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Welcome to
the FFES (Foundation for Economic Stabilization) Case Study Course applying
principles of mathematical probability to the production of profits from
prognostication. The old
Romans were wise enough to know that things change and fluctuate. They
therefore recognized that the best way to know what would probably happen in
the future was to study how changes took place in the past. To symbolize this,
their two headed Janus was their chief deity with one head confidently looking
to the future as the other head had studied the past. While it is
true that few things are certain to happen in the future at a definite time
such as the time that a certain person will die in the future, this
mathematical probability has made tremendous profits for the insurance concerns
that use it, as well as similar profits for investing individuals who employed
it. What are
some of the important profit making principles that you are now about to learn
to use. One is the application to price fluctuations of Newton’s law of physics
to which the late Roger Babson attributed his fortune of over $50,000,000. The
Action and Reaction Rule that states these are equal and opposite. Another is
how drawing a single line will enable you to know
where the price of any stock or any future is now headed and the probable time
it will reach there. Then there are principles that enable you to switch
positions so near to the turning points or pivots that start each new trend,
that you may be constantly either long or short making money whether price is
rising or falling. Also in each weekly letter on the right hand column you’ll
see some abbreviations that are headed “reasons for actions taken”. As a course
member now you’ll have the glossary of these abbreviations so you can now
verify on your own chart that every change of position from long to short has a
scientific reason. Have you ever seen elsewhere anyone making such information available. Many of our members have taken other courses and
we hope you’ll find as they have that this one of yours in the best. Besides the
above principles that are unique to this Course you’ll also find what we have
been informed are better ways of using other well known methods, and as an
example we’ve added channel lines to the popular moving average method in a way
that you’ll find helps eliminate some of the whip-saws the usual moving average
followers frequently find troublesome. Then various members of the past have
added improvements that bear their names, as you may do in this wide open field
of probability applications to price fluctuations. Your
glossary of abbreviations is enclosed so that you may soon get the meaning of
the abbreviations that summarize the rules. Other Course studies including some
recent Course letters will follow soon. So many investors
have doubt as to the possibility of constantly predicting when and where prices
will turn. Therefore the Marechal Chart is a good starting point for your
studies as he was one of the first to use mathematics to show what the DJI
would do during the coming 20 years from the time he copyrighted his chart. Feel free to
write whenever you have questions and I am confident you’ll be happy you’ve
joined this wonderful group of investors who want to become “Good Stewards” as
in the parables in Luke 19:11 on and Mathew 25:14 on if my memory is correct. You
investors are the life-blood of the economy. Without you there’s be no banks,
chains or factories, etc. where a person could choose
jobs, nor would the government be able to collect the taxes they now get. Your
importance has been neglected, too long. Sincerely, Alan
H. Andrews, Trustee FFES. [OF 836 PAGE1] You will
find enclosed the first study of the Course concerning the ML (median line)
Method. This enables you to know where the trend of anything that fluctuates at
random is headed. What everyone wants to know is where the latest trend is
headed, and where the next pivot (P) will be from which the reverse trend will
start. The
probability of the next P being at the latest ML seems to be about 80%, and
even without any additional rules that enable you to be constantly either long
or short , the profit potential of this simple rule is
tremendous for you. Although
Marechal never left us exactly how he was able to predict twenty years in
advance what his copyrighted chart showed the Dow Jones Industrial Averages
would do, you can draw in the MLs from each P bisecting the distance between
the 2 latest alternate Ps, and see that nearly every time the new P occurred
when prices met that latest ML. You’ll also see that on the right hand side of
his chart prices were too strong to drop to the ML that started from the high
in 1945, which always signals that a big rise is ahead unless the next trend
fails to reach the new ML. This cancels out the prior signal and signals a big
move contrary to the big move previously signaled. And as there was no contrary
signal after prices failed to drop to reach the ML from the high in 1945, you
could be confident of realizing a big gain from your long position taken as soon
as prices crossed the parallel to the ML from the high of 1945. You draw this
parallel from the third top that the ML was drawn half way below on the
distance to Previous P. You can now
tell from the enclosed Glossary what the abbreviations mean, in the right hand
column of each weekly letter. This enables you to understand the scientific
reason for each new position taken based on simple geometry. When you change a
position your new methods enable you to be one of the few persons who knows how
to be constantly either long or short, in this way you make profits after each
rise and fall that follows the rise. You may be whip-sawed a few times but if
you get you order in before the market opens the next day, should prices move
against the position you have just taken, your losses will be small and often
show a small profit. You will see
all this after you’ve done some “paper trading” which you should start on right
away showing on your chart where each position was taken. You should
concentrate on the ML method applying that even if you have had experience with
other methods. For we learn best by concentrating on one thing at a time. When
you have a question mark where the question arose and send me a copy of your
chart that should also list our profits from the two contracts you take each
time you change position. When you write out your question leave a space where
my answer can be written and mailed back to you. After you
see that your paper trading has made well over the 100% profit rate, it will
indicate you are ready to learn the Action and Reaction Method to which my
friend the late Roger Babson attributed his fortune of over $50,000,000. Then
after that let us know and you will be sent the rest of the Course Studies. Sincerely. [OF 836 PAGE2]
[OF 836 PAGE3] Case
study course rules Median
lines and MLH:
the MLs enable the user to be one of the few who can tell where the prices are
headed, and the place they will reach about 80% of the time, and when
approximately that place will be reached. Slopes of alternate MLs of comparable
length indicate the trend. When both
recent MLs slope in the same direction the trend is strong and price change
rapid. A reverse ML is formed when 1ML2-3 is exactly reached at P4, and is a
reliable CL for applying the AR method. There is
a high probability that: 1. Prices
will reach the latest ML 2. Prices
will either reverse on meeting the ML or gap through it 3. When
prices pass through the ML, they will pull back to it 4. When
prices reverse before reaching the ML, leaving a “space”, they will move more
in the opposite direction than when prices were rising toward the ML. 5. Prices
reverse at any ML or extension of a prior ML. Frequently, after
crossing a lower MLH, prices continue to rise along the MLH before the further
drop that was signaled by passing through. So here you can use a sliding
parallel through the bottom of the range of the most recent day as a sell
signal if prices drop through that SH. MLH are
places beyond which each day you place a buy or sell order before the market
opens the next day if prices pass through that MLH. MLs between P2 and P3 can
start from nearby or more remote P1s, and prices tend
to reverse at each of these MLs. The distance of each MLH from its ML is the
distance of the next warning line (WL) from that MLH. When a second “space”
reversal negates a previous one, there has been a “shake out” that signals a
larger move in the opposite direction. Mini
median lines (MMLH): Use the MMLH as the buy/signal when you expect a
reversal because of a P5, or because prices are at an RL, WL, major ML
extension, etc. Also use MMLH as a stop loss right after entry. If prices
cross an MMLH and then move along it, enter when prices reverse by use of an
SH. In some
markets drawing MMLH from end of ranges is best to reduce whip-saws, but use
closes to draw these MMLHs between usually. Converging
lines that meet prices have high probability of trend reversal. MMLH lines can
be drawn through the daily range after a gap. Two to four
days is usually a maximum between 2 and 3 for an MML. P1 can be 1 day or more
back from 2 and 3. ACTION/REACTION
are equal and opposite: CL can be
0-3.0-4, Reverse ML, MPL, 2G, MA, MA Channel Line, 2P, Peak to Low, Low to Peak
etc. Normally use
a down sloping R line to call a sell point, with A
line measured through a bottom. Exception: still using Dt R line to call the
sell point, when CL is a 0-3, the top seems to work for the A distance, as well
as the bottom. When prices
pass through R lines, it often drop back as with MLs that are passed by prices,
but signals probability of further move in direction before the pull-back. Since each
gap is 2 Ps they can be used for A points. When MA is
used for CL, use closes for measurement above and below MA. Hagopian's Rule
applies to R lines. The longer the CL the more reliable it seems. [OF 836 PAGE4] Case Study Course on
Price Fluctuations Sir Isaac Newton and
George Marechal Of the two
kinds of change in the Universe, flowing change and random change, we are
indebted to Newton's invention of the Calculus that enables us to find out in
advance the conditions that flowing change will produce in the future. His discovery of the natural law that Action and Reaction are equal
and opposite in the field of physics also has been applied in the Course to the
random changes of price movements in free markets. This application of
the Action-Reaction law enables you to learn in advance where the probable
reversals of price trends will come in the future. We owe this application to
the late Roger Babson, who credited this law as the basis for his fortune of
over $50,000,000. When we
speak of any scientific law, we mean a statement that a relationship has been
observed among certain given conditions. We mean “if these conditions now, then
those conditions will follow, and can be expressed mathematically”. We have
“order” through which we can know the outcome from these conditions. We can
therefore take advantage of this knowledge, and thereby progress and profit. So Newton
was one of the great discoverers of this “orderliness” that underlies all of
the Creator’s work, even if we are often slow in discovering it. Newton’s Laws
therefore as stated above, have benefited the users in both flowing and random
changes. The
definition of randomness implies that future conditions are unascertainable,
because there seems to be a lack of order underlying such change. Such has been
the almost universal belief, still prevalent with most people as far as price
prediction is concerned. Marechal,
also by mathematical methods of his own was the first to demonstrate that there
is also order underlying the so-called random changes in price fluctuations. No
professor in any University, no government economist, has ever been able to
produce a similar chart showing as Marechal’s famous chart, copyrighted in
advance, what the Dow Jones Industrial Stock averages would do 18 years ahead.
As one of many other examples of this mathematical orderliness regulating the
flow of stock prices, the writer received from this remarkable man now
approaching 90, several months before President Nixon’s election, an accurate
prognostication of what the DJ Industrial Averages would be the day after
Nixon’s election. Many others
such as classmate Dewey’s Foundation for the Study of Cycles have shown the
“order” underlying stock and future prices. For example the recent rise in
price of Copper futures was predicted by the cyclical studies of that
Foundation several years before the advance took place. So now and
during each of the past ten years your Foundation for Economic Stabilization
has presented this Case Study Course on the predictability of prices, summing
up the results of thirty years of research and inquiry among successful
investors. By the use of these Course Rules never before published except by
your Foundation, you as a Course member will have an advantage over others
without knowledge of these Rules. Alan H.
Andrews, Director [OF 836 PAGE5]
[OF 836 PAGE6] The Median Line
Method for Foreseeing Trends Below is a
stock market index which you will find valuable in anticipating what your
stocks are going to do, whether they will continue to rise or fall and how
fast. These are the facts everyone wants to know, and this method has not been
revealed before to the best of our knowledge. Those who acted on this method
got out of their stock either at the end of February or April right near the
top. Start with
any pivot such as low pivot 1 and draw a line bisecting the distance between
pivots 2 and 3. On April 1st all the information you had as to prices ended at
pivot 3. This bisecting line is always a test barrier, whatever pivot you start
from. If prices fail to rise above the barrier, the rise is finished, as turns
out to be the case at pivot 4. Next, as time passes and new prices develop a
pivot at 4, start at pivot 2 and draw a line bisecting 3 and 4. You will see
that this dash line is steeper down than the slope of 1-4. So this is like a
vector diagram of forces showing the trend will be steadily down along the dash
line until medians point upward again. So continue to draw these lines so you
may get in near the bottom. Similarly in
a rising market, you will notice that the fastest gains are always made when
bisectors from higher and lower pivots point in the same direction. This method
is superior to the Moving Average Method of recognizing Trends in that there is
less “whip saw”, and closer positions to the bottoms and top pivots are
possible. One reason for this is that there is a probability that when prices
do pass through the bisecting lines, they will return to it before continued
movement in the newly indicated direction. (Rule #7 – Penetration Rule)
[OF 836 PAGE7] Hagopian’s
Rule:
When prices
reverse trend before reaching a line at which probability indicates such a
reverse could start, proper action may be taken in buying or selling, as soon
as prices cross the trend line they were moving along before reverse. (Mar.
Corn, e.g.) A large
countermove is indicated and confirms the first action as above, when prices
cross the first Trend Line sloping away from the original line. This line may
be a trend line, a median line, a reaction line, or a moving average line. The
rule still applies. For example
of May Soybeans chart, UTL2-4 is the first UTL to slope away from 2ML3-4,
UTL1-3 the first on Pork Bellies, DTL2-4 and UTL5-7 on Sugar, and UTL2-4 and
b-c and c-d on Wheat. The other TL that can be drawn from the low pivots,
parallel or slope toward the original “Barrier Line”, whichever type of line we
choose to measure from.
[OF 836 PAGE8] For those
whose tuition is fully paid we show a weekly price range chart for Winnipeg
Berley nearest Futures, and the 3 steps in practical analysis of such a chart
to assist in realising gains. (1) We begin
to wonder about the orderliness of price movements in stocks or in
commodities, we note that whenever there is a sudden drop or rally, it is a
signal that a series of 10 degree T.L.s (Trend Lines) can be generated as drawn
in on this chart, each a “Horn of Plenty”. (2) Gathering
data and taking measurements on numerous active charts shows that these
drawn?in T.L.’s are frequently helpful in determining
the pivots (buy and sell points). (3) To find
out just how orderly and useful these relationships are, we note
that the rise can go on without any concern to those with a “long position”,
provided the price movement stays within the first two 10 degree lines as
shown. Upon
crossing the 20’ (degree) line, prices frequently drop to the 30’ line, giving
opportunity to add to one’s long position, or “pyramid” for possible resumption
of the rise along or within the 40’ line. Frequently,
crossing the 40’ up-trend line, or UTL means beginning a substantial DTL (Down
Trend Line). This is very frequently true if this downward
counter move is preceded by a sharp vertical peak. The top of the price
movement shown here is a rounding top, as named by Chartists. Obviously
the slope of the TLs depends upon the relative proportions of the coordinates
used by the maker of the chart. But by counting how frequently these
pivots occur, and the exactness of fit for each particular stock or
commodity charted, indicates the reliability of the probability
for their reoccurrence. And action can be taken when the odds are
strongly in your favor. The words
above that are underlined are all terms used in the study of Probability.
Reference to the chapters dealing with Frequency, Reliability, Exactness of
Fit, in Monroney’s “Facts from Figures”, go into their meaning and application
in detail. Upon request
you will be supplied with Stephen's Stocks or Horsey’s Stock Picture if you
wish to apply the various aids provided by this course to particular stocks
that you own or are interested in. Also you will be supplied with Dupont’s
Chronoflex if you wish to fasten this transparent drawing paper over your
charts in order to avoid drawing-in the various lines and measurements on the
charts directly. We have also
designed several devices or tools, in the use of which protection is provided
through the US Patent Office, which will make it easy for you to apply the
principles of probability which we have developed relative to price movements.
These methods will enable you to continue to make gains similar to those made
by others in this course who followed the indications
properly. Alan H.
Andrews, Director
[OF 836 PAGE9] The NY
Silver chart below was drawn by a new member, Mr. Edward Palm applying the
Foundation’s “Horn of Plenty Study”. Mr. Palm has made, and is making an
exhaustive Study of all available scientific Courses relative to Price
Prediction, and was before going into business for himself the writer of the
periodic letter sent to customers of one of the largest Commodity Firms. The lines
below from the “Horn” method illustrate how prices fluctuate along these
regular geometric 10 degree radial lines as well as between them. Another
Course member has written us that he has made very satisfactory profits from
the “Horn” method and it is apparently his favorite course method. It seems
natural for each person to select a method that appeals to him. One of our
friends who is one of the County’s largest Traders
told the writer that he liked the Moving Average Channel line method for
although it didn’t get him in always at the bottom or out at the top, it did
give him profits from the long trends. However this man was constantly on the
lookout for other successful methods. For there may be frequent times when
other methods can prevent some of the “whipsaws” common to side wise movements
of prices in their fluctuations. You might
like to put a piece of tracing paper over this chart and start your radial
lines from the low on the last of November 1973 at the 275 area and see the
similar fluctuations along and at these radial lines. Such practice certainly
gives the investor a “feel” of the market.
[OF 836 PAGE10] Rule
#1.
Where prices are always headed Rule. You course members are among the fortunate
few to be able to draw a straight line and know that prices are headed toward
that ML. Very few investors have ever applied this ML principle of statistics
to price fluctuations, and we've never seen this in any books on investment. So
very few know that prices are always headed toward the newest ML. Rule
#2.
The Rule of coming opposites applies all through life. E.g., "Blessed at
they that mourn (when the price of their stocks fall), for they shall be
comforted." For the value of their savings that they had put into stocks
will fluctuate up again. And find the “Wes Usto” also in the New Testament and
in prices. Rule
#3.
"Turn your mind about," or "Rethink, for all good is at
hand." We should mentally prepare ourselves for the coming reversal in
prices, and other affairs. Here's one way for example, that
you members who know the ML rules can use: When prices are skyrocketing upward,
we do this preparation by thinking "If prices pivoted here today at this
price, I'd draw a new ML bisecting the distance between today's price and the
price from which the rise started." And we know now that if this is a
Major Pivot, prices will fall rapidly to this new ML. Profits from such drops
are big and quick. Rule
#4.
Rule for anticipating major P's. If after a decline you can count four previous
P's, the fifth one is highly probable to be the one from which a new trend
starts. Rule
#5.
Rule for easily detecting the major P from which you can make a quick, big
profit is to watch for the EP , IEP and SEP
formations. Rule
#6.
The other reversal rule is that prices tend to reverse at or near any ML, as
well as at any extension of each ML. And also at any MLH or
extensions of MLH. Rule
#7.
The Penetration Rule is that whenever prices gap past, or plunge through any
ML, there is a high probability that they will quickly return to it
temporarily, and then resume the trend they had before they gapped or plunged
through. Rule
#8.
Price Failure Rule; When prices fail to reach the ML
as shown by a space between the P of reversal and the ML, the probability is
that this price reversal will go further than it did on it's approach toward
the ML. Rule
#9.
The price failure rule is negated when the next price trend is also a failure
in reaching the ML. This is almost invariably a signal (a shakeout) of a big,
fast move in the direction indicated by this last "space." Rule
#10.
Reliability of ML and (3) as CLs on weekly and monthly range charts is good for
the MLs but as significant Ps may be hidden in any weekly range, you’ll have to
make allowance that this happens. This chart
shows you how to draw the Median Lines (ML) from each pivot (P). You start the
line from each pivot and bisect the distance between the next two pivots
extending the line for the next pivot will 80% of the time be at or near that
ML. And when late prices meet this ML extension as shown in the months of
September and November you see that you will have price fluctuations around the
extension of the 6ML7-8. This enables you to be one of the few investors who
always knows in advance the probable place where a
reversal of the trend will come.
[OF 836 PAGE12 Study what
days of the week do Ps fall on ! Here are a few
for you to add to. You’ll see on your March Soybean Chart that either a P or a
gap (which is 2 Ps), since June 1st has come on every Monday except 4 days and
a holiday. This includes all minor Ps of either ranges or closes. A P fell on
every Wednesday except 4 plus 2 holidays. When no P on Wed it
came 3 times on Thursday and the rest on Thursday. On
Hogs all Mondays except one and a holiday or two. Major Ps about half
come on Monday. Use of monthly
range charts and sliding parallel: The enclosed Egg Chart that was sent you
before to have as a confirmation of the long term probabilities as indicated by
the short period range charts is a good sheet the practice the use of ML, MLH, SH. You’ll see
the ML starting from Aug. 1960 and after prices pass through the lower MLH
signaling that lower prices are eventually coming, prices continued to rise for
4 months along the lower MLH as they frequently do. But if you draw the little
dash line (SH) you see your sell signal when prices drop through in August at
about 37 for a nice 7c drop during the next 4 months. We’ve drawn another
sample ML from that Aug. 1961 top and a SH through the top of the range in May
of 1962 with the buy signal when prices rise above it. You can see that when
prices drop through the MLH of this ML from Aug 1961 they rally, and the rally
from this MLH that starts in Dec. 1964 at the 26 buy area is profitable. Use
tracing paper and fill in the other with B & S points and add up your paper
profits.
[OF 836 PAGE13] All
fluctuations in prices are changes in the price level about the ML first
presented to investors in this Case Study Course. Each ML starts from a pivot
or turning point in trend and is drawn so that it bisects the distance between
the next two Pivots (Ps). Then a parallel is drawn from the second P, and
another from the third P, as shown on these charts below of leading
Broadcasting concerns listed on the stock exchange. On the ABC
chart below you see drawn the ML, the two parallels abbreviated MLH, with UMLH
denoting the upper one and LMLH the lower. Also note the minor ML that starts
with the low in Oct.1972, bisecting the distance between the high in Nov and
the next low. When prices at the close on the second week in
February drop below the LMLH at 39 during the second week in January that is
your signal to sell short. Also another such signal was the gap-down in
the third week in Jan. Further confirmation of the correctness of this short
sale is given when prices drop below the major MLH the last week in Jan., at 35
area. By end of ’73 price had dropped to 19. So gain was about 33% in the 4 months shown on chart below or at
rate of 100% yearly. While the mathematical probability of prices
reaching the latest ML is high, you’ll note prices here couldn’t reach it, a
sure signal of a big drop ahead. Capital Cities chart and the others use the
same method to show you where to buy, via passing the MLH, and on a “break-away
gap”.
[OF 836 PAGE14] Case Study
Course Method of use of the Mini Median Line (MML) and parallel (H) lines, to
determine entry and exit points enabling you members to be constantly either
long or short, thus making profits on every up and down fluctuation on any
stock or any future. Use of the MML method at P5 or P7 is especially important
after probability shows end of trend is near. [OF 836 PAGE15] Warning
Line (WL or W) of nearby shift of major trend: When you draw the
MPL from P1 in Sep ’65 your CL to measure Action and Reaction distances from,
you see that this MPL line is also the ML. So 1ML2-3 is also the MPL. So by
measuring the distance (A or Alan marked on chart)
that P2 is from that CL, you know that P3 will be where prices meet the R1
line. And if you draw another H line the same distance that A1 and R1 were from
the CL, that line will be your warning line, that indicates that the decline
signaled when prices falling from P4 crossed the MLH of 1ML2-3, was about to
end. Similarly with P2MLP3-P4, you draw the “dot dash” warning lines that
signal you to look for another P from which reversals occur. Since a Gap is 2Ps
you see Gs at P6 and where prices rise for a fast move up in Apr ’68 as they
cross the P6ML7-8. You’ll also see that even where prices pass the W lines they
usually double back to it at least even if the original trend toward that W
line is resumed. But usually there is a worthwhile reversal as shown by the W
for the PrML6-7 where prices reversed from the 370 area on signal at 360 in AP
’68 to the 320 area the next week.
[OF 836 PAGE16] Median Line
#2: From a P3 after a change in Trend draw a line bisecting
the distance between P2 and P1. Then using this ML#2 as a CL
draw the usual A and R lines in order to see the strength as indicated by the
ability for prices to recover back to each R line that was past.
Relative strength is also indicated by recovery to the latest minor ML after
each drop or nearness to the latest ML.
[OF 836 PAGE17] Below is a
modified Schiff ML. As you can see the starting point is not under the top
close of 12th September, but at the half way mark of the line sloping from that
high to the low close on Oct. 23. And it bisects the distance between the close
of that date and that of the next P of high close on Nov 13th. You notice that
the low on Dec. 16 reversed the trend when it nearly touched the modified
Schiff ML. Next you see that there is always a reversal or gap when prices
reach any of the WLs. Note that the usual Schiff ML calls the first low P on
Nov 28 and the modified ML indicates the low area on Dec 16th. But prices tend
to Pivot when meeting any of these ML. But doesn’t the slope of coming trends
more closely follow or H that of the mod.ML.
[OF 836 PAGE18] Where only
Schiff MLs were used on the July Lumber 1982 weekly range chart you see some
profit making signals by drawing the H and the WLs from the usual Pivots of the
Schiff MLs. And as Mr. Schiff told members “use the weekly charts for overall
picture but zero in with the daily charts”. Notice the
probability that there will be a good profit from the reversal each time prices
reach an H or a WL as well as when prices again reach the original ML. For
example prices climbed back to the 7 in 2 weeks to the Schiff 5-6ML whereas if
the ordinary ML had been used there would not have been any sell signal due to
prices reaching the ML as they did at 7. The dotted line is for the H or the
WL, and the dash line for the ML. Notice how prices dropped back to the
parallel of that nearly horizontal H from 7 for a one week rise signaling a big
drop ahead which carried prices below WL#1 almost to WL#2 and then a made a 5 P
Elliot rise to above the horizontal H of Schiff ML5-6 and then started a new ST
of 5Ps from 9 to 10 reversing at the WLs repeatedly, for good profits each
time. There was
not space enough to draw the other parallels and ML lines but if you put a
transparency over this chart and draw those lines in, you will see that they
too provide signals for additional profits. So remember to use these Weekly
Range charts to increase your profits by using the Schiff MLs.
[OF 836 PAGE19] Lack of
faith, inability of unwillingness to believe, a search for reasons why to avoid
taking action seems to be the reason that more people failed to avail
themselves of the hundreds of percent profits they should have been making
since December 1972. Below are a few of the charts showing the exact dates and
prices where purchase or sales were indicated by the methods presented to you
only in this course. Remember what Mr. J. P. Morgan said, “prices
will fluctuate”. There are even quicker profits ahead for you on the “down”
side after these rises are over. And those of
you who haven’t the time available to give to commodity trading can use the
principles just as successfully to make 100% plus yearly from your stocks. Or
you can follow the “orders indicated” and positions of the weekly Course
letters and just phone your broker. But be sure you give the orders, and “don’t
let him advise you” is the advice given by nearly every successful trader. You figure
the percentage profits on margins of 10% of the total value of each contract.
Perhaps next week we’ll find time to give the percentage gains made by all who
acted on these course signals.
[OF 836 PAGE20] Case study course on
applications of mathematical probability and morphology to prices The Action
and Reaction (or AR) Rule: This Rule was first applied to price trend changes
by the late Roger Babson. He adapted it to price movements from Sir Isaac
Newton’s scientific law that states “Action and Reaction are equal and
opposite”. He stated that his fortune of over $50,000,000 was due to this
principle. In gratitude to Newton, he established the Gravity Research
Foundation now located at New Boston, N.H., and went to England where he was
able to buy Newton’s former home. He then transported the study where Newton
made his discoveries to the Babson Business Institute, and you may visit and
sit in the this beautifully paneled room at Wellesley
Hills in Babson Park. The writer, your director was presented with some apples
and said to the descendents of the apple tree that Newton is said to have been
sitting under when the fall of an apple started his train of thought leading to
the important laws that he developed, relative to gravitation. You can
realize that a principle such as this AR Rule that produces such profits is
worthy of your attention and understanding. For once you understand how you can
apply this Rule to make money for yourself you are on the road to an
independent fortune of your own. Colleges have endeavored to impart the
essential knowledge for you to qualify for a profession or job through which
you may make a living. But do you know of any college that had given any
courses on how to make money ? Mr. Hunt of Texas,
reportedly one of the world’s richest men has stated that college education
does not seem to be of much help in fortune building. Mr. Ling of Ling Vought
Temco who made the largest check of over 400 million was a Drop-out. Ted Warren
who made a fortune in Commodities never finished grammar school. All these men
needed was common sense and a desire to become
wealthy. So too may you through these Course Studies apply these principles
proven to be the important ones by men who have become affluent, principles
never elaborated anywhere except by this Course you are now taking. In order for
you to use this AR Rule mathematically, you need a center line about which to
measure the Action of the past, with the Reaction in the future. Such is the
marvelous order in any random movements such as occur in price movements in
free markets, that you will find many lines can be used as center lines, To
name a few of these, the fan lines you have just studied in the “Horn of
Plenty” studies charts are one example. Try it yourself on any chart and see
how this Rule will enable you to sell after rises and buy after declines. The
zero pivot to the four pivot is another useful center
line. Lines drawn through three or more Pivots are important center lines to
measure from, the more pivots such a line passes through the greater its
reliability. Each line through two or more gaps in price ranges is another.
Your Course will furnish you with examples of each of these center lines, but
now you should test your understanding of how to draw these AR lines on each of
the final lines on your “Horn of Plenty” charts. To avoid confusion from too
many lines on each chart, put tracing paper over it and draw the AR lines about
each rib of the fans. See how you are provided with the knowledge of buying
profitably after declines, and selling profitably after rises. Loss comes when
you don’t. The method of doing this you find in the “Course method to Increase
Your Holding”, and the accompanying International Minerals and Chemical Chart
(IGL). Alan H. Andrews, Director [OF 836 PAGE21] Case study course on
applications of mathematical probability and morphology to prices The Action
and Reaction (or AR) Rule: This Rule was first applied to price trend changes
by the late Roger Babson. He adapted it to price movements from Sir Isaac
Newton’s scientific law that states “Action and Reaction are equal and
opposite”. He stated that his fortune of over $50,000,000 was due to this principle.
In gratitude to Newton, he established the Gravity Research Foundation now
located at New Boston, N.H., and went to England where he was able to buy
Newton’s former home. He then transported the study where Newton made his
discoveries to the Babson Business Institute, and you may visit and sit in the this beautifully paneled room at Wellesley Hills in
Babson Park. The writer, your director was presented with some apples and said
to the descendents of the apple tree that Newton is said to have been sitting
under when the fall of an apple started his train of thought leading to the
important laws that he developed, relative to gravitation. You can
realize that a principle such as this AR Rule that produces such profits is
worthy of your attention and understanding. For once you understand how you can
apply this Rule to make money for yourself you are on the road to an
independent fortune of your own. Colleges have endeavored to impart the
essential knowledge for you to qualify for a profession or job through which
you may make a living. But do you know of any college that had given any
courses on how to make money ? Mr. Hunt of Texas,
reportedly one of the world’s richest men has stated that college education
does not seem to be of much help in fortune building. Mr. Ling of Ling Vought
Temco who made the largest check of over 400 million was a Drop-out. Ted Warren
who made a fortune in Commodities never finished grammar school. All these men
needed was common sense and a desire to become
wealthy. So too may you through these Course Studies apply these principles
proven to be the important ones by men who have become affluent, principles
never elaborated anywhere except by this Course you are now taking. In order for
you to use this AR Rule mathematically, you need a center line about which to
measure the Action of the past, with the Reaction in the future. Such is the
marvelous order in any random movements such as occur in price movements in
free markets, that you will find many lines can be used as center lines, To
name a few of these, the fan lines you have just studied in the “Horn of
Plenty” studies charts are one example. Try it yourself on any chart and see
how this Rule will enable you to sell after rises and buy after declines. The
zero pivot to the four pivot is another useful center
line. Lines drawn through three or more Pivots are important center lines to
measure from, the more pivots such a line passes through the greater its
reliability. Each line through two or more gaps in price ranges is another.
Your Course will furnish you with examples of each of these center lines, but
now you should test your understanding of how to draw these AR lines on each of
the final lines on your “Horn of Plenty” charts. To avoid confusion from too
many lines on each chart, put tracing paper over it and draw the AR lines about
each rib of the fans. See how you are provided with the knowledge of buying
profitably after declines, and selling profitably after rises. Loss comes when
you don’t. The method of doing this you find in the “Course method to Increase
Your Holding”, and the accompanying International Minerals and Chemical Chart
(IGL). Alan H. Andrews, Director [OF 836 PAGE22] What the
ML lines show you, that make your profits certain. #1. You members are
among the few who know where the price of any stock or future is headed. It is
headed toward the latest ML, toward the minor ML first and on passing that
toward the major MLs #2. When after a long
decline price drops to the lower MLH, it signals the probability of a big rise
ahead, The 6/26/77 ML’s lower MLH was reached as shown on 8/15 and 8/23, as an
example of this rule and drop to it was signaled by #3 MLH Rule. #3. “When prices fail to
reach the ML (shown by space#1) it signals probability of a drop beyond the
prior low.” Another example of this rule is at Space#2 when prices failed to
reach the 8/8ML. The rise signaled by #2 was from 447 area
on 8/23 to 507 area in less then 3 months for a $3,000 profit. Then space #3
signaled a drop below the 10/19 low, before a reversal. Two more signals shown.
[OF 836 PAGE23] Study on
Action and Reaction Lines: In this
Course you should realize the importance of A-R lines. When a man who had made
over $50,000,000 attributes his fortune to this principle that Action and
Reaction are equal and opposite, you too will find that they can increase the
odds enormously in your favor by knowing what they tell you. One reason you
will make consistently large profits is because you will sell after rises and
buy after declines. When one check the reason for past
losses in stocks or futures, he invariably finds he has done just the opposite.
To use this method, you measure the distance from a center line such as the 0-4
line shown here. In a rise you measure back to the top pivots in order to find
an equal distance to future low pivots. You do this easily by drawing parallels
as shown. The R1 line lets prices drop through before the price rallies back
the next day to this line. When price drops through it indicates that the
previous trend will continue. When as in this case the rally back to the line
is small shows you that the prices will move lots more in the original
direction to the next trend reversal at the next R line. In R2 prices gapped, a
gap being a negative reversal. This fact was first shown in this Course. A gap
is nearly always followed that same day or the next with a reversal or another
gap. Once the
trend line was crossed by the closing price on February 10th a short sale could
have been made and held from 72 price to the present as prices continued to
drop though every R line.
[OF 836 PAGE24] Case Study course on
prices and prognostication Zero to
Three Lines: The weavers of “Meshes and Nets, Grid Matrix and Sets.” Pythagorus
and members of his Courses taught that each combination of numbers had meaning
other than that of a “Set” of numbers. As members of this Course you have seen
that the 0-4 lines are useful to measure (A) and (R) lines from, and how 1-3 or
2-4 lines in SEP [skewed expanding pivot] are useful when prices cross them as
profit makers. This study
reveals to you that these 0-3 lines no only are good lines to measure from, but
they are unique in that there is a high mathematical probability that their (R)
lines will pass through at least one P at the start of a new trend, and usually
the P at the start and the P at the end of the move, whether the move be a long
or short one. Therefore
the 0-3 line shows you what other investors would give a lot to know, viz.,
“how fast will the next drop (or rise) be, where will the start be and where
will the end be.” For examples
and proof refer to the enclosed Winnipeg Flaxseed Chart. You can start with
line D as the #1 Centerline (CL) as it passes through Pivot 0 and P3. As one of
several past Ps you can take the Gap, line C as 1(a)1,
and take line A as another, 1(a)2. In this last example you notice that this
lien passes not only through the usual low P that we measure to when prices
have been dropping, but this line also passes through the top P where the drop
started. You’ll also note that line Z-Z at the extreme left of the chart passing
through both top and bottom Ps enables you to sue it as an (a) lien about line
A as a CL And it tells you to sell short on July 31
when line B turned down pries at 330. Line B was of course the corresponding
(R) line to Z-Z. So you now
have another member of a “set” that you can use to measure from, as well as the
0-4 and 1-3 and 2-4, and other members of the “set”. As further
examples of the marvelous order, a geometrical order that you are one of the
few people in the world to know of its existence, is: 1. Since (A) and (R)
are parallel the price trend at all (R)’s from 0-3 CLs are all parallel and all
tend to pass through Ps at the top and bottom. 2. Each of these (A)
and (R) lines can also be used as a reliable CL to indicate where future prices
will change trend. Now you
should check all the other lines marked by capital letters of the alphabet with
other (A) and (R) lines that you draw in yourself. You will
notice that you have a mesh of ascending and falling parallel lines that form a
network along whose lines prices tend to rise and fall. Alan H.
Andrews. [OF 836 PAGE25]
[OF 836 PAGE26]
You members
will see that each of the three different positions shown here were taken by
getting your orders in before the market opened at the price where it might
possibly meet one of the Course lines in two cases. In the third case where the
mini ML and its H line were used to signal the buy, you assumed that prices
might rise above the H line so had your order in to buy at 197. Similarly where
you used the (3) as a CL from which to measure back to a low P in order to get
the probable distance to its corresponding High P, you see how high price would
have to rise on 2/15 in order to meet R2, and you put your order in at that
price. Similarly you’d see that 206.50 would reach 2/21/ ML. [OF 836 PAGE27] This 0-4 CL
tells you when to buy on this chart when you measure back to the distance of
each top P to five you the same distance to the next low P. This is our famous
Action & Reaction Rule that my late friend from MIT adapted from Newton’s
law of physics that “A” and “R” are equal and opposite, and on which Babson
attributed his fortune of $50,000,000. If you only learned this one rule from
this Course, you could become a millionaire also, as other people have. Each
little circle is at the top P from which the A line is drawn. To get the place
to sell you reverse and draw in another convenient 0-4 CL that slopes downward
and now measure back to the low Ps for you’re a line distance, and then draw
the opposite R line. You have several places where you can draw this 0-4, such
as the one we numbers and drew in for you. To avoid too many lines messing up
the chart, you can get semi-transparent drafting sheets at office supply stores
to put over your original chart.
[OF 836 PAGE28] Course
members who do a little chart work are making profits like those below, so get
with it.
[OF 836 PAGE29] Another
Action & Reaction Rule for price fluctuations is the (0 to 1) CCCCCL to
measure action and reaction from. Remember the “equal & opposite” part of
this Rule of the great Isaac Newton who discovered this rule in physics, and
that my friend the late Roger Babson adapted to price fluctuations, and
attributed his $50,000,000 fortune to. If you made $2000 each week for 50 years
you’d have $50,000,000. These lines are started from the closes, whereas
(0-4) lines start at the extreme of range. Note that you have a high
probability of profit by acting on each R line.
[OF 836 PAGE31] The dash
line is a (3) to measure back to the top close for (A) distances as a CL to
measure ahead to another parallel that is the (R) line where prices make a top.
This alteration of the principle “Action & Reaction are equal and opposite”
provides signals for additional Ps that are sometimes missed when we confine
our lines to those Ps that are opposite. The other
two (3) lines use the opposite principle: The top (3) has no A nor R lines so
that you can practice drawing them and see the profits you can be making after
your paper trading shows you that you have mastered this.
[OF 836 PAGE32] 0-4) is the
Zero to Four line as a center line (CL) from which to measure the distance of
the top pivot so you can measure an equal distance ahead or below for the
reaction parallels each pointing to the low pivots from which prices will rise.
[OF 836 PAGE33] A drop from
97 to 37 in a bit over 1 year offered a potential profit of 60c. Each 10c drop
showed a $5000 profit or enough to double the number of contracts held if
margin was $5000 per contract. Therefore for each 10c drop in a 60c decline you
find the number of contracts held is 32 if you started with one contract, and
giving you two eks from profit on the first drop, 4 eks after the second drop,
8 after the next , etc. Of course the 10c in Mar & Apr in 74 would wipe you
out if you had not sold at 70 area in ‘74R4, or at 62 area @ R6. But use DTRs
on DT to keep selling and UTRs on UT to keep buying with part of your profit
each time at least. Not buy signal each time price rises from the left to meet
the R line. Note sell signal each time that prices fall to the right of each R.
[OF 836 PAGE35] It doesn’t
seem to matter when you can’t decide which is the proper P4 when you draw your
0-4 to use as a CL in the Action-Reaction Rule for if you try them both as done
here in September and again in December Treasury Bonds, the R lines point to
lows from which good profits can be made except where there is a gap. But even
with a gap prices will probably come back near it so loss could be small. Note
how this A-R method works on Relative Strength Index and Weekly Range Charts.
[OF 836 PAGE36]
Case
Study Course Example of Expanding Pivot Formation, of 0-4 line as a Center
Line, and of 1-4 line as a Center Line (CL); also of the Moving Average lines
as CL.
These are
only three of the CLs that can be used to measure Action and Reaction (A) and
(R) from. Other CLs are Median Lines, (ML); Multi-pivot lines, (MPL); Peak to
Low, (P-L); (Note that this P-L is usually a 0-5 line). Also, such is the
marvelous order of Price Fluctuations that you may use lines between any two Ps
as CLs. Can you now see how this application of Newton’s Law about Action and Reaction
applied to prices, was the principle to which Roger Babson attributed his $50 million ? First you
should notice how Ps 1,3,5 are progressively higher
while Ps 2&4 are points in a down sloping line giving you the E.P.
Formation. You recall the E.P. Rule states that prices will drop at least that
distance below the 0-4 line that they are previously above that line. Now if
you had sold short near P5, you might put an order in to cover at 2.78 on June
17. But when prices gap and drop way below the R1 line on that day, you know
from this that even though prices nearly always ally back toward that R line,
they are seen going much lower. So you take your position accordingly,
following the trend down until R2. Again drops below the price at which R2
intersects, signals another 100% drop as a high probability, to R3. Here you
find the same signal. Remember that this continued drop to equidistant R1, R2, R3 is peculiar to the E.P. formation. Here only is the
probability high that you can safely ride a long trend down by observing this phenomena which is meaningless to other investors who
have not taken the Course. You may now start looking for the inverted E.P. on
other charts as well as for this E.P. above. Please note
how you can use the 30 day M.A. line together with the 10 day line to check how
far probable declines will end. Here just consider the 30 day M.A. which on
4/24 the day of P1 closed about 60 points above the M.A. on that day. Similarly
on the days of P4 and P5, about 60 points difference. Therefore you know there
is a high probability that the drops on June 17 and July 6th, will be about the
same distance of 60 points below the M.A. Line on that date. You get more
accuracy in correspondence by measurement to the close usually than by
measuring to the extreme of the range, for those days. A.H.
Andrews, Director ? 1971 [OF 836 PAGE37] “Believe it or Not” You can
learn here in this page of our Case Study Course, how to anticipate, for the
months ahead, when to take profitable action in the stock market. You can do
this be simple graphic mathematics. At the end of March, this chart gave you
all the information you needed to make money in the stock market during the
next seven months, by buying near the lows and selling near the high pivots. “here’s How”, so drink deep of the new revelations from this
Fount of Wisdom. You draw a Median Line (ML) as shown from 1 bisecting the distance between 2 and 3. Then draw another ML from b, bisecting the distance between these same pivots 2 and 3 again. One of our discoveries is that when prices meet one of these ML lines, the probability of a countermove starting at or near the meeting point is high. So whenever prices drop to meet the ML from b on the chart, and stop, you can buy with “impunity and abandon”, figuratively. And when they rise to meet the ML |
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