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
Would be most interested to know who are the Directors of Benrace. (See
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.
TLS - PDF
ICS - PDF