The most important thing to know about the market is the trend. Since we aim usually to operate i... more The most important thing to know about the market is the trend. Since we aim usually to operate in harmony with this trend, a study of our Daily Trend Chart (daily vertical chart of a composite stock average) should be the starting point of all our deductions. The accompanying chart includes the total volume of transactions of all stocks dealt in daily, as indicated by the vertical lines at the bottom of the sheet. These volumes must be considered in conjunction with a study of the price movement. The element of time, as previously explained, is represented by the daily additions to the chart from left to right. The closing figure of each day is indicated by a horizontal line across each of the vertical lines which represent the range from high to low. A good way to impress upon your mind the principles involved in reading the chart is to cover all but the extreme left side of the chart, exposing only the first few days' plotting. As you read the instructions which follow, gradually slide the paper toward the right, revealing the price movement and volume one day at a time. This will have the same effect as reading the market just as if it were being recorded on the chart today and as if you didn't know what was coming next. The story told by this chart is as follows: We use the period from December 8th to December l7th as our starting point, and without regard to the market history previously recorded. This interval of nine days marked a sharp acceleration of the previous major decline, culminating in a widening spread of the daily price range and a very marked expansion in the daily volume of trading as the market reached its low point-thus reflecting the panicky selling which takes place under such conditions (see Footnote following). The volume on the 8th was around 2,000,000. This increases to 5,000,000 on the day of the low point. Tape observers would have noted the fact that a large part of this volume occurred as the market recorded the extreme low and on the rally from the lows. This confirms the fact that the climax of the downward movement (*) has actually been passed, and gives us the starting point for our next forecast. *The phenomenon of the Selling Climax is caused by the panicky unloading of stocks (supply) by the public and other weak holders which is matched against buying (demand) of (1) experienced operators; (2) the large interests and sponsors of various stocks who now either see an excellent opportunity to replace at low prices the stocks they sold higher up, or wish to prevent further demoralization by giving the market support temporarily; and (3) short covering by the bears who sense a turn. Stocks thus become either temporarily or more lastingly lodged in strong hands. An abnormal increase in volume is one of the characteristic symptoms of a selling climax, since supply and demand must both expand sharply under these conditions, but the supply is now of poor, and the demand of good, quality; and since the force of supply now will have been exhausted, a technical rally ensues. If buying on the break (i.e., during the Selling Climax) was principally for the purpose of supporting prices temporarily and checking a panic, or relieving a panicky situation, this support stock will be thrown back on the market at the first favorable opportunity, usually on the technical rebound which customarily follows a selling climax. This, and other selling on the
The most important thing to know about the market is the trend. Since we aim usually to operate i... more The most important thing to know about the market is the trend. Since we aim usually to operate in harmony with this trend, a study of our Daily Trend Chart (daily vertical chart of a composite stock average) should be the starting point of all our deductions. The accompanying chart includes the total volume of transactions of all stocks dealt in daily, as indicated by the vertical lines at the bottom of the sheet. These volumes must be considered in conjunction with a study of the price movement. The element of time, as previously explained, is represented by the daily additions to the chart from left to right. The closing figure of each day is indicated by a horizontal line across each of the vertical lines which represent the range from high to low. A good way to impress upon your mind the principles involved in reading the chart is to cover all but the extreme left side of the chart, exposing only the first few days' plotting. As you read the instructions which follow, gradually slide the paper toward the right, revealing the price movement and volume one day at a time. This will have the same effect as reading the market just as if it were being recorded on the chart today and as if you didn't know what was coming next. The story told by this chart is as follows: We use the period from December 8th to December l7th as our starting point, and without regard to the market history previously recorded. This interval of nine days marked a sharp acceleration of the previous major decline, culminating in a widening spread of the daily price range and a very marked expansion in the daily volume of trading as the market reached its low point-thus reflecting the panicky selling which takes place under such conditions (see Footnote following). The volume on the 8th was around 2,000,000. This increases to 5,000,000 on the day of the low point. Tape observers would have noted the fact that a large part of this volume occurred as the market recorded the extreme low and on the rally from the lows. This confirms the fact that the climax of the downward movement (*) has actually been passed, and gives us the starting point for our next forecast. *The phenomenon of the Selling Climax is caused by the panicky unloading of stocks (supply) by the public and other weak holders which is matched against buying (demand) of (1) experienced operators; (2) the large interests and sponsors of various stocks who now either see an excellent opportunity to replace at low prices the stocks they sold higher up, or wish to prevent further demoralization by giving the market support temporarily; and (3) short covering by the bears who sense a turn. Stocks thus become either temporarily or more lastingly lodged in strong hands. An abnormal increase in volume is one of the characteristic symptoms of a selling climax, since supply and demand must both expand sharply under these conditions, but the supply is now of poor, and the demand of good, quality; and since the force of supply now will have been exhausted, a technical rally ensues. If buying on the break (i.e., during the Selling Climax) was principally for the purpose of supporting prices temporarily and checking a panic, or relieving a panicky situation, this support stock will be thrown back on the market at the first favorable opportunity, usually on the technical rebound which customarily follows a selling climax. This, and other selling on the
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