Aug notes - emailed to subscribers - August 11th 2002

A reminder of accumulation / distribution and the process that goes on within it. The most effective trades are once accumulation / distribution has finished, and the stock breaks one way or the other. A very good book was released about this process, from a psychological viewpoint, last year; the book is called 'Trading with Crowd Psychology', by Carl Gyllenraum, a broker, and founder of the Swedish Technical Analysts Assoc. You will find yourself talked about in this book, for sure, and I found it a very useful read. It is this sort of thing that would have been going on, for example, when TLS (tls.gif) was at its previous high prices, and as it turned out, distributing above and below $8. If you have found yourself having trouble pulling the trigger and executing a trade at the break of accumulation / distribution, this is the book for you.

On the subject of psychology, why have I not bought ICS on the way up so far? Psychology that's why. A few stops have been taken this month and last, trading is a bit tougher, I missed the first break, and have been in this stock once before, (it was on the virtual), and took a stop back then. If one is not careful, mind can very quickly turn to negative thoughts; eg, if I buy it now, sure as eggs it'll be the top, and the stock will then collapse (like last time ?), eg the Dow is down 300 points this morning, looks grim, eg the broker tells me they expect another accounting scandal tomorrow, eg, there has been an announcement already, and on and on. It is very easy to think like this, looking for all sorts of reasons why I should not buy the stock. So I don't.

But all thru last month, the trend on ICS was / is up. How to avoid the negative thoughts, and buy in? Gann pointed out that during such trends, it is rare for a stock to have more than two consecutive days of lower top lower bottom bars, before resuming the uptrend. Buy, once the high of the second day's lower bar is exceeded. It is worth doing the day counts, in addition to measuring ranges.

And even though with all I have learned about trading, the old thought patterns can still rule. I hate picking wrong, then being stopped out, even though I know that to win, you have to risk losing. And being stopped out is NOT a losing trade. Bizarre isn't it. It is only thru real trading that such emotional battles come to the surface. This is how I know Gann knew what he was writing about; you can feel it in his books.

Would be most interested to know who are the Directors of Benrace. (See chart ics.gif.)

In general:
Well we had one piece of news that had to come out to drive markets higher; Brazil is being bailed out. The market knew that already, that's why the higher low in the US on Aug 6th formed as it did, in advance. (I am as yet unable to work out what the news release will be; just that it has to come out. Be assured that Gann knew what the news release would be, you can read it in his posthumously published 1929 forecast, added to Gann's stock book by Billie Jones who bought the rights to Lambert-Gann publishing off Ed Lambert in the early eighties, Gann's former business partner.) Bailing out Brazil, the banks have come up with a suitable package to save themselves yet another bundle in faulty loans they have made. That's nice. History repeating. I hope you can see thru this process, and know that it happens every cycle. One of the biggest ever bailouts was of Baring's Bank in 1893, after Argentina defaulted on all their loans, many of which were made by Barings. Barings was the banker to Queen and royal family at the time, how could it ever be permitted to fail! (And the Queen lose all her deposits ???)

My book (on US real estate) will have a lot more on this.

Note again, how on the days these lows formed, 24/7 and 5/6, bad news covered the pages of market reporting. Watch those dates I have given you, the biggest market turns for the year are only ever on these dates. Action requires the opposite to your emotional state at the time.

Speaking of the Queen, Greenspan is to receive an honorary knighthood! Now that's nice too. For "his services in maintaining economic stability throughout his tenure, and provision of advice to the English Government" said the Queen. Yeah right. Statues are only ever built to those working hard to maintain the status quo.

This month and next, expect to see a lot of spin from the White House talking up the economy. We choose to follow the chart. Note that the last three quarters US GDP figures were late last month, revised downwards, sparking talk of a 'double dip' recession for the US. Remember how in June and early July, US economists were remarking that the market, on its downswing, was not reflecting the sound fundamentals of the economy, i.e. the original GDP figures, so the market probably had it wrong. The market always knows. Reasons for a market's move ALWAYS surface later. Never forget that. Gann said it many times. Here it is in action for you.

A couple of stocks:
MWE looks interesting on the weekly, for a break of accumulation, but again, a bit thin possibly. ARL, could be a turn around situation here, and one to watch.


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