The sellers up to now have had trouble if they hold for longer than a day or two
so I can’t see that changing yet either as there has been no real fundamental
change taken place.
Chapter 13 165
One thing that is very important to consider right now is the fact that the
LONGER TERM players are still in the game and right now they have an
opportunity to buy more stock at lower prices than they have been paying lately.
That’s always a good incentive for them. A one or two day correction is not going
to scare them off at this stage.
While the daily chart is making higher highs and lower lows the bullish trend is
still up according to my rules; when it changes I will know.
Probably the biggest obstacle for the bear camp is the OEX right now. Although
it has corrected yesterday a little over the prior daily chart correction there is still
another 1:1 to overbalance from early April before this chart loses its bullish
structure. On top of that it has a pivot support at 692.29 that would have to be
broken to indicate a larger degree bearish pattern.
As you can see each day brings forward a new issue to consider and if you elect
to neglect business all that will happen to you is you will eventually get your ass
handed to you on a plate.
The easiest thing to do in life is to neglect to do your daily preparations and

think that you know enough to get by from what you have seen during the past
few days. But this is the biggest mistake you can make if you want to be a
successful trader.
Success will only come to you if you do the work and take things one day at a
time. I am convinced of that.
Chapter 13 166
Thursday 7th June 2007:
Well it does not matter what you think the market is going to do, the PRICE
ACTION alerts you to the direction almost immediately.
All indices had a large range down today. It basically started from the opening
bell. The supports I mentioned for the SPX and OEX started to break and then
began rolling like 9 pins as the downdraft gained more momentum.
11:04:42 {BBG} this market is struggling to keep its head up

11:05:25 {BBG} OEX is on the border line now
11:08:38 {BBG} to be honest with you this market is looking like a wall
climber hanging on by its nails
11:09:15 {BBG} if OEX breaks 692 it could collapse
11:10:36 {BBG} this is the case of going, going and then GONE
11:11:26 {BBG} they might need a rescue team here to dig this thing out
of the mud
These were some of the comments I made before the seriousness of the
situation unfolded.
Once the OEX began to fall over it was curtains for the SPX and the shorts were
in total control of the situation.
There was a partial recovery of 10 points ES between 2:15pm and 3:15pm but
by the end of the day the ES fell down another 16 points making the total down
for the day -27.50 points.
This doesn’t look very good for bulls now as the leveraged players are getting
squeezed.
Chapter 13 167
Even if we get some sort of relief rally now the prior supports on the way down
will become new resistance levels to restrict any upward progress.
Technically the larger degree trend has now confirmed itself to down and the
market is in the midst of a reversal week. The next MAJOR support for the OEX
is a swing low at 683.68 and then further down the implied support on a larger
degree 38.2 at 675.
From the double top high this week the futures contract is down 55 points. Any
rallies would now have to go up more than 50% of this larger degree swing to
reverse the trend. The largest rally from the high to date has been 10 points so
this now becomes our benchmark 1:1 to work with if we want to keep confirming
a down trend continuation.
It is a long way back to the 200 day moving average but this has to be a
consideration now. On the OEX the 200 day MA is going to be somewhere
around the major degree 1:1 at 660 and there is a 61.8 level in the vicinity there
also. We do not know what will happen of course but it bears thinking about it in
advance as it may become a reality.
After all this market has been overvalued for some time and the writing was
always on the wall that something of this nature was clearly on the cards; I have
to remind you I have been warning of the possibility from the beginning of these
chronicles.
Another day or two down and the bull’s party will definitely be over.
Chapter 13 168
This is what I have been waiting for in any case as you all know from receiving
the transcripts throughout the past 6 weeks. Nevertheless it wouldn’t be out of
the question for the SPX to recover 38.2 or 50 of this 3 day fall before heading
south again.
As I have said so many times along the way, for an active trader it all boils down
to ONE DAY AT A TIME and following the PRICE ACTION. Even when you have a
completely different idea to what is about to happen between trading days, once
the market begins trading the picture clears itself up as long as you follow the
rules.
As I have been writing these chronicles I have on a daily and weekly basis just
related what has been going through my mind at the time. At the end of the day
there is only the market and the people trading it that count.
I often get people saying to me things like this:-
Q. The market never went to the expected level how do you explain that?
A. I just reply well it was only a possibility in the first place.
Q. Why do you continually put shit on market forecasters?

A. Because they do not understand anything about trading.
Q. Does your software help you trade?

A. No it does not help me trade but what it does is high light to me all the areas
and levels where other traders are going to make decisions. So if I can see a
level that lines up 2 or 3 different way as a resistance or a support I know what
to expect other traders to do. The real point is that if they don’t do it they also
provide me with the information to trade on in the direction of least resistance.
My view is it does not matter who is right or wrong about the future, all that
counts is how you trade it.
Chapter 13 169
There are no absolute guarantees in anything to do with trading, but there are
repeating patterns and possibilities all the time to take advantage of. When they
work they give you an advantage no one else has other than those traders doing
the same thing. When things don’t work immediately you will know straight away
to get out and rethink the whole situation.
It all boils down to OPPORTUNITY versus MONEY MANAGEMENT to make

consistent profits trading. If you understand the opportunities and ignore the
money management you will lose. I’ll bet on that.
There is not a lot more to it all so to prolong this teaching lesson is basically only
going to be a repeat of anything I have said so far. So over the next week I am
going to go over some of my pertinent points you need to focus on each day and
then call it finished.
The one thing that might come out of these Chronicles if you read and reread
them is you will see how I can stay with the market on a day to day basis and
have no fear of what it might do now or in the future.
I follow rules and my method is discretionary which means I can flip backwards
and forwards between opportunities without having to explain to anyone why I
am doing it. And if you understand my method properly you will realize that it is
the only way you can make profits trading day in and day out as well as week in
and week out.
If you understand the basic tools I use to stay in tune with the market and how
to use our software package there is no reason you cannot do the same.
You will also need some commonsense which is a rare commodity these days as
I have been finding out again as the SPX has been rocketing along and attracting
the lambs to the slaughter house as it does in every bull market.
It always amazes what the public will accept from brokers and advisors and then
down the track when they have lost their money just forget about it.
It is not my intention for you to lose your money but I will repeat this warning to
you. If you think you are going to reinvent the wheel and then find some way to
sit back and do no work it will never come to pass that you will be able to
successfully trade the market.
Trading for a living is a hand’s on occupation and those people that think it isn’t
will only come unstuck in the future. Maybe not straight away but eventually
they will. I have seen it time and time again over my years in the industry.
Chapter 13 170
Friday 8th June, 2007:
Friday when the cash market opened the SPX traded to a new 3 day low for an
instant then began to rally back up. The futures contract stopped initially on the
1:1 resistance up 9.75 points at 10:00am. The ES then went sideways in a 7
point range for 3 hours before breaking to the upside. By the end of the day the
SPX had retraced 38.2 of all the losses from the high of last Friday.
If you look closely you will see the 1st resistance from the low today was the 1:1
up and then after the breakout the next resistance was the high pivot from
yesterday. The corrections were reducing on the rally so it was not surprising the
market continued to move up into the close.
Chapter 13 171
As I said yesterday, on the beginning of page 169, there was a distinct possibility
to rally up 38.2 or 50 after such a solid decline in the previous 3 days. At this
stage of the game I am only putting it down to short covering pressures. If we
were to rally above the 61.8 I would have to think a little differently.
One particular issue I would have right now about the potential for this rally to
go higher is the 2 day correction rule has now reversed to the upside versus the
downside. If the SPX can move above 1510 we have 1514 (the 50) as the
implied resistance. Then there is a small consolidation zone between the 50 and
the 61.8 that implies that if the 61.8 breaks to the upside the SPX would be back
in a relatively strong position technically. All these things I am mentioning do not
tell you what the market will do; all they tell you is how to interpret these actions
should they take place.
The only way to trade is to follow the PRICE ACTION in 5 minute or even less
intervals and use all the other higher time frames to keep a broader outlook on
things.
What will be, will be; and as long as you just take things one step at a time you
will never get out of step for more than a few hours at the most. If the market
appears complicated just step back and give things a little time to settle into a
rhythm again. I used to say that I was never wrong about the market direction
for more than a day, but my record is much better than that once the market
opens and gets trading each day.
Chapter 13 172
Chapter 14
Contract Expiry Week:
This week coming is the June contract expiry; although it is not the volume
contract anymore it is still active up until Thursday. Thursday will the last day
before contract settlement and multiple options expiries as well. This
combination of events is known as quadruple witching.
There were really no clear cut geometric trades today. This could be a byproduct
of the rollover week and the maneuverings of system traders. It is hard to say
but I have seen this sort of thing happen time and time again during the
transition phase from one contract to another.
I have included a 1 minute chart for today so you can look at it under the
microscope. The two trade opportunities that stand out are the double bottom
and the double top, but they were pattern alone as there is no supporting
geometry at them. Not unless you wanted to call the double bottom on a 1:1.
Chapter 14 173
After the morning low on the double bottom the maximum rally for the market to
remain a short would have been 61.8 back to 1523.25 and this only caused a
brief correction before the market confirmed it was going to go up. It wasn’t like
you couldn’t find a trade, it was just that the pattern was difficult to confirm with
any solid geometry.
OEX today:
The OEX gave a clearer picture today if you had been following it; normally it
does in any case. When decisions are required the OEX has the last say.
Chapter 14 174
The bulls lost the plot today after they managed to fill the gap. The fate for the
afternoon became clear after the 5.50 corrective 1:1 was overbalanced, with a
further confirmation coming after the trend line break. If you look at the TWS
(slow trend wave) today it tracked the trend perfectly.
Chapter 14 175
The cash SPX and OEX both closed on their lows, but they reached a solid
technical support which will come into play when we open tomorrow. If we were
to break today’s low the next support is at last Fridays low.
I wouldn’t like to make a forecast for tomorrow but the guidelines are very clear.
If the 1:1 DD does not reverse the swings back up then this market has only one
more chance to save itself at a double bottom with Friday. A swing up from here
or a double bottom also has to get above the B pivot at 1497.26 to demonstrate
a show of strength. Just so you know how important the B pivot becomes it
would also represent a smaller degree 1:1 up if the market began a rally from
today’s close.
Chapter 14 176
Wednesday 13th June, 2007:
The guidelines were very clear today before we started and the futures opened
with a gap above the -5.00 1:1 and the swing pivot I was talking about
yesterday. The cash came on and confirmed the reversal. Although things looked
like they were going to head back down there was a revival of bulls at the double
bottom 61.8 which overshot a 1:1 DD by 2 ticks. After that the trend reversed up
and followed that path into the close.
11:16:02 {BBG} I think I will take a break now

11:16:18 {enzo} of course that is why I am in here
11:24:10 {enzo} rich you here ?
11:25:01 {Richard_To<ZH>} hi...enzo you looking for me?
11:25:39 {enzo} can you help I am trying to find the gap fill bottom
11:26:08 {Richard_To<ZH>} Does the open line on?
11:26:40 {Richard_To<ZH>} if yes....just reload ....if not turn the OPEN on
and then reload
11:26:43 {enzo} yeas I have the open 1514.50
11:27:36 {enzo} ok thanks gone reload
Chapter 14 177
11:53:01 {enzo} I have a question on situasion like now on 1:1 DO

YOU WAIT FOR A NEGATIVE BAR OR HAVE AN ODER IN
AND then put a stop ?
12:03:14 {Nick_S} Enzo,I thought the 1.1 at 1518 nwas a good bet so I put
a limit order in at 1517.50 b4 the mkt got there.
12:04:18 {enzo} thanks that helps to know how different traders
handle the situasion
12:05:26 {enzo} there you let see if goes for the gap
12:06:08 {Nick_S} the gap is definately a target down below
12:06:39 {Nick_S} but the selling looks weak here
12:07:34 {enzo} TWS stil down
12:08:03 {Nick_S} exactly,the tws helps us out in this situation
12:08:08 {enzo} pointing sory
12:09:58 {Nick_S} the globex es m7 made a 1.1 bullish sup too,that may
be helping the bulls out a bit
12:10:06 {Nick_S} and es u7
12:11:52 {enzo} let see
who wins
12:16:43 {Nick_S} the thing I don't like about this short here is that it is so
slow,the double top at 1520.75 at 10.50 sold off pretty quickly
showing bear dominance,this 1.1 here looks directionless,who
knows it could be distribution but then it may not be
12:18:20 {enzo} in the last few days the sold of came at around 2pm
12:19:23 {Arnold_T} anyone notice the 70.7% on the open before this 3.25
1:1
12:19:27 {Nick_S} with the gap fill that is a big possibility this arvo
12:21:06 {enzo} arnold the xad .707 ??
12:21:07 {Nick_S} y,I saw it Arnold
12:21:47 {Arnold_T} 1521 - 1514.75
12:23:41 {enzo} ok got it the bcd = .707
12:38:10 {enzo} thanks I sow it
13:24:29 {sangli} Enzo, notice how the oex price vibration....in the
morning, the high @691.83 is the 0.667 ret, and now there is a
1:1 to a 0.667 ret.
13:27:23 {Richard_To<ZH>} Beige book at 14:00
13:27:53 {sangli} Thanks for the reminder
13:33:38 {enzo} thanks sangli
13:57:29 {enzo} sangli the high today was .707 the exspansion could
be 1.414 down ?
14:00:22 {sangli} Well, a 1.414 expansion up is 1527.0...making it a
double top
14:03:29 {enzo} yeas thanks
14:08:20 {sangli} You're lucky I understand you well, enzo....
Chapter 14 178
14:10:06 {Nick_S} with the positive Beige book,does anyone think the gap
fill is a chance this arvo?
14:14:06 {Paul_D} hope your not still short nick
14:14:32 {Paul_D} just mucking around
14:14:49 {Nick_S} if I was Paul I would beat the crap out of my self
14:15:02 {Paul_D} after yesterday what do you reckon
14:15:41 {Nick_S} who knows Paul,this is pretty crazy,its like all the other
traders have taken eccies or something:_))
14:18:45 {Nick_S} this d.d and d.t looks enticing
14:18:54 {sangli} Why, you guys didn't buy at the low when I pointed out
to Enzo regarding the 1:1 and .667 ret on oex
14:19:14 {Nick_S} at 1527 which sangli mentioned b4
14:20:53 {sangli} I wouldn't be too greedy....1523.25 was the closing low
on Monday., is also a .382 retrace from 1557.75~1502.25
14:22:07 {sangli} Anyway, the trend is up...until 1527.0
14:28:29 {Nick_S} Sangli ,is the low you bought off 1512.50 at 13.15,if
so,didn't you worry when the OEXbroke downfrom the
consolodation range it made?plus it broke its own 61.8
14:29:38 {sangli} No...I bot @1515.0, 1:1 (-2.0) and 50% and minor swing
high.
14:30:56 {Nick_S} very nice,so if a low of some significance is made you
look to enter on a 50/61.8 retrace?
14:31:07 {Nick_S} or a high in the reverse case
14:31:08 {sangli} y
14:31:57 {sangli} I did get long @1513.0...but small scalp...then waited for
a breakout above 1515.0 for confirmation
14:31:59 {Richard_To<ZH>} sangli could you do me a favor?
14:32:13 {sangli} y, richard...anything
14:32:26 {Richard_To<ZH>} pick 6 numbers out of 1 to 47 please
14:32:56 {sangli} Are u trying to analze my character or wanting to a
lottery
14:33:19 {Richard_To<ZH>} do u know Mark-six?
14:33:25 {sangli} No
14:33:36 {Richard_To<ZH>} a kind of lottary....
14:33:59 {sangli} Did you hear my story about winning the lottery
14:34:14 {Richard_To<ZH>} y, u told us yesterday
14:34:34 {sangli} was it yesterday? NO...was Monday
14:35:00 {Richard_To<ZH>} doesn't matter....I just want six numbers pls
14:35:10 {sangli} Not now!
14:35:30 {sangli} Would I get 1/3 of the win
14:36:09 {Richard_To<ZH>} I'll buy u drinks even if I don't win.....u know
the chance to win is very small
Chapter 14 179
14:36:39 {sangli} I'll go to China town this evening for dinner...there will
be a number in the fortune cookie for you
14:37:26 {sangli} No promise...may not go tonight...but sure will this
weekend
14:38:15 {Richard_To<ZH>} ok....anytime u get it it would be fine. No
hurry and no worry
14:39:30 {Richard_To<ZH>} http://bet.hkjc.com/marksix/default.aspx
14:52:16 {sangli} Enzo, another .667 ret on the oex
14:52:35 {enzo} yeas I am here
14:53:23 {enzo} are you using the 5 minutes chart ?
14:53:37 {sangli} y
14:54:06 {enzo} xad is 848 ?
14:54:12 {sangli} just adjust your swing value...
14:54:25 {Nick_S} on 60 min es wt assistant snapshot,we have 1.272 alt
and 78.6 xcd
14:54:27 {sangli} 696.89~685.98
14:54:49 {enzo} got it thanks
14:56:07 {enzo} 1527 is also DD
14:58:24 {enzo} sangli right at the 1.41.4 expansion now
14:59:26 {sangli} could be history now....let's see
14:59:29 {enzo} opps just went true
15:00:12 {sangli} 2 ticks for confirmation
15:01:06 {Wayne_R<EN>} 3 pm
15:03:22 {enzo} oex is at the .786 now
15:06:55 {Arnold_T} False break - Rollover effect??? anyone?
15:07:48 {sangli} Arn,,,in TTW...it mentioned something like there need to
be a full point move below the b/d level
15:08:26 {sangli} that is a trade below 1526.0...I could be wrong...ask
BBG tomorrow
15:08:55 {Arnold_T} b/d?
15:09:09 {sangli} break down level...1527.0
15:09:18 {Arnold_T} ah,
15:09:22 {sangli} break back
15:09:57 {sangli} But in this case, the mkt did break above 2 ticks...so it
could be a buy on a retest?
15:11:11 {sangli} But you can give it a try...that is short at this level
because OEX never breaks out above yesterday high
15:11:38 {enzo} thanks sangli learnig a lot
15:12:02 {enzo} the correction is - 3 to break
15:13:18 {Arnold_T} All I can see is the 1531.25 DT and 1:1.272. I am
sitting now.
Chapter 14 180
15:14:41 {sangli} No harm sitting on the side...no confirmation that a top

is in place...plenty of opportunities to go short if the mkt is
going down
15:16:12 {enzo} sangli you are a great techer :))
15:17:06 {enzo} needs 2 ticks to over balance the correction ?
15:18:28 {sangli} are u talking to me?
15:19:09 {enzo} yeas sangli we need to tick to have confirmation
correct
15:20:16 {sangli} NO always...sometimes, we do get an overbalance, and
the mkt moves higher....there's no fast and hard rule...
15:20:34 {sangli} not always 2 ticks...
15:21:11 {enzo} of course just as guide
15:22:39 {sangli} You know I'm just trying to keep this room going...do
not want to see BBG's effort and hard work being wasted...you
guys should be more initiative...I.e posting what you see or if
you've a question. But not silly question like the software
15:23:52 {enzo} yeas sangli I don't post any mory silly question on
the software
15:24:13 {enzo} more sory
15:34:31 {Nick_S<EN>} c u guys tomorrow,thanks for your help Sangli,I
learn't alot today,and reinforced things I have already learnt.
15:34:53 {sangli} you're welcom Nick
15:34:53 {enzo} ciao nick
15:34:58 {Wayne_R<EN>} bye Nick
15:43:49 {sangli} Enzo...look what happen..the market overbalanced the -
3.0, and still make a new high
15:44:02 {enzo} yeas looking
15:50:06 {Richard_To} <<file:C:\Program
Files\1stWORKS\hotComm\UPLOADS\2007-06-13
t155006_Richard To.HCC>>
15:50:13 {sangli} Enzo, one of my stock holdings, ILMN,a bioteck
company, had a huge gap up yesterday. You want to buy and
help pushing it higher
15:51:07 {Richard_To<ZH>} the X and then 1-1 onto 61.8
15:51:19 {sangli} Thanks ! richard
15:53:05 {Paul_D} good night all
15:53:29 {sangli} good night Paul
15:53:32 {Richard_To<ZH>} good night paul
15:54:01 {sangli} So this rally from Thursday low, could be a flat...that is
a W.2 or B
15:54:34 {Richard_To<ZH>} CPI and quadruple witching on
Friday.......good time for lunch Paul
15:55:15 {sangli} another 6 pts to go
Chapter 14 181
15:55:34 {Richard_To<ZH>} not today lah i think

15:55:55 {sangli} If it doesn't work...we all have to reverse LONG
15:56:18 {Arnold_T} you mean tics?
15:56:34 {sangli} points...1536.0
16:00:50 {enzo} hi sangli sorry I was on the phone with italy
16:01:43 {sangli} I didn't say anything
16:02:16 {enzo} I sow the writing about your stock
16:02:46 {enzo} thanks a lot I learn a lot today
16:03:08 {sangli} oh...forget about it
16:03:29 {sangli} only kidding
16:03:48 {enzo} I know you werw kidding
16:03:53 {enzo} were
16:04:39 {enzo} nice lesson to learn when gaps don't get fill
16:05:39 {sangli} I did tell you yesterday that gaps are continuation
patterns. If it doesn't get filled, and break above the high, you
must go LONG....
16:07:14 {enzo} yesterday at the close there was an ab=cd pattern
also hard to belive it gap up
16:07:58 {enzo} <<file:C:\Program
Files\1stWORKS\hotComm\UPLOADS\2007-06-
13_t160758_enzo.HCC>>
16:09:30 {sangli} You've been to my place...Did you notice a big sticker
saying, "NEVER TRADE WHAT I THINK. TRADE ONLY WHAT I
SEE". A quote from BBG's book
16:10:40 {enzo} yeas I know that one is gone go on my computer
also
16:11:15 {Wayne_R<EN>} Good bye All see you tomorrow
16:11:28 {enzo} good night wayne
16:11:38 {sangli} Goodnight Wayne
16:12:14 {sangli} I'm off too...see u all tomorrow
This was the day according to my gang (no editing). You can paddle your way
through it and see for yourself.
Now we have the most important day of rollover coming up. The last full trading
day before all the June contracts expire and go to settlement on Friday morning.
This could be a day to remember given the battle going on between the shorts
and the longs over the past week or so.
Currently the bulls are staging a comeback, but they need to get SPX above
1516 to keep it going.
Chapter 14 182
Thursday 14th June, 2007. Last day of the rollover week and we are back
where we started twice over in a 25 point range; some systems would be getting
an ass kicking by now.
This is one of the things I love about this business is the way all the forecasters
get buried in the dirt. They might tell you to buy or to sell but they will never tell
you to reverse backwards and forwards as if you were in a dancing contest.
The dance goes on relentlessly and the music never stops.
This market could go up and it could go down from here! The odds maybe better
on the short side to keep it in the week’s range but that does not mean anything
major. It hardly looks like we can break the 1487 low today unless an Atomic
bomb hits Wall Street. Nevertheless a break to the upside of this range only has
the 61.8 above as resistance before things look decidedly bullish for a few more
days.
The market will tell us who has the controlling hand as the day goes on. My
personal view is to let the price action tell us when a trade presents itself;
outside of that just take the day off.
Chapter 14 183
Prior to the morning opening the Globex ES had already been trading above the
close of yesterday. When the day session opened ES started moving up almost
immediately above the old high resistance pivot indicating the bulls were in
control. After a high at 10:40am on the LD retrace level of 70.7 the market
retreated in a 3 wave swing with a 50 retrace on the way -8.25 terminating as a
1:1. Buyers returned and after a 5 point rally the market went into hibernation
for the day.
The market ultimately closed near its range highs for the day. Overall the bulls
maintained control throughout the day.
Chapter 14 184
Basically the rollover week is now complete except for the fact that the June M7
contract can trade overnight in Globex up until 9:29am Friday. If you have never
seen this then it is worth knowing about.
Over the past few days the market makers have managed to fleece all the
medium term short position holders.
Now it is time to re-evaluate where the general market position stands. On the
face of it the bulls have nothing to fear at this stage.
Friday 15th June, 2007:
As you can see from the June chart above the ES futures were going to open
with a gap up and they did and the Cash markets followed.
All it took to motivate the traders was the CPI figures at 8:30am ET.
Chapter 14 185
10:39:53 {BBG} well it is at 1:1.618 now

10:40:10 Picture
10:41:55 {BBG} That might be it
10:42:36 Pictures (6) OEX was at a DOUBLE TOP
10:48:12 {BBG} the head and shoulders idea is rat shit now
10:53:48 {BBG} Think what you like but trade what you see............
10:54:17 {Nick_S} that’s right Bryce
11:02:58 {BBG} Might as well sell 50 contracts here and leave a stop at
1555
11:06:18 {Paul_D} who do you think we all are the Borsellino clan!!!
11:07:01 {BBG} Well they could be doing 100's or more
11:07:51 {BBG} they are not going to miss this opportunity
11:12:04 {enzo} yeas thanks
11:12:06 {Wayne_R} Y
11:13:53 {BBG} Now it is move the stop to BE and pray
11:14:30 {BBG} Nothing to lose
11:16:52 {BBG} This is the sort of shit that makes hero's if it works
11:18:01 {BBG} If it doesn't then nothing lost
11:20:26 {enzo} spx has not Rich (reach) to double top
Chapter 14 186
11:21:14 {BBG} who cares it can do that Monday if it wants I am only

concerned with now
11:21:40 {enzo} ok sorry
11:22:43 {Nick_S} Bbg, will traders view a break back under the head and
shoulders levels as bearish or will they not care?
11:23:12 {BBG} H & S argument is not good anymore
11:23:24 {Nick_S} cool, no worries
11:24:01 {BBG} Today now is all about DT on OEX and the gap
11:24:50 {BBG} What ever force got it up here appears to be exhausted
11:25:08 {BBG} that is all I am dealing with right now
11:27:48 {enzo} bbg if the push below globex they will try the gap ?
11:28:02 {enzo} globex high sorry
11:28:22 {BBG} Why are you worrying what will happen?
11:29:00 {BBG} If it is going down and you sold at 1553 like I said you
should not be worried about anything
11:30:26 {enzo} yeas I am not worry I did sold and move stop at break
even
11:30:54 {BBG} Then why do you want to know what it will do?
11:31:13 {BBG} I don't know and either does anyone else
11:31:34 {enzo} yeas I understand thanks
11:32:37 {BBG} But I do think the chances are better for a gap fill than
not
11:33:53 {BBG} I think today is not a good day to go to lunch
11:34:37 {BBG} if the 1548 comes out it might keep the move going that
is the only obstacle at the moment
11:36:30 {BBG} You could scalp profit now and put a stop order to sell at
1548 if you want
11:39:06 {BBG} What ever you do that is your business - my job is to just
teach you to recognize opportunity
11:39:55 {BBG} If I could see it then someone else with money would
have seen it
11:41:18 {BBG} Anyway I don't want this forum to be a tipping site
11:41:26 {BBG} Just a place to learn
11:42:19 {Nick_S} if this room was a tipping service, I would not have
learnt much as I would have not been thinking what to do and
only been waiting too see what you said Bryce
11:43:56 {enzo} thanks nick am with you you write much nice then I
do
11:44:48 {BBG} It's no good relying on me to tell you when to trade I am
not here all the time
11:45:07 {BBG} I don't intend to be
11:45:17 {Nick_S} no worries Enzo
11:45:34 {BBG} I don't mind telling you what I think and the reasons
Chapter 14 187
11:46:23 {BBG} when I am here but you can't do this unless you learn
11:57:26 {BBG} See that little retrace to the 50 that is a sign they want to
take it down
11:58:44 {Gary52} Yes, and in my mind the earlier high of 1551.50 acting
as resistance also
12:02:02 {BBG} The main point is until they get it below 1548 most of the
whackers will not panic
12:09:08 {BBG} Anyway you guys should have the idea by now
12:09:55 {Wayne_R<EN>} Much clearer these days
12:11:47 {enzo} thanks for point out how the big traders think I am
here every day but each time I am here I pick up few tricks
grazie molto
The past 2 weeks in the stock markets.
The blue chips have been maintaining strength, but if you look at the SPX it
didn’t quite make it to the double top today due to the middle ranking stocks
slightly under performing the current rally. If a double top is going to repel price
it is most likely that the DT will come in the OEX first.
Chapter 14 188
Looking back over the past two weeks there was a period where I thought we
would never get back to today’s levels, well not at this pace anyway. It is just
another lesson in how it pays to keep an open mind on things. The way I look at
it, it is better to have a view where you say to yourself each day; well if it does
this then I will do this, if it does that then I will do that. This way you won’t be
wrong for long. If you maintain a personal view when everything you see is
saying the opposite the result will be catastrophic.
If the market goes higher in the coming week, all the Elliott Wave Counters with
bearish counts will have to revise their wave counts.
The next FOMC meeting begins on Wednesday, June 27th and the announcement
is the next day at 2:15pm. There does not appear to be a lot between now and
then to upset the apple cart other than the day to day speculation.
The SPX corrections over the past 3 days have been reducing slightly and the
futures contract has been making no more than 1:1’s; until we start to see any
deeper corrections the large and medium degree trend is presumed to be UP.
In any case contract rollover is out of the way now so we can move on, one day
at a time.
Chapter 14 189
Chapter 15
Think what you like, but trade what you see:
Futures markets are the modern day equivalent of the old gold rush days in my
opinion.
With a small initial stake you can go prospecting and return with riches beyond
the comprehension of most everyday people. All you will need is the right
attitude and the ability to persevere. You only need to learn the ropes and also
what you are up against before you take the journey. Each day is a digging
process and it goes on like that for as long as you want to be involved.
Future’s trading is not a place for the faint hearted or the lazy. You will find this
out once you have been involved in it for a while; if you can last out that long.
If so far the things I have been showing in this text do not make any sense to
you then my advice is to scrap the idea of trading right here and now before you
lose any or all of your money. If it does make some sense to you then you
should try and see if you can master it. At first you should contain your
exuberance and move along quietly until your confidence grows and you can see
that your plan is viable.
The most important thing that will ensure your success is a confidence in your
trading method. It has to work consistently in all market conditions to be viable.
You may get off the rails from time to time due to ego or foolish mistakes in
judgment; but if you can recognize these events and learn from them you will
move ahead. If you keep repeating the same old mistakes over and over you will
just end up a statistic of the “gold rush”.
Commonsense is your greatest asset in this business and if you don’t have any
your chances of success are limited to say the least. There is hope for everyone
but it is not a simple cake walk like most people expect.
You should know by now that over 90% of starters in this business lose money
and the reason is that they either just guess or they keep running from guru to
guru to see if this will the answer their prayers. Unfortunately it is not that
simple to make money and end up keeping it and also making more on top of it.
You need a work ethic!
Chapter 15 190
One thing you will learn from this business is that each day is a new day and you
will have to learn to adapt; if you don’t you will only end up as cannon fodder for
the professionals.
Each day you must:-

1. Review the market action in the Globex session before you even
contemplate a trade.
2. Review the current news and confirm the market mood going into the
open of the day.
3. Know where the Globex high and low lie from the overnight trading
session.
4. Observe the OPENING PRINT as this will be the starting balance point for
the day.
5. After the market has been open for 10 minutes check the progress of the
OEX, DJIA and SPX cash markets.
6. If the trend in the Globex has continued after 9:45 when everyone has
taken their initial positions it could be your guide to the day, nevertheless
if the market has gone down or up initially from the opening print and
more or less made a counter move to the Globex; things will be workable
from your opinion at the close of the previous day.
7. If the market opens the day session with a gap and there is no evidence
of a panic then you need to consider the gap will have a chance of being
filled at some stage throughout the current day, usually earlier than later.
8. The three major issues at the start of each day are the previous days
close and trend, the open for the day and the current news.
9. Next comes your medium degree MOB levels on the up or the down
related to the close of the previous days day session.
10. You will also need to make sure the Globex has not reached one of these
levels in the overnight market and reversed before the day session begins.
If it has the market may continue with that reversal as the day session
gets underway or the day session may go back to test the MOB level and
confirm it as a significant MOB.
Once you have all these issues sorted out in your mind and you can see what the
market players are doing you can apply the PRICE ACTION tactics to your
trading plan as the market moves along.
Only time will tell how good you are at understanding other people’s motivation
in the markets, but believe me when I say this, the only person standing in the
way of your success is you! It will be up to you to understand and adapt to the
things I am teaching you.
Those people who want to succeed will find a way – those who don’t will find an
excuse.
Chapter 15 191
There are ways to work out what to expect as the day goes on:
The important part though is to realize that the regular market participants have
a wide variety of trading approaches and you have to focus on the common
denominators that will influence their trading decisions. Basically when all the
current news has been absorbed by the market these will only boil down to
support and resistance levels, trend, overbought and oversold indicators. There
is nothing much else to it except for the geometry where the finer aspects of
market analysis will come into play.
There are always means to work out where the bigger picture players stand:
When you find this recipe for success you have to embrace it and follow it
without wavering.
But you must always remember:
Markets can be manipulated up and down in small ranges when neither side is in
total control.
It is when you can recognize where either the buyers or the sellers are at a
distinct advantage that opportunity really looms.
To make trading decisions and track all the signs will require work and a tool box
like we have in the WAVETRADER software.
If you think you can do it any other way well go do it; it is a free world.
Something else:
The US S&P 500 is a stock market index which is designed to act as a valuation
tool and a guide to the health of the underlying stocks involved. Each day this
index will fluctuate up and down in value relative to the changes in the individual
stock prices it incorporates as they trade on the NYSE. As each stock goes up
and down then so does the combined value of index.
There are many reasons why individual stocks will rise and fall in value; but the
bottom line is determined by the buyers and the sellers who determine the BID
and the OFFER at any one time.
Stock valuations are fundamentally driven by the investor’s perception to good or

bad future earnings and/or future forecast performance to add value for stock
holders.
Chapter 15 192
Consequently there will always be some stocks going up in value and some going
down.
But if the overall economic perception is good the majority of stocks will go up
and if conditions change then the majority will go down.
Buyer and seller perceptions of value can change in an instant on good news or
bad news. Perceptions can also change when economic reports are released that
would imply future economic conditions may affect the earnings capabilities of
companies as a whole; for good or bad.
Sometimes as segments of the market become overbought sellers will dominate

and those stocks will go down. Conversely stocks can become oversold and
buyers will move back in.
Basically as a trader rather than an investor we have to learn to work around the
changing conditions. The constant changes in investor sentiment will cause small
daily fluctuations and often larger weekly changes to the market index.
Nevertheless this is only the simple side to it.
INVESTMENT FUNDS:
There are thousands of investment funds investing money in the market for
superannuation and private investors. They earn fees, and substantial ones.
These funds have different approaches to where they invest the money, but the
basic assumption is for growth based on earnings. Large movements in stock
holdings can lead to wide fluctuations in the market price.
HEDGE FUNDS:
There are thousands of these funds as well but they are different in the way they
work as they employ leveraged tactics.
They most often use systems to make trading decisions.
The systems they predominately use are either fundamental or based on

technical analysis. It is more the technical systems that we are concerned with.
Technical analysis systems are primarily based on mathematical algorithms

interrogating the constant price data coming from the exchange.
The majority work with indicators to determine overbought and oversold
conditions as well as market support and resistance levels.
Systems such as these generate buy and sell signals based on fine tuning the
past data in the expectation the same things will repeat in the future. These
types of systems generally have a position in the market at all times, either long
or short.
Chapter 15 193
Systems are never that accurate and due to the volumes of trades they generate
can cause the market to go up or down over shooting the suggestion of
fundamental valuations.
It is when the systems push the market into territories of over or under valuation
that it brings the fundamental traders back into the picture and the market will
reverse direction. Whether it is for a day, a week or a month is not important to
us, only that it happens.
Once you can understand the underlying influences we are dealing with then it
makes the price action approach seem simple.
DAY TRADERS:
These traders have a wide variety of approaches they employ, from systems to
simple pattern breakouts and program trading.
This group of traders will most days provide 80% or more of the volume and the
liquidity to the S&P500 index and related futures contracts.
These guys are short term oriented so basically unless there is some major news
to be released they need have no concern for the unexpected.
Even if there is some major news release that sends the fundamental guys
overboard in one direction or the other, the day traders have approaches that
can often turn the market back around during the day and send it back the other
way.
THE MOST IMPORTANT THING I CAN TEACH YOU:
Is to always know where the 1:1 supports or resistance levels are.
There are usually 1:1’s of varying degree that you need to keep track of, they
start with the:-
1. Smaller degree and go up in levels of pattern.

2. Small and medium degree.
3. Large and larger degree.
So long as the 1:1’s of each degree are not overbalanced the trend in that
degree has to be viewed as still intact.
When you have a major change in trend take place the whole process begins
over again and follows the same rules.
Chapter 15 194
Chapter 16
The Finale:
The next FOMC is scheduled for Thursday 28th June at 2:15pm, a week and a
half away. Nevertheless there will be lots of speculation in the next week or so
surrounding the possible outcome. Interest rate policy seems to be a major
concern to traders right now. The bulls are punting on a no rate rise policy and
the bears are punting on a rate increase. I am not in either camp at the moment
although the fundamentals would seem to me to favor a rate increase.
The magnitude of the present situation becomes fairly obvious when you look at
the long term charts, especially the stock market performance from 2004 on.
This is the chart everyone is watching at the moment, the monthly DJIA, this is
the top 30 industrials. The 2002 low fell on October 10 and it is now approaching
5 years. The 2004 low W[4] also fell in October. In 1987 we had a market crash
in October. Now this does not mean we will have a crash or a low this October
but it becomes a psychological factor for the market to deal with the closer we
get to October this year.
The next concern for the bulls is the performance of the Russell 2000 since 2002.
It has already had 3 larger degree set backs in the past 3 years.
Chapter 16 195
If you look at the frequency between the set backs you can see that it is not
unreasonable to think another set back could come at anytime now.
You should be able to see that I am not making any forecasts, I am only pointing
out the obvious. The reason I am pointing it out is to get you to think about the
possibilities. The greater possibility is obviously the market will have another
setback before to long. Now if it is obvious to us then it is also obvious to large
investment funds; some of them may already have been positioning for a
downturn in the near future.
One thing I have learnt from my years in this business is that nothing continues
to go up forever. Another thing I have learnt is that you always get a warning
and a second chance before any market comes tumbling down. This is why I
would tread carefully on the long side in the coming days and weeks. The recent
3 day drop down was a warning sign in my book; most likely a warning sign of
worse to come.
Anyway we will see as we go forward. I am not going to report each day from
here on, what I will do is just record the important signs as they come to hand.
Tomorrow is Monday June 18th let’s see what it brings forward first before I
waste a few pages on it.
Monday morning 9:00am – the Sunday Globex coming into this morning has held
up and the -8.50/-8.25 corrections from last week are still in play for the upside.
Chapter 16 196
MOB’s to start the day are:- 1:1 Support 1546, 1554 Friday’s high Resistance. R2
1557 Contract high, Friday’s Gap fill 1540.
9:30am ET: Open 1550.75
End of the day:
There was nothing dramatic happen today and the ES traded in a 7 point range.
The low for the day reversed on a small degree 1:1 DD and 50 retrace of the
price range of similar medium degree. This was after the 1:1’s of -8.25/-8.50
were exceeded with a range of -10.25, the SPX also overbalanced its 1:1 series,
but the OEX held above its 1:1. The pattern resulting from the past two days
trading looks decidedly like a distribution pattern and would imply more
downside from Fridays high; or the market is going sideways trying to build up
some strength to break above the double tops in place.
Chapter 16 197
We should have a clearer indication of direction when we review the Globex

chart prior to trading on Tuesday morning.
The DJIA is indicating a technical downtrend in the smaller degree with a close
just above a smaller degree pivot.
Possibility of an Island Reversal:

There is an interesting situation looming if the ES were to open with a gap down
on Tuesday, something I haven’t seen for quite some time. It is worth thinking
about because if it were to happen it would be a very bearish scenario for
tomorrows trading. The possibility is quite real at this stage as we have a
HOUSING STARTS report to be released at 8:30am ET.
Chapter 16 198
This will be interesting to say the least as the REDBOOK is also due for release at
8:55am ET.
8:30am - Housing starts came in at 1474 M slightly better than consensus.

9:30am – Open at 1543.25 leaving a small gap down yet not exactly an Island
reversal as I had hoped.
The housing data has been interpreted as disappointing by the media.
Chapter 16 199
So far from yesterday we have two smaller corrections of 2.25 and 3.00 and then
a 5.75; these will have to break to negate the downtrend in progress.
Now it is a waiting game to see who wins, the market by the way just filled the
gap from Friday I listed as an MOB before trading began yesterday.
10:35am – 1546.25 is now the MOB for the bulls.
12:50pm – 1:1 reversed the market for a while but strong buying in the OEX
then forced a rally to put the bulls back in control.
Chapter 16 200
4:15pm: The OEX dominated the movement in the SPX today.
The way the OEX is going it is hard to think we are at a major high. It certainly
looks that at least one more large swing to new highs is in the wings as long as
the small 61.8 correction today remains intact.
Chapter 16 201
Wednesday 20th June,2007: 2 days to the Solstice.
9:05am Globex.
Around 8:15am ET the ES Globex completed a small 1:1 DD on a double top.

This event is technically bearish for the start of the day. It is going to depend on
how the cash indices behave after they get fully open.
9:28am ET: Looks like we will open with a gap up of about 3 points, I would
expect the gap to fill fairly quickly.
9:50am ET:
The decline continued into 10:05am where the OEX reversed on a 61.8 retrace.
Chapter 16 202
One thing that should be coming fairly apparent to you by now is the influence
the OEX has over SPX and obviously the flow on to ES futures.
Here’s an example of the OEX repeating 61.8 reversals.
If you still haven’t got the message why I follow the actions of the OEX you
never will and it will cost you opportunity if you decide to trade the ES without
following it.
10:45am:
By about 11:00am it was becoming obvious the rally in progress had stalled.
Chapter 16 203
A few days back I was mentioning the importance of the OEX to the state of the
trend up. Today when the two 61.8 levels came out the market signs were
turning bearish, by the end of the day we were left with an outside reversal.
Chapter 16 204
The 38.2 retest rally reversal was the nail in the coffin for OEX today.
14:49:37 {BBG} Which ever way you look at it today is heading

TOWARDS BEING A key reversal day
14:51:59 {BBG} THIS BEING THE CASE YOU WON'T BE GETTING A LOT
OF BUYING THE CLOSER WE GET TO THE CLOSE UNLESS IT
IS SHORT PROFIT TAKING
15:06:06 {BBG} Everything has swung short on 3 days now so they
should try and bury the hatchet into it
In the last hour today we dropped 13.00 ES points; a good point to remember.
Also you should remember that the ES Globex was the precursor to the mood for
the day. When the OEX went slightly to a new high and fell back it obviously
encouraged the bearish mood as the broader market stocks were already in a
much weaker position than the OEX. You only have to look at the Russell to see.
Chapter 16 205
Thursday 21st June, 2007:
16:14:18 {Arnold_T} cannot resist putting this up after the fact.

16:14:49 {Arnold_T} OEX rules today
14:52:58 {Gary52} getting a bounce off of the .382 of today's range
Chapter 16 206
14:53:38 {sangli} there is a fib level on the OEX... BcD 0.5, XcD 0.382 and
0.707 alt
14:54:10 {sangli} According to TTW, it's a buy pattern
14:54:11 {Gary52} saw it too late to exit that short in time
14:54:44 {sangli} Well, you must purchase the software then...
Well, if you look at the accuracy in the OEX geometry today they really prove the
point of the method I am teaching you. I wrote about all this years ago.
Also today proves the point that all you need to do to trade accurately is
approach it one day at a time. The trades will come to you if you are smart
enough to wait instead of trying to forecast what will happen.
We do not know what will happen or the way it will happen. We can have a
reasonable idea of what to expect in the short term but not as good in the long
term.
The market may eventually go up or down and reach some of our forecast
targets, but the path it actually takes along the way is impossible to forecast.
Yet on a day to day basis if the market weaves a pattern of geometric sequences
it offers us a trading opportunity no matter where it eventually ends up.
Chapter 16 207
OPPORTUNITY:
The real opportunity in this business is in knowing what the “smart money” will
do before it happens.
There are 1000’s and 1000’s of traders who will never experience or even
contemplate the possibility of trading the way I teach. The losers will always be
there to hand over their money when the right time comes, you can be sure of
this.
So if you want to get into the swing of things that will help you make the right
trading decisions all you need do is study my method.
The big problem for most is they will not understand the method as they won’t
be prepared to do any work. The strange thing about this is that this is one of
the reasons why it works for only the minority.
There is a minority of people who work at my type of method and they work in
unison; even if they do not know each other. When the signals come together
they will act in unison if they recognize the signals and the whole thing becomes
self fulfilling. Did you ever consider that scenario? I did.
You could go through life wondering why the things I am showing you work, but
then that would be an excessive waste of time.
The thing you need to consider and have faith in is the fact that after all the
years I have been teaching my method it is still working as well, if not better
than when I first discovered it; and it will continue to work years and years on
into the future. Not because I say it will but because the traders who follow this
method have no other alternative.
The end:
I think today is fitting day to end Volume 1 Price Action Chronicles and start a
new Volume 2 next week.
I hope you can get my message and learn from it.
Bryce Gilmore
22nd June, 2007:
Chapter 16 208

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This volume covers a candid day by day

[C] Bryce Gilmore 2007

All rights reserved:

PRICE ACTION CHRONICLES

PRICE ACTION METHOD:

Our method is based on the continual and repeating habits employed

Cover, Contents and disclaimers 1-4

1 One Day at a Time 5-10

2 Each day is a new day 11-14

3 Pre Opening - Monday 23rd 15-25

4 Tues 24th – Fri 27th April, 2007 26-42

5 A New Week Ahead 43-55

6 Federal Reserve Meeting week 56-71

7 After the FED announcement 72-83

8 Day after ES Larger degree 1:1 84-89

9. What is the RISK on any trade? 90-93

10. Back in the RANGE AGAIN 94-115

11. The Beat goes on 116-136

12. Has the Trend Reversed? 137-157

13. Contract Rollover Approaching 158-172

14. Contract Expiry Week 173-189

15. Think what you like but 190-194

16. The Finale 195-208

Bryce T. Gilmore [C] 2007

Price Action Chronicles – One day at a time – Edition – [c]2007

DISCLAIMER : Edited by Bryce Gilmore (C) 2007

Conditions of supply : read this

For a further overview of the purchase terms and conditions see :

Phone/Fax 61-7-5573 5510 - Mobile 0419-576 923 - Email: bbg144@bigpond.net.au

The scene is now set for Monday’s trading session.

Nevertheless whichever you believe there is no denying that the market is

As we move forward I will demonstrate to you the continuing repetitions that

Trading profitably can be a very boring occupation if you do it correctly by

I find Bloomberg provides more than enough fundamental and psychological

Before Monday 23rd April, 2007:

GETTING YOUR MIND RIGHT:

NOW IF YOU CAN UNDERSTAND THE POSSIBILITIES I HAVE EXPLAINED SO

So which do you want to be?

GLOBEX SESSION – Pre Monday day session:

7:10am Monday: price trading at 1493

Presently the market is trading back around 1493.

Some HC transcripts from the open today:

09:23:42 {BBG} It is still valid in that range

10:49:59 {BBG} I bet you guys don't say much now

11:15:24 {BBG} Now lets see how this works out.

11:29:16 {BBG} You wouldn't want to lose any money on it now so

11:43:06 {BBG} It could go anyway now and it will sooner or later

13:06:36 {sangli} no volume...

4:35pm Globex is rallying:

Except for the fact I thought it might go sideways in the preparation

So now we have a look at the ES 60 minute chart for tomorrow and

Two reports due at 10:00am.

Consumer Confidence & Existing Home Sales:

The 10:00am reports came in as follows:

The reason is threefold:

Wednesday 25th April, 2007:

Knowledge and discipline is extremely important to any game involving

Thursday 26th April, 2007:

The OEX today:

Friday 27th April, 2007:

09:28:31 {BBG} Ok there is a slight overbalance in the wave structure now

11:30:11 {BBG} If I am wrong I SAR