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GeorgeLindsayandtheArtofTechnicalAnalysis
TradingSystemsofaMarketMaster
EdCarlson
VicePresident,Publisher:TimMooreAssociatePublisherandDirectorofMarketing:AmyNeidlingerExecutiveEditor:JimBoydEditorialAssistant:PamelaBolandSeniorMarketingManager:JuliePhiferAssistantMarketingManager:MeganColvinCoverDesigner:AlanClements
ManagingEditor:KristyHartProjectEditor:BetsyHarrisCopyEditor:CheriClarkProofreader:WaterCrestPublishing,Inc.Indexer:LisaStumpfCompositor:NonieRatcliffManufacturingBuyer:DanUhrig©2012byPearsonEducation,Inc.PublishingasFTPressUpperSaddleRiver,New
Jersey07458Thisbookissoldwiththeunderstandingthatneithertheauthornorthepublisherisengagedinrenderinglegal,accounting,orotherprofessionalservicesoradvicebypublishingthisbook.Eachindividualsituationisunique.Thus,iflegalorfinancialadviceorotherexpertassistanceisrequired
inaspecificsituation,theservicesofacompetentprofessionalshouldbesoughttoensurethatthesituationhasbeenevaluatedcarefullyandappropriately.Theauthorandthepublisherdisclaimanyliability,loss,orriskresultingdirectlyorindirectly,fromtheuseorapplicationofanyofthecontentsofthisbook.
FTPressoffersexcellentdiscountsonthisbookwhenorderedinquantityforbulkpurchasesorspecialsales.Formoreinformation,pleasecontactU.S.CorporateandGovernmentSales,1-800-382-3419,[email protected].,[email protected].
Companyandproductnamesmentionedhereinarethetrademarksorregisteredtrademarksoftheirrespectiveowners.Allrightsreserved.Nopartofthisbookmaybereproduced,inanyformorbyanymeans,withoutpermissioninwritingfromthepublisher.PrintedintheUnitedStatesofAmericaFirstPrintingAugust2011
ISBN-10:0-13-269906-0ISBN-13:978-0-13-269906-8PearsonEducationLTD.PearsonEducationAustraliaPTY,LimitedPearsonEducationSingapore,Pte.Ltd.PearsonEducationNorthAsia,Ltd.PearsonEducationCanada,Ltd.PearsonEducatióndeMexico,S.A.deC.V.
PearsonEducation—JapanPearsonEducationMalaysia,Pte.Ltd.LibraryofCongressCataloging-in-PublicationDataCarlson,Ed,1959-GeorgeLindsayandtheartoftechnicalanalysis:tradingsystemsofamarketmaster/EdCarlson.p.cm.Includesbibliographical
referencesandindex.ISBN978-0-13-269906-8(hbk.:alk.paper)1.Lindsay,George,1906-1987.2.Technicalanalysis(Investmentanalysis)I.Title.HG4529.C36762012332.63'2042—dc232011017617
Contents
IntroductionPartI.Biographyand“TheOtherHistory”Chapter1.Biography
Chapter2.TheOtherHistory
PartII.ThreePeaksandaDomedHouse
Chapter3.ThePhenomenon
Chapter4.ThreePeaks
Chapter5.ADomedHouse
Chapter6.TheTri-DayMethod
PartIII.TheLindsayTimingModelChapter7.Overviewofthe
LindsayTimingModel
Chapter8.KeyDates
Chapter9.TheLow-Low-HighCount
Chapter10.CombiningtheCounts
PartIV.TheCountsChapter11.Long-Term
CyclesandIntervals
Chapter12.BasicMovements
Chapter13.CountsfromtheMiddleSection
Chapter14.CaseStudy:The1960s
GlossaryIndex
Thisbookisdedicatedtomywife,Keika,forherpatienceandsupportduringthewritingofthisbook.
Andtoouryoungson,EdwardKazuya,whosebigsmileandglowingoptimismbrightenedeventhedarkestdaysandwhowasalwaystheretoenthusiasticallyapplaudevenmymost
meageraccomplishments.
Acknowledgments
TheAuthorwouldliketoacknowledgeandthankthefollowingpeoplefortheirhelpinprovidingtheinformationnecessarytomakethisbookareality.Theirhelprangedfrompersonalrecollectionstoprovidingactualresearchandcorrespondencefrom
Lindsay.Theyarepresentedinalphabeticalorder.StephanieCassidy(Archivist,ArtStudentsLeagueofNew
York)PhilCovato
ArchCrawford
PeterEliades
CarlFutia
YaleHirschKarenE.King(Curator,
NationalPublicBroadcastingArchives)
LarryPesavento
GeorgeSchade
LarryWilliams
JonathanWoodVeryspecialthanksareowed
tothefollowingpeople:JohnBollinger,whosharedatreasure-troveofoldLindsaynewslettersandcorrespondence.Thiswouldhavebeenaverydifferentbookwithoutthosematerials.ReaderswhohavebeenexposedtoLindsay’swritingsonlyviatheInvestorsIntelligencecollectionwillfindtheirworldsexpandedsignificantlythankstoJohn’s
safeguardingofthesematerials.JaniceTeisch,widowofStuartTeisch,Lindsay’spartner.Janicesharedherinsider’sviewoftheLindsayorganization.Shealsohadasuitcasefullofpastreports,photos,andsoon,whichmadeadefiniteimpactonthisbook.Lastly,averywarmthankyouisowedtothefamilyof
GeorgeLindsay.Theirsupportandencouragementforthisbookwassecondtonone.Theirintimateknowledgeofaman,whommanydescribedasaloner,providedinsightswhichcouldhavecomefromnowhereelse.MythanksgotoVickieLindsayGilbert,DonGilbert,TamaraMitchell,and,mostnotably,JamesLindsay,whosehoursofwork,e-mails,andphonecallscould
neverreceivetheirduepraise.Helpwasalsoobtainedfromthefollowingorganizations:TheCMEGroupInvestorsIntelligence
ToobtainacollectionofGeorgeLindsayarticles,pleasecontactInvestorsIntelligence30ChurchStNewRochelle,NY10801
914-632-0422www.investorsintelligence.comAllpricechartswerecreatedinMetaStock,Equis.com.
AbouttheAuthor
EdCarlson,CMT,isanindependenttraderandconsultantbasedinSeattle,Washington.HehoststheMTAPodcastSeries:ConversationsandmanagesthewebsiteSeattleTechnicalAdvisors.com.Edspent20
yearsasastockbroker;heisacharteredmarkettechnicianandholdsanM.B.A.fromWichitaStateUniversity.
Introduction
“Ithasbeenproventimeandtimeagainthattrueandlastingsuccessliesinthedisseminationofknowledge,ratherthaninitsconcealment.”1—R.N.Elliott,founderofElliottWaveanalysis
WhowasGeorgeLindsayandwhydidIundertaketowritethisbook?Ifyou’veneverheardofGeorgeLindsay,you’vealreadyansweredthesecondpartofthequestion.Lindsaywasconsidereda“stockguru”inthe1960sand1970s.HismarketopinionsoftenappearedintheNewYorkTimesnexttootherprognosticatorswhosenamesaremorecommonlyknown
today,butveryfewpeopletodayareacquaintedwithLindsay.Evenamongtechnicalanalystswhodoknowthename,veryfewarefamiliarwithhiswork.Lindsay’sideasareindangerofbecominglosttohistory.Heneverwroteabookonhismarketmethods,onlynewsletters.Hedidwriteonebook(TheOtherHistory,examinedinChapter2)butit
pertainedtopoliticsandhistory,notthemarkets.Thisbookistheresultofreviewinganuntoldnumberofhispastnewslettersandcobblingtogetherthepartialdescriptionsofhisdifferentmodelsintocoherent,step-by-stepexplanations.It’snowonderthatveryfewmarketparticipantshavechosentousehismethods.ReadingLindsay’s
newslettersislikedrinkingfromafirehose.Hisstyleofwritingisverydifficulttoread.Thereadernevergetsamomentto“catchhisbreath”astheideasjustkeepjumpingoffthepage.Thepresentationformatofhisnewslettersisdifficultaswell.Modernreadershavebecomeaccustomedtotheformattingofwordprocessors—bullets,labeling,chartsplacednearthenarrative,andsoon.AsI
readLindsay’snewsletters,Iimaginedhimsittingatatypewriter,typingtotherightsideofthepage,reachingupwithhislefthandtoshiftthecarriagebacktostartanewline,andblastingthroughyetanotherline,theideaspouringforthwithverylittlethoughtgiventoanyonetryingtoassimilatethemassofinformationbeingthrownatthem.
WeliveinaworldthatwouldsendthebestandbrightestofagenerationofftofightanddiefortheinvisiblehandofAdamSmith,butaskthosesamepeopleabouttechnicalanalysisandtheycallitvoodoo.Thosewhohaveacceptedandpracticetechnicalanalysistendtogatherintotheirowncampsoflike-minedanalysis.Lindsaywasanunintentionaliconoclast.Hisapproach,
whileoftenincorrectlydescribedascycles,wasanoriginalapproachdifferentfromanythingpreviouslyknown.LikeLindsay’smother,whospentthemajorityofheractingcareeroff-Broadway,Lindsay’sideasweredecidedly“off-WallStreet.”Moderntechniciansoftenseemtobespendingmoreandmoreoftheirtimeexaminingthemicro—30-minutecharts,5-
minutecharts,tickcharts—anapproachwhich,whentakentotheextreme,ismyopicandcanborderonnihilism.Lindsaytookabroad,perhapshealthier,viewofthemarket—butonethatshouldn’tbeconfusedwithanythingapproximatingthebuy-and-holdapproach.Whileothersmayfocusonthetrees,Lindsaywasbusymappingtheforest.
Ithasbeensaidthatinordertounderstandthephilosophy,onemustunderstandthephilosopherandhistimes.NeverwasthistruerthanintryingtounderstandtheworkofGeorgeLindsay.Lindsayhasbeenamysteryfigure.Priortothisbook,verylittlehasbeenknownaboutthemanhimself.WhowasLindsay?Geniusorhigh-schooldropout;artistorsophisticatedWallStreet
professional;heterosexual,homosexual,orasexual;aright-wingpoliticalconservativeoranonconformistdreamerandfuturist?TheanswerstothesequestionscomefromanunderstandingofLindsay’sbackgroundandhencethebiographyinChapter1.Lindsay’sexperienceasanartistcanbeseenthroughouthisworkinthemarkets.
CharlieParker,thegreat,early-twentieth-centuryjazzsaxophonist,oncesaid,“You’vegottolearnyourinstrument.Then,youpractice,practice,practice.Andthen,whenyoufinallygetupthereonthebandstand,forgetallthatandjustwail.”That’sprobablygoodadvicewhenusingthemodelsLindsaycreated.Likemusic,hismodelswerefullofrulesandspecificcountsbutthe
magiclayintheexceptionstothoserules.Itisbylearningandpracticingtheguidelineslaidoutinthisbookthatonecanhopetoachievethatproverbial“feelforthemarket”and“justwail.”
EdCarlsonMarch2,2011
Endnote1RobertPrechter,R.N.Elliott’sMasterworks,1980/1994/2005.
PartI.Biographyand“TheOther
History”Chapter1:BiographyChapter2:TheOther
History
Chapter1.Biography
“IcanunderstandyourfeelingsaboutNewYork,butIdon’tthinkIwouldbecontentanywhereelse.Iamsingleandunconventionalandcanbreatheonlyinabigcity.”—GeorgeLindsay
FamilyHistoryGeorgeLindsayappearstobethefourthgenerationoftheLindsayfamilyborninVirginia.George’spaternalgrandfather,AlbertLoftusLindsay,wasanofficerintheConfederatearmyduringtheAmericanCivilWar.InApril1862,AlbertwasmadechiefofGeneralJohnBankheadMagruder’ssignalcorps.Albert’sinterestincodesand
“secretmessages”wouldonedaymanifestitselfinGeorge’spassionfortechnicalanalysis.GeorgeLindsay’smother,NellieVictoriaMeyerLindsay(b.1876;d.1954)wasanactressinmusicalcomedies,onandoffBroadway,andusedthestagenameNellieVictoria.Aphoto,dated1903,ofNellieVictoriacanbefoundinthe
Macauley’sTheatrecollectionintheUniversityofLouisvillearchives.AnotherphotoofNellieVictoriacanbefoundintheUniversityofWashingtonLibraries,SpecialCollectionsDivision.NellieLindsaypassedawayonDecember8,1954.George’sfather,GeorgeSr.(b.1863;d.1921),studiedengineeringandgraduatedin1882fromVirginiaTech.He
wasChiefJournalClerkoftheVirginialegislatureforseveraldecades.HewasappointedCommissionerofValuationsforNorfolk,Virginia,onMarch27,1900,andservedasthefirstheadoftheIRSinNorfolk,apositionhehelduntilhisdeathin1921.GeorgeLindsaywasbornNovember11,1906,inPortsmouth,Virginia,
followedbyhisbrother,FrankLoftusLindsay,in1910.Thefamilyhomeat229MountVernonAvenueinPortsmouthremainstheretoday.Atage14,afterthepassingofhisfather,GeorgewassenttothePenningtonSchoolinNewJersey,aboardingschool60milesawayfromhisremainingfamily,whomovedtoNewYorktobewithNellie’ssister.
AninterestinengineeringrandeepintheLindsayfamily.Hismother’sartistictalentswereinheritedbyGeorgeaswell.InheritingthesetwoverydifferentattributesnotonlymadefortheperfectbackgroundtoLindsay’slaterinterestintechnicalanalysisbutsurelycontributedtohisuniqueapproach.
Artist
Bythefallof1927,at21yearsofage(seeFigure1.1),GeorgewasenrolledintheArtStudentsLeagueofNewYork.TheschoolboastsanimpressivelistofalumniincludingGeorgiaO’Keeffe,JacksonPollock,andRoyLichtenstein.
Figure1.1.Georgeat21yearsofage.(Source:
Lindsayfamily)
Lindsaybecameinvolved
withoneoftheheavyweightsintheadvertisingbusinessatthattime,JamesYates.FamilymembersrecountthatGeorgewasinvolvedwitharedesignoftheCamelcigarettepackinthe1930s.Heevenhadhisbrother,Frank,drawtheparallellinesonthepyramids.Itiswell-documentedthatJamesYates,whileartdirectoratWilliamEsty,handledtheCamelCigaretteaccount,soa
connectionbetweenthetwomenisclear.YateseventuallybecameArtDirectorforTheSaturdayEveningPost.By1933,GeorgewasworkingasacommercialartistforMacy’sDepartmentStores.DespitetheconsensusviewofthosewhoknewhimlaterinlifethatGeorgewasahomosexual,itisknownthathedidproposemarriagetoawomanin1931.George
neveropeneduptoanyoneastowhatwentwrongintherelationshiporwhysheturnedhimdown.Lateinherlife,Nelliewouldtellothersthatinthe1930sGeorgewouldstayinhisroombyhimselfandplaytheVictrola,laugh,and“haveagrandtimeallalone.”Asotherswouldrecountinthefuture,Georgewasnotatalkativeman.Yet,despitethese“quirks,”Georgewaspersonableand
alwaysavailabletoanswerquestionsabouthiswork.
ChicagoNooneknowsforcertainwhenLindsaydevelopedhisinterestinthemarketsorhisuniqueideasandapproach.ButonJune1,1939,Georgepaid$1,475foraseatontheChicagoBoardofTrade(seeFigure1.2),soitcanbeassumedthathehadbeen
intentlyworkingonsomeofhisideasbythenandwaslookingforawaytotestthem.Ayearlater,afterGermanyinvadedParisonJune14,1940,tradingattheCBOTcametoavirtualstandstill.AswillbeshowninChapter2,“TheOtherHistory,”GeorgehadanimmenseknowledgeofhistoryandcouldprobablyseethattheimmediatefutureattheCBOTwasbleak.That
wouldexplainwhy,onJune12,1940,hehadalreadysoldhisseatontheexchange.Hewaspaid$1,300forit.
Figure1.2.GeorgeinfrontoftheChicagoBoardofTradein1939.(Source:
Lindsayfamily)
LosAngelesAmonthearlier,FrankhadmovedtoLosAngelesinsearchofwork.Itwouldn’thavetakenmuchtopersuadeanunemployedGeorgeandNellietoleavethecoldNewYorkwintersandmovetowarmandsunnyLosAngeles.The1944voterrollsshowGeorgeandNelliebothregisteredasRepublicansandlivinginanapartment
buildinginHollywood.GeorgecontinuedtolivewithNellieuntilherdeath.GeorgewrotethathestudiedaircraftengineeringattheUniversityofSouthernCaliforniaattheoutbreakofWWIIandthenworkedasanengineerforMcDonnellDouglasduringtheperiod1942–45.Hecouldn’thavebeenatUSCforlongbecausehewasstillinChicagoin
mid-1940andbeganhisemploymentatDouglasAircraftin1942.GeorgewaspartofamassivehiringboomatDouglasAircraft.WorldWarIImeantgoodtimesforDouglas.Butthecompanysufferedattheendofhostilities.TheDouglasAircraftCo.wasforcedtocutitsworkforceby100,000peopleattheendofthewar.Nodoubt,anartist
withlittleinthewayofanengineeringbackgroundwasamongthosetobeletgo.ThereisnorecordofGeorgebeingemployedafterhistimeatDouglasAircraft.ItisthoughtthatbythistimeGeorgecouldn’thandlethepressureandfrustrationinvolvedinworkingwithothers.Hewrotehispamphlet“AnAidtoThinking”in1950and
foundedhisadvisoryservicein1951.Bythe1950s,GeorgewasitchingtogetbacktoNewYorkbutwasneededtostayinCaliforniatotakecareofNellie,whohaddevelopedbreastcancer.ItisthoughtthatGeorgepreferredthecoldclimateofNewYorktothebalmybreezesofSouthernCalifornia.Itiswell-knownthatinlateryearsinNewYork,Georgewouldkeepawindowopenduring
thewinter.Accordingtofamilymembers,thetimesurroundingNellie’sdeathandtheroleGeorgeplayedasherprimarycaregiverwasGeorge’s“shininghour.”AfterNellie’sdeath,GeorgeleftLosAngelestoreturntoNewYorkin1955.
TheAnalystQuitealegendhasgrownuparoundGeorgeLindsay.Yale
Hirsch,intheStockTrader’sAlmanac,wrote,“GeorgeLindsayisoneofthefewpeopleintheworldwhofrommemorycanreproduceachartofstockmarketpricesforeveryoneofthelast150years.”Lindsay(seeFigure1.3)wasa“unique”individual.Hewasoftencalledeccentric,aloner,peculiar,seeminglybizarre,brilliant,andatypical“GreenwichVillage
Bohemian.”Andyethehasbeendescribedjustasmanytimesassharing,modest,open,kindandgenerous,notmaterialistic,havingadesiretohelpothers,averysharingperson,andwillingtoadmittobeingincorrect—twosetsofpersonalitytraitsthataredifficulttoreconcile.
Figure1.3.Georgecirca1960s.(Source:Lindsay
family)
Hislastresidence,720GreenwichStreetinGreenwichVillage,wasa
studioapartmentthathadaseparatebathroom(thewatercontinuallydrippingfromthebathroomtap)andasmallkitchenwithswingingdoors,thoughherarelycookedforhimself.Hesleptonaconvertiblesofainthemainroomanddidmostofhisworkonacardtablethere.Hehadonesmallbookcase.Aposteronhiswall,ofanakedVenusinaclamshell,hehadfoundonthesidewalkin
someone’strash.Lindsaydidn’tevenownatelevision.Theceilinginhisapartmentwasveryhighandtherewasabigwindowthathewouldkeepopeneveninthewinter.Lindsaywasnocturnalsoheworkednights.Hehadastrangelivingpatternwhichincludedbreakfastat3:00a.m.Henevergotaroundtobuyingdressshirts,andhisentiresupplycamefromhis
sister-in-law,Mary,andniece,Vickie,inCalifornia.Despitethislackofinterestinclothingandhisimmediatesurroundings,Lindsaywasknowntobeaveryvainindividual.Hehadatleasttwoface-liftsduringhislife.Unfortunately,thelastface-liftlefthimabitstrangeinappearanceasitpusheduphiseyebrowssohelookedperpetuallysurprisedorasifhiseyebrowsmighthave
beenburnedoff.Healsoworeatoupee.Atonetimeheownedthree:onetolookasthoughhehadjusthadahaircut,onetolookasthoughheneededahaircut,andonetoappearasa“normal”length.
PoliticalViewsInFebruaryof1970,RalphNaderannouncedtheformationofCampaignGM.
Thecampaign’sgoalsincludedconvincingGM’slargeinstitutionalshareholderstoforceGMto“makealargercommitmenttosolvingsuchproblemsasairpollution,highwaysafety,andjobopportunitiesforminorities.”1
FourdaysafterthedefeatofCampaignGM’sproposalatthe1971shareholders’meeting,Lindsayfeltthe
needtowritethefollowinginhisMay28thnewsletter:“ThecentralideaofRalphNader’sorganizationisthatvariousgroupsshouldberepresentedinmanagement—forexample,consumers,ethnicminorities,dealers,workers,etc.Thisgoesunderthegeneralheadingof‘consumerism’today,butitisstraightoutoffascism.Notthefascismthatweremember
fromHitler,buttheoriginaldoctrineasintroducedbyMussoliniin1922.AndGeneralMotorscontinuesunderassaultonthegroundsthatitistoobig.This,ofcourse,isanessentiallysocialisticidea.”2
FromthissmallinsightintoLindsay’sthinking,andhisCaliforniavoterregistrationasaRepublican,itcanbeinferredthathispoliticswere
decidedlyright-wing,conservative.ThemodernreaderwillfindLindsay’spoliticstobeyetanotherincongruouspersonalitytraitofhisastheconsensusopinionofLindsayduringhisNewYorkyearswasthathewasahomosexual.Lindsayisdescribedbyhisfellowanalystsatthattimeasflamboyant,flaming,anonstoptalker,delightful,andexhilarating.Lindsaymust
havecutquiteafigurewithhisbrightredwig,blackpatentleatherboots,bluedouble-breastedblazer,andastripedshirtsentbyCaliforniarelatives.InalettertofellowtechnicianJamesAlphier(October18,1971),Lindsaywrote,“Iamsingleandunconventionalandcanbreatheonlyinabigcity.”3
AdvisoryService
LindsayfoundedhisadvisoryservicewhilestillinCaliforniain1951,anditlasteduntil1975.HewroteaweeklyinvestmentletterhecalledGeorgeLindsay’sOpinion.InFebruary1972,at65yearsofage,Lindsaywenttoamonthlyformat.Lindsaymaintainedhisadvisoryserviceuntil1975andafterthatwrotefourlettersayearaspartofJohnBrown’sTheAdvisor,whichwaspublished
inHouston,Texas.In1979,hebecameaconsultantwithErnst&Company,whichtookovertheproductionofthenewsletter,stillbasedonLindsay’sanalyses.Hestoppedpublishingthenewsletterin1984.Lindsaydidnottradeforhisownaccount.Hislovewastheresearchhewasdoing,andby1969hisprimaryresearchdidnotconcernthemarkets.Rather,hehaddiscovered
“intervals”inhistoryandwascertainhehaddiscoveredawaytopredicthistoricalevents.In1971,hepresentedhisideasatthefirstinternationalconferenceoftheWorldFutureSocietyinWashington,D.C.HealsomadeseveralpresentationsonhisdiscoverytoaNewYorkorganizationhebelongedtocalledS.I.R.E.,theSocietyforInvestigationofRecurringEvents.Hisideasare
presentedindetailinthenextchapter.
StuartTeischStuartTeischisanamethatappearedonthebylineofLindsay’snewsletternexttoLindsay’sownname.TeischwastheotherhalfoftheLindsayorganizationandhada17-yearassociationwithLindsay.StuartTeischwasbornApril29,1929.Anative
NewYorker,hestudiedpodiatryatLongIslandUniversityandwasapracticingpodiatristbythetimehediscoveredtechnicalanalysis.TechnicalanalysissoonbecameTeisch’spassion,andhegaveuphismedicalpracticetofullyimmersehimselfinthemarkets.Teisch’sfamilywereevenpartoftheorganization:Hismotheractedasthecompany’s
bookkeeper,andhisfatherandTeisch’swife,Janice,bothhelpedwiththeday-to-dayoperationsofthebusiness.WhenLindsayretiredinthe1970s,StuartandJanicemovedtoArizona,wherehestartedaphoneadvisoryserviceandnewsletter.Inhislateryears,TeischworkedforCharlesSchwab.StuartTeischpassedawayonMarch
30,1998,inScottsdale,Arizona.
TrackRecordBy1980,Lindsay’sadmirerswerelegionandhisdetractorswerefew.Theraceforfirstamongequals,intheeyesofthepublic,however,allowsforonlyonechampion.Atthattime,thecupwenttoJoeGranville,theKansasCitytechnicianfamousforhisOn
BalanceVolumeindicator.Granvillewasknownasagreatshowmanwhowouldemergefromacoffinataninvestmentconference,orappeartowalkacrosswater(ataswimmingpool)whenmeetingclients.WhileacomparisontoGranvillewashardlythekindofthingLindsaywouldhaveappreciated,hemusthaveknownhehadreacheda
rarifiedlevelintheeyesofthepublicwhentheanalystJamesAlphierpublishedareportin1981titled“GranvilleinPerspective.”InithesummarizedGranville’srecord.Hethencomparedittotherecordsofthefewmarketanalystswhoweretruemarketgurusbecauseoftheirlongrecordsofsuccessfulpredictions.ListedamongthoseguruswasLindsay.
Alphierwasn’ttheonlyonetotakenoteofLindsay.YaleHirsch,publisheroftheStockTrader’sAlmanac,hadtakenaninterestinLindsay,aswell.In1968,theAlmanacbeganpublishingLindsay’sannualforecastandcontinueddoingsoforoveradecade.Inthe1968StockTrader’sAlmanac,YaleHirschwrote:“ManyannualforecastsarepublishedeachJanuarybyleadingWallStreetanalysts.
OneunusualforecasterwhohasattemptedtheimpossibleduringthepasttenyearsisGeorgeLindsay,editorofGeorgeLindsay’sOpinion.Eachyearhepredictsthecourseofthestockmarketforawholeyear,onamonth-to-monthbasis,pinpointingralliesanddeclinesandestimatingthepricerangeoftheDowJonesindustrialaverage.”TheStockTrader’sAlmanaccalledLindsay’s
1969forecast“thefinestlong-termforecastwehaveeverseen.”In1987,JohnBrown,whohadmergedtheLindsayletterintohisown,publishedaletterfromLindsaydatedJuly1,1987.LindsaydiedshortlythereafterbutnotbeforecommunicatinghisfeelingstoBrownthat“itnowseemslikelythatthelasthighwillcomesometimeinAugust
1987.”OnAugust25th,theDowstartedwhatappearedtobeanormalcorrectionbutonethatmorphedintooneofthebiggestWallStreetcrashesinhistoryasitfellover40%duringthenext39tradingdaystoanintradaylowonOctober20,1987.
WallStreetWeekwithLouisRukeyserLindsayappearedtwiceon
LouisRukeyser’stelevisionprogramWallStreetWeek—onceonOctober11,1981,andagainonMay8,1983.WallStreetWeekwasproducedbyMarylandPublicTelevisionandwasthefirstnationallysyndicatedtelevisionshowtofocusonWallStreet.Theshowranfor32yearsbeforeRukeyserleftin2002.Aninsidejokeamongfamily
memberswasthatbecauseGeorgedidn’tlikecoatsandties,theonlydressshirthehadavailabletowearontheprogrambythattimehadaholeintheleftshoulder.Duringhislastappearanceontheprogram,onlookerscommentedthatLindsaystruggledtogettothestageandhadtobehelped.Yearslater,duringanepisodefeaturingsnippetsofpast
guestsandhighlightingeachguest’sforecastingability,Rukeysersaid,“InOctober1981,eightmonthsbeforehistory’sgreatestbullmarketbegan,Iinterviewedaseeminglybizarreguest,whoturnedouttobeanuncannilyaccurateforecaster.”DuringhisfirstappearanceontheprograminOctoberof1981,RukeyserhadaskedLindsay,“Whendowegetoutofthisbearmarketandintothatbull
market?”Lindsayreplied,“Theendofthebearmarket—theearliestIcancountitisaboutAugust26,1982.Ithink750to770ismoreliketherangeofthefinallow.”TheintradaylowofthebearmarketoccurredonAugust9,1982,andtheclosinglow,threedayslater,wasat776.92.
Death
Lindsay’sobituaryintheNewYorkTimesstatesthathediedofaheartattackonAugust6,1987.George’smarkerisatOakHillMemorialParkinSanJose,California,wherehisashesareinterred.
ConclusionNoone’slifecanbesummedupinjustafewwords.Theobjectiveofthischapterisnot
onlytodocumentLindsay’sunusualabilitytotimethemarketbutalsotoprovidesomeunderstandingofthepersonalhistorythatproducedthatability.Whendrawingapicture,onedifferencebetweentheartistandnonartististhewayinwhichtheylookattheblankpagebeforethem.Thenonartistoftenbeginsbydrawinganobject,indetail,inoneareaofthepageand
thenmovingontoanotherdetailedobjectinadifferentarea.Anartist,ontheotherhand,willthinkintermsoftheentirepageandusebroad,sweepingmotionsunafraid,almostuninterested,inthedetailsofthefiguresuntilthebroadsketchiscompleted.ThisapproachisvividlyclearinLindsay’sapproachtothemarketsandisverydifferentfrommostapproachestotechnicalanalysistoday.
Endnotes1Science,May29,1970,Vol.168no.3935,pp.1077–1078.
2Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
3GeorgeLindsay,lettertoJamesAlphier,October18,1971.
Chapter2.TheOtherHistory
“Everythingintheuniversemovesinarhythm.Nothinghappensatrandom.Theunderlyingfactorsare,intheirturn,subjecttothesamerhythmsasthefinalproduct.Thewholeisnot
thesumoftheparts,butboththewholeandpartslaborundersimilarinfluences.”1—GeorgeLindsay
ItiswidelyknownthatLindsay’sgreatestpassionwasthesubjectmatterinhisbook,TheOtherHistory,whichhecalled“technicalhistory.”Lindsaycoinedtheterm(anallusiontotechnical
analysis)todescribethemethodsexplainedinthisbook.TheOtherHistorywasLindsay’sonlybook.Itisnotknownwhetherheattemptedtogothroughnormalpublishingchannels,butintheendheself-publishedthebookthroughVantagePublishing,a“subsidy”publisher.Inotherwords,hepaidtohaveitpublished.
Forawriterwhosesubjectmatterwasdifficultandwritingstyledense,Lindsay’sbook,TheOtherHistory,mustbe,unfortunately,themostimpenetrableexampleofhiswriting.Jampackedwithminutedetailsandobscurereferences,thebookleavesthereadertodetermineforhimselfwhetherLindsaywasgraspingatstrawstobuildhiscasefor“technicalhistory”orwhetherhewas
actuallyontosomething.“Herodotusdied2400yearsago,buthisinfluenceisstillpervasive.Everyhistoricalworksincehisdayhas,withrareexceptions,adheredtothemodelhesetup.Ithasbeenastraightnarrativeofeventsinchronologicalorder;totheextentthattheauthortriedtoexplainthematall,hereliedonacceptednotionsofcauseandeffect.”
Lindsaywrotethatonly20bookshadbeenwrittenoverthepreviouscenturyinthisgenre.HementionsasnotableDupuy’sOriginedestouslescultes,HistorionomiebyStromervonReichenbach,andLesrhythmesdansl’historiebyGastonGeorgel,addingthathisbookisintheschoolofGeorgel.HealsonotesthatverylittlehasbeenwrittenonthesubjectinEnglishotherthanTheLawof
CivilizationandDecaybyBrooksAdamsandTheRuleofPhaseAppliedtoHistorybyHenryAdams.ItissafetoassumethatLindsaydevelopedtheseideashimselfasanoutgrowthofhismarkettimingtechniques.NonumberofexamplescanservetoconvincetheskepticalmindofLindsay’sideas.Butthemindismuchmoreopento“technical
history”afterareviewofLindsay’smarkettimingtechniques,whichalsoincludetheconceptoftimeintervals.Theskepticalareadvisedtorereadthischapterafterfinishingtheremainderofthebook.
TimeIntervalsTheOtherHistory,likeLindsay’sworkinthestockmarket,isconcernedwith
intervalsoftime.Thestartingpointisalwaysanagitation:“Anagitationisaheightenedconsciousnessandincreasedactivityamongalargenumberofpeopleataspecificmomentintime.Itisnormallydirectedtowardacertainend.Anagitationmaybephysicalinnature,inwhichcaseitusuallyinvolvesbloodshed;oritmaybeintellectualoremotional.”Theimportantnumberstobe
acquaintedwithare36,40,and56.Theseareintervalsoftime—36years,40years,and56years.Eachintervalisapointestimate;Lindsayallowsforayearoneithersideofthepointestimate,so36yearsisthenameofanintervalthatactuallyendsanywherefrom35to37yearsafterthestartingpoint,oragitation.Thesameappliesto40and56.Afinalintervalinvolvestheyears64–69.
Whathappensintheinterim,betweenintervaldates,isirrelevantandmaybeignored.Theseintervalsmarktimesofeaseorsuccessaftertheinitialdifficultiesassociatedwiththestartingpointortimeofagitation.“Accordingtothetheory,anycollectiveundertakingfails,orsucceedsimperfectly,unlesstherewasanagitationdirectedtoward
thesameendabout36or40yearspreviously,andunlessthecentralideabehindtheeffortwasclearlydefinedatroughlythesametime.”Thefirstintervaltooccurafteranagitationvaries.Itmaybe36years(35–37years)or40years(39–41years).Asasidenote,thisbookwasbeguninthe41styearafterthepublicationofTheOtherHistory.
Oftenthereisaretrogrademovement.Theretrogrademovementisanattempttoturnbacktheclockwhichrunscountertothemaintrendofdifficulttoeasy.“Italwaysappearsshortlybeforethemomentoffinaltriumph,andconfusestheoutlook.”Theretrogrademovementnormallyappearsshortlybeforetheexpirationof40years.Thenextintervalisthatof56years(55–57years)
andafterthat,thefinalintervalof64–69years.
WarsandUnsuccessfulRevolts“...throughouthistory,themisfortuneatanintervalafteranunsuccessfulrevolthasnormallytakentheformofamilitaryreversal,thedeathofasovereign,theendofadynasty,oracombinationofthese.”
AnagitationofaphysicalnaturethatLindsayspendsafairamountoftimediscussingisthatofunsuccessfulrevolts.Theseintervalsarelookeduponfromtheviewofthesuccessfulsovereign.Repercussionsafterthestandardintervaltendtohurtthepartyinpowerthathadsuppressedtherevolt.Consequently,theintervalsaredescribedaseasy
(suppressionoftherebellion)todifficult(“victory”fortherebels).“Accordingtomytheory,thelosersofunsuccessfulrevoltsgaintheirends,tosomedegreeatleast,afterthelapseofoneormoreofthethreeintervals.”Awell-knownexampleofanunsuccessfulrevoltistheAmericanCivilWar,1861–65.Itisalsoanexampleofmultiplecyclesoverlapping
andexertingtheireffects.Whenviewedasasimplerebellion,theprogressiongoesfromeasytodifficult.“Notonlydoesthepartywhichputsdowntherebellionsuffermisfortuneafterthelapseofaninterval;thelosingsideusuallyachievesatleastpartofitsaims.”OfalltheaimsoftheSouthduringthistime,themostinfamouswastokeep
African-Americansinsubjugation.InMayof1896,35yearsafterthestartoftheCivilWar,theSupremeCourtoftheUnitedStateshandeddownadecisioninthecaseofPlessyvFergusonthatupheldtheconstitutionalityofstatelawsrequiringracialsegregationunderthedoctrineof“separatebutequal.”InSeptemberof1901,40
yearsafterthebeginningoftheCivilWar,PresidentMcKinleywasshotandkilled.McKinleywastheleaderofthesidethathadquelledtherevolt.Lindsaywrotethatindecidingwhethertherewillberecognizableeffectsfromassassinationattempts,wemustexaminewhetherthecountsagreewithintervalsfromotheragitationsandgaugetheimpressionan
attemptedassassinationmakesoncontemporaries.Finally,56yearsafter1861,Germanyannounceditspolicyofunrestrictedsubmarinewarfare(January1917),forcingtheUnitedStatesintoWorldWarI.Again,onemightthinkthatAmerica,beingatamomentofdifficulty,wouldlosethewar.NotonlywasAmericaatajunctureofbothdifficulty
andease,butGermanyfounditselfatajunctureofdifficulty.“Wehaveseenthattwodevelopmentscannormallybedetectedattheintervalsafteranunsuccessfulrevolt.Therebels,ortheirsuccessors,gainaportionofwhattheyhadstruggledfor.Sometimestheyrealizetheoriginalaiminapositivefashion;inothercases,the
besttheycandois,ineffect,wreakvengeanceonthepartythatsuppressedtherevolt.Thefactionwhichquelledthedisturbance,oritslinealsuccessor,suffersamisfortuneinitsturn.Itmaybeparticularizedinaheadofstate,someoneclosetohim,oranindividualtowhomhehasdelegatedpowers.Onotheroccasions,thedisasterisvisitedonthenationasaunit,andithasmostoften
takentheformofamilitarydefeatatthehandsofaforeignpower.Whenmisfortunedoesnotcomeinthisobviousway,itislikelytocomeinthatfieldorendeavoratwhichthewinnersoftheearliercontesthavetriedhardesttosucceed.”Anexcellentexampleofdifferentprogressionsoverlappingcanbeseenin18th-andearly-19th-century
Germany.Aperiodofdifficulttoeasy(fromtheviewpointoftheGermanstates)beganwiththedefeatofPrussia,byNapoleon,in1806attheBattleofJena.The57-yearintervalin1863appearedtomarkaturninfortunesandculminatedintheestablishmentoftheGermanempirein1871,69yearsaftertheBattleofJena.Theyear1871markedthestartofanothercountof64–
69yearsofpositivetime.Countthe69-yearintervalfromtheestablishmentoftheGermanempirein1871andyoucometo1940.HitlerreachedhisapogeewiththedefeatofFranceinJune1940,andhisfortunesbegantowanewhenhelosttheBattleofBritainthatfall.Atthesametime,aprogressionofeasytodifficultwasoccurring.Nationalisticrevoltshadoccurredinboth
BerlinandViennain1848.Bothrevoltswereputdown,startingaperiodofeasytodifficultforGermanauthorities.Then,69yearslaterwastheendofWorldWarI,aperiodofdifficultythatwasoffsetsomewhatbytheperiodofeasethatwastoculminatein1940.
EmotionalAgitations“Theintervalsmaybe
counted,notonlyfromepisodesofviolence,butfromeruptionsofanemotionalnature.”Anemotionalagitationmaybereligious,economic,orpoliticalinnature.“Anemotionalagitationisnormallyajunctureofdifficulty,andtheintervalprogressesfromdifficulttoeasy.”Itishardtodatethegenesisofanemotional
agitationaccurately.Thestartingpointisnotnearlyasclearasbloodshedinarevolutionorotherphysicalagitation.EmotionalagitationshaveanidiosyncrasythatLindsaydescribed:“Whilethedelayedeffectafteraphysicalagitationislargelyconfinedtothecountrywheretheviolenceoccurred,therepercussionsfollowinganemotionaloutburstcanleap
acrossnationalboundaries.”Hefoundthattheserepercussionsweremostlikelytospreadifoneormoreconditionsweremet.Iftheagitationwerebasedinanimportantlocusofculture,suchas15th-centuryFlorence,Italy,theeffectsweremorelikelytospreadacrossborders.Lindsaywrotethattheintensityofanagitation,morethanitscontent,isakeyfactor.
Finally,iftheeventwasradicallydifferentfromtheacceptedorderofthings,itwaslikelytospreadregardlessofborders.Anotheridiosyncrasy:“Asarule,thoughnotinvariably,successforanideaisachievedafterthesecondemotionalagitationofaseriesdirectedtowardthesameend.”ThefoundingoftheChristian
churchcanbethoughttohavedatedfromthecrucifixionofJesusChrist.Lindsaywrote,“TheministryofJesusChristwasanemotionalagitationandthecrucifixionwasapurge.”Lindsaywrote,“Sincethecrucifixionisclassifiedasapurge,theprogressionrunsfromeasytodifficult;bothRomeandtheJewswereduetoundergomisfortune.”This
progressionisfromtheviewpointoftheRomansandJews.UsingA.D.30asthemostprobabledateofthecrucifixion,countingforward36yearstotheyearA.D.66sawtheJewsrevoltagainstRomanrule.VespasianlaidsiegetoJerusaleminA.D.68,andthecityfelltoTitusinAugust–SeptemberofA.D.70atthe40-yearintervalafterthepurge,orcrucifixion.
TheRomanssufferedmisfortunestoo.IfA.D.30wasdefinitelytheyearofthecrucifixion,thentheGreatFireofRome,inA.D.64,wasoneyeartooearlytobeattributedtotheprogressionfromeasytodifficult.ButgiventherelativeuncertaintyofthedateA.D.30,theGreatFireofRomedeservesmention.Thefireburnedforfive-and-a-halfdaysandonly1of14districtsofRome
escapedthefire.Lindsaywrites:“TheonethatcouldhavebeenpredictedwasthedeathofNeroinJune68,andevenmoretypically,theextinctionoftheJulian-Claudianhouse.Therepercussionsinthecaseweremoreextraordinarythanusual,forthreeemperorsswiftlyfollowedNerointhe‘longbutsingleyear,’asTacituscalledit.”
Lindsaywrote,“Countthe55-yearintervalfromthecrucifixioninA.D.30andyoucometo85.AbitterquarrelbrokeoutbetweenEmperorandSenatewhenDomitianhadhimselfappointedcensorforlife.”Theclimaxwasreachedatthe66-yearintervalinSeptemberofA.D.96whenDomitianwasassassinated.Asfortheopposite
progression,fromdifficulttoeasy,Lindsaywrote,“The64–69-yearintervalfromdifficulttoeasyafteranimportantemotionalagitationhasnormallysignaledaperiodofremarkableprestigeorprogress.Sometimesthiscountdenotesthestartofsuchanera.Inthatcase,thegoodfortunelastsanother64–69years,andthismaybestretchedto80or90yearsundercertaincircumstances
—whenforexamplethereissecondagitationtocountfrom.”Tosumup,Lindsayexplainedhisviewsbestwhenhewrote:“Emotionalagitationsarenotthecauseofsubsequentsuccess,butmerelyanoutwardsignoflittleunderstoodforceswhichoperateunderthesurface.”...“Argumentsareneverwonbylogic,meritor
evenperformance:menareincapableofjudgingsuchpointsobjectively.”...“Theintervalsoperatebyinfluencingthemindofamaninsolitudenolessthanbyarousingthecrowdthroughtheoverworkedbogeyof“masspsychology.”
CreativeConcentrations“Thechiefrequirementof
thisphenomenonistheappearanceofanumberofbooksorartwithinabrieftime.Theshorterthespaninwhichtheyarebunched,themorevalidtheconcentrationis.”AnotheragitationistheCreativeConcentration,adatesurroundedbyaconcentrationofgreatworksofart.ACreativeConcentrationcaninclude
books,paintings,controversialplays,andmusicincludingsymphoniesandoperas.CreativeConcentrationsalwaysmovefromeasytodifficult.Anotherfeatureofacreativeconcentrationisthatthemeritofthebooksisrecognizedabroadasathome.Influenceiswhatcounts,notworth.Noteveryagitationisfollowedbyrepercussionsatallthreeintervals.Somecountsare
moreimportantthanothers.Toestimatewhich,correlatetheintervalsofonecountrywiththoseofitsrivals.Wheneaseanddifficultyarescheduledforthesametime(whentwoopposingintervalsexpireatthesametime),itisunknownwhichwilltakeeffectfirst.Expectrapidshiftsinfortune.Remember;disastersaremomentarywhilestretchesofprosperitylastlonger.
LindsaygivestheEnlightenmentasaprimeexampleofaCreativeConcentrationanddatesitto1749basedonanumberofbookswhichappearedaroundthatyear.Fortyyearslater,adifficultywouldbeexpectedforFranceand,indeed,1789wastheyearoftheFrenchRevolution.Einstein’sAnnusMirabilispapers,“aseminalexposition
ofanewprincipleinphysics,”publishedin1905,togetherwithahostofotherGermanwriters,formedaconcentrationthatyear.FortyyearslatermarkedthedefeatofGermanyinWorldWarII.“Thetechnicalhistorianisnotafraidofcouplingideasfromunrelatedcategories.Hedoesnotrejectcontinuityofthought,buttheconnectionneednotbetheobviousone
thatseemsappropriatetothesentientmind.Themeaningfulthoughtisthatwhichhasbeentransformed,andperhapsrechanneled,throughaperiodofsubconsciousrumination.Itbecomesaningrainedattituderatherthanadirectedeffort.”
TheLostManuscripts
ItisknownthatLindsaywasworkingonasecondbookatthetimeofhisdeath.Hehadmentionedtheworktopeople,andapartialmanuscripthasbeendiscoveredbyfamilymembers.ThisbookwastoaddresstimeintervalsofamuchlongerdurationthantheintervalsLindsayidentifiedinhisearlierwork.Lindsaydevelopedwhathe
calledtheM-Patternofhistory(seeFigure2.1).Hewrotethatthemethodwouldnotpredictactualevents,butrather,“Awayhasbeenfoundhowever,toforecasttheconditionswhichmakeacertaintypeofeventprobableatagiventime.”2Inthecaseofwars,hismethodwouldnotpredictthatawarwouldoccur,onlywhichsidewasthelikelywinner.This
assumeseventswithincertainperiods.
Figure2.1.M-Pattern.
“Thereisnosurewayofdecidingthataspecificevent
ofprimeimportancewilltakeplace,suchasawarbetweenthemajorpowers.Ifsuchadevelopmentiscomingatall,however,therecordimpliesthatitwilloccuratoneofthetimeperiodswhicharecalculableinadvance.”3
Whenprojectinginternationalevents,thetimingofonecountrymustbesynchronizedwiththatofanother,andthetwogovernmentsmusthave
unusualrelationswithinthistimeperiod—thatis,relationsthatgobeyondtheroutine.
ConclusionInhisbook,TheOtherHistory,Lindsaychallengestheacceptedviewsof“causeandeffect”andreplacesthemwithhisownobservationsoftimeintervals.Likehismarkettimingtechniques,Lindsay’sapproachto
history,althoughsimilartocycles,isfarmoreunique.ItwouldbeeasytodismisstheideaspresentedinTheOtherHistoryifitwerenotforthesuccessLindsayexperiencedusingthissameapproachinpredictingthestockmarket,anothertaskmanybelievetobeimpossible.ThischapterprovidesonlyatasteofLindsay’sbookforthereader.Intheoriginaltext,Lindsay’sattempttoprovideenough
examplestobeconvincingunfortunatelybecomesoverwhelming.TheOtherHistoryisoutofprintbutcanbefoundinsomelibrarycollections,includingtheM.T.A.Library.
Endnotes1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishedbook,TheOtherHistory,1969.
2GeorgeLindsay,“AWaytoPredicttheFuture”(unpublishedmanuscript;date[post-1982]unknown).
3Ibid.
PartII.ThreePeaksandaDomedHouseChapter3:ThePhenomenonChapter4:ThreePeaksChapter5:ADomedHouseChapter6:TheTri-DayMethod
Chapter3.ThePhenomenon
“Therearealsoperiodswhentrendsareshort-livedandsubjecttofrequentreversal.Techniciansassumethatsuchirregularmarketsdonotfollowanyrecognizablepatternfor
longandthatabruptchangesintrendcannotbepredicted.Mystudiesshowthattheseapparentlyhaphazardmovementsnearlyalwaysfollowthesamepattern.Thetwoformationstobeexplainedhavebeenrepeatedoverandoveragainfromtheearliestrecords.Aroughtallyindicatesthatthemarkethasfollowedthematleast
60%ofthetimeforthepast150years.”1—GeorgeLindsay
Afterintroducingtheconceptin1968,GeorgeLindsaypublishedhis“ThreePeaksandaDomedHouse”newsletterin1970.Thisnewsletter,alongwithothers,laterappearedinabooktitledEncyclopediaofStockMarketTechniques,publishedby
InvestorsIntelligence.Thosewhoarealreadyfamiliarwiththismodelwillnoticesomethingmissingfromthisbook:Lindsay’snumberingsystemforthedifferentwaveswithintheformation.ThesystemLindsayusedinhis1970newsletterexplainingthe“ThreePeaksandaDomedHouse”wascumbersomeanddistractedfromastudent’s
understandingofthemodel.EvenLindsaydidn’tholdthesystemheusedinthatnewslettersacrosanctbecauseonlytwoyearslater,inhisMay15,1972,newsletter,hechangedthesystemtoincludefewernumbers.Thisbookhaseliminatedthenumberingsystementirelyandreplaceditwithtermsthatshouldbeintuitivelyobvioustothereaderratherthanforcingthereadertoconstantlycheck
andrecheckwhichnumbersapplytowhichpartsofthemodel.Lindsayhadaverydefiniteopinionastowhichequityindexshouldbeusedwithhismodel.Inhis1969pamphlet,“OneYearLater:AFollow-UpoftheThreePeaksandDomedHouse,”Lindsaywrites,“Averagescomposedofasmallnumberofbluechipshavealwayshad
crisperchartpatternsthanall-inclusiveindexes.Itislargelybecauseunseasonedstocksareinastateofflux:newonesarebeingadded,oldonesaredropped,andthenumberofsharesisconstantlychanging.TheDowJonesstocksaremorestableincomposition.TalkoftheDowJonesAverageasbeingunrepresentativeisbesidethemark.Ifyouwanttoknowthetruelevelof‘the
market,’lookatthebroaderaverages.Ifyouwanttopredictthefuture,gobytheDowortheNewYorkTimesIndustrials.Indeed,sometechniciansgetthemostreliableresultsbyusinganindexofonlytenortwelvesensitiveandinfluentialstocks.TheNYSEIndexofallstocksisnearlyworthlessinforecasting.”Thischapter’sopeningquote
fromLindsaycontainstheboldstatement(Lindsaywaspronetosuchstatements),“Aroughtallyindicatesthatthemarkethasfollowedthematleast60%ofthetimeforthepast150years.”Clearly60%oftheDow’spriceactionforthepast150yearswasnotspentformingthe“ThreePeaksandaDomedHouse”pattern.Lindsay’scontentionwasthatthepatterncouldbefoundat60%ofbullmarket
topsandatthepeaksofralliesinbearmarkets(cyclicalbullmarkets).“ThemajorityofallmajoradvancesendedinapatternwhichresembledtheThreePeaksandaDomedHouse.Somecameclosertotheidealformthanothers.However,afewtopareasdon’tfitintothepatternatall:itwouldbestretchingtheimaginationtoseeitaroundthehighsof1909and1937.”One
hundred-fiftyyearspriortotheyearofpublicationofLindsay’snewsletterwouldhavemeant1820—wellbeforetheDowJonesIndustrialAveragewascreatedin1896(andevenbeforeitsforerunner,theDowJonesAverages,wascreatedandpublishedbyCharlesDowin1884).Lindsaywrote,“TheDow-Jones20-stockaverageisusedbefore1897,theDow-JonesIndustrials
sincethen.”TheDow-Jones20-stockaverageistheDowRailroadindex,which,by1896,contained20railroadstocksandevolvedfromtheoriginalDowJonesAveragesandits11transportation-relatedstocks.InLindsay’s1965newsletter“ATimingMethodforTraders,”Lindsaywrotethatheusedadailyaverageofsevenmarketleadersfrom1861to1885.Thatstillleaves41years
unaccountedfor,buttheexamplesLindsaysharesarenoearlierthan1890.
IdentifyingCharacteristicsLindsaywrotethatthetwopatternswhichbeganJuly26,1893,andJuly26,1910,wereveryclearandprovidedtheinspirationforthe“ThreePeaksandaDomedHouse”formation.Thesetwopatterns
peakedSeptember4,1895,andSeptember30,1912,respectively.Thischapterintroducesthe“ThreePeaksandaDomedHouse”formation(subsequentlyreferredtoas3PDh)anditsmajorcharacteristics.Thesecharacteristicsshouldnotbepassedbytooquicklybythereaderinsearchofmoredepthordetailbecausethesecharacteristics,thoughsimple,areextremely
important.Thepatternisostensiblyamethodforidentifyingtheendofabullmarket.However,3PDhisbroaderinscopethansimplyusingittofindthetopofabullmarket.Onceit’srecognized,onecantradeitonthewayup,too.Identifyingandseparatingtrue3PDhpatternsfromimpostersisessentialtoprofitabletradingofthepatternpriortoits
completion.Lindsaywrote:“Thesepatternslastalongtimesoanyonecanusethemtoadvantageifherecognizesthematanearlystage.”Lindsayalsowrote,“Throughaverycomplicatedprocedure,itispossibletoforecasttheinceptionofsuchamovementbeforeitbegins.”Unfortunately,hedidn’tdescribethat“complicatedprocedure”and,unlesshe
passeditonorally,itappearshetookitwithhimtohisgrave.Fortunately,byidentifyingthekeycharacteristicsofthepattern,oneneedn’tusecomplicatedprocedurestorecognizethepatternlongbeforeitscompletion.Thebeautyofthepatternisinitssimplicity.Figure3.1presentsanidealizedshapeofthe3PDhpricepattern.Onecanclearly
seethethreepeakstowardtheleftsideofthefigurefollowedbyasharp,two-wavesell-off.TheDomedHouseencompasseseverythingafterthetwo-wavesell-off(middletorightsideofFigure3.1),includingthelargesell-offtakingpricesbacktothebottomoftheentire3PDhpattern.Thechiefcharacteristicofthewholechartisthatpricemakesrapidupsideprogress,
butcontinuesforonlyashorttime.Inbetweenthebriefspurts,pricesgothroughlongstretchesofconsolidation,orsidewaysmovements.Thepatternischaracterizedbysharprisesfollowedbylongconsolidations.Whenyou’researchingforthepattern,itistemptingtoacceptadvancesthatclearlybreakdownintoadvancingwavesratherthanthesharpadvancesLindsaydescribed.Don’tbetempted
bytheseadvancing“waves”unlessothersegmentsofthepatternareabsolutely3PDhandtheweightoftheevidenceisundeniable.Wheneverthemarketspendslotsoftimemovingsideways,weshouldlookforotherindicationsofa3PDhpattern.Inthispattern,pricesadvanceonlyabouthalfthetime—theymovesidewaysonasmanydaysastheyadvance.
Figure3.1.Idealizedshape.
Lindsaywrote:“BoththeThreePeaksandtheDomedHousearedistinguishedbytheadvancesanddeclineswhichtravelmanypointsinastraightline.Butthese
movementsdon’tlastlong.Inbetweenthefewexplosivemoves,themarketspendsmuchofthetimebackingandfillinginacomparativelynarrowrange.Thesecharacteristicsusuallymakeiteasytorecognizeaformationshortlyafteritbegins.Oncetheformationisunderway,itusuallylastsalongtime.Thisgivesitpredictivevalue.”
Lindsaydifferentiatedbetweenpatternsthatemergefromadvancesoffabearmarketlow(cappingacyclicalbullmarket)andthosethatculminateasecularbullmarket.“ThemosttypicalThreePeak-DomedHouseformationsstartatabearmarketlow.Whenthishasbeentrue,thehighestpointinthepatternhasneverequaled
thetopofthepreviousmajorbullmarket.”Lindsaydidn’tmeantoimplythatthe3PDhformationsareanymorecommonoffofbearmarketlowsthanbullmarkethighs.Heonlymeantthatformationswhichemergefromadvancesoffbearmarketlowshaveamore“typical”structure(seeChapter4,“ThreePeaks,”andChapter5,“ADomed
House”)thanwhatoneseesinpatternsatbullmarkethighs.Hencethefollowingquotes:“TheThreePeak-DomedHousepatterncanalsobegininthecourseofalongadvance.Whenthishappens,thetopoftheDomedHouseisusuallythebullmarkethigh.”“Thepatternswhichstartinthelatterpartofamajorbull
marketdonotnormallylastaslongasthosethatbeginatabearmarketlowandareoftenlesssymmetrical.”Finally,thecompletedDomedHousesectionofthepatternshouldhaveasquareeffectaboutitandaroundedtop.InFigure3.1,aftertheThreePeaksattheleftsideofthechart,andafterthetwo-wavesell-off,asmallbaseisformed.Thisbaseisthefirst
sectionoftheDomedHouseandisfollowedbyasharprise,whichiscalledtheFirstFloorWall.ThisFirstFloorWallisfollowedbyafive-wavereversalpatternthatservestoconsolidatethesharprise.Thefive-wavereversalisreferredtoastheFirstFloorRoof.Lindsaywrotethatafive-wavereversalextendingthreemonthsormorenearly
alwaysmeansthattheformationisaDomedHouse.TheFirstFloorRoofissubsequentlyfollowedbyanothersharprise,whichisreferredtoastheSecondFloorWall.TheSecondFloorWallisfollowed,andtheentire3PDhformationiscapped,byasmallhead-and-shoulderspatternthatresemblesthecupolaofahouse.Ahorizontalline
drawnthroughtheleftandrightshoulderofthecupolasuggeststheroofofasecondstory.AftertheCupola,adeclinebacktothebeginningofthepatternbegins,whichnormallywillincludeatleastonebounce(afinalrightshoulder)onthewaydown.NotethattheFirstFloorWallisbalancedbythedropfromthefinalrightshoulderandtherisefromtheFirstFloorRoofisoffsetbythedecline
fromthefirstrightshoulderinthecupola.Thisgivesthepatternasquareeffect.Atthesametime,thereisaroundedeffectatthetopduetothehead-and-shoulderspattern.Finally,the3PDhformationcansometimestaketheplacenotjustofasingleadvance,butofabearmarket.Inotherwords,insteadofgoingdown,themarketfluctuates
backandforthandtracesthisfamiliarpattern.Whenittakestheplaceofabearmarket,thetimingisirregular.Seeexamplesof3PDhformationswithirregulartiminginTable3.1.
Table3.1.ThreePeaks/DomedHouse
Eachofthesesegmentsofthe
3PDhwillbeexaminedindetailinthechaptersthatfollow.Beforemovingon,however,twosimpleconceptsthatLindsaywroteaboutarereviewed.
PrincipleofEqualizationAsthereaderwillsoondiscover,whenweexamineactualexamplesofthe3PDhpattern,reallifedoesn’t
alwaysfollowthe“idealized”shape,timeframe,orcounts.Lindsayhelpstheanalystadjustforreal-worlduncertaintiesthroughthePrincipleofEqualization.LindsaymentionsthePrincipleofEqualizationalmostinpassing.Hedefinesitthisway:“Whenoneformationfallsshortofthenormalduration,thenextoneequalizesthetotalelapsedtimebybecominglonger.”
Determiningwhata“normal”timeframeisrequiressomedetectivework.Heisveryclearthatthetimebetweenthethreepeaksis“normally”eightmonths,sowewouldexpecttoadjusttheexpecteddurationoftheDomedHouseiftheThreePeakswerelongerorshorterthaneightmonths.ItwasmentionedpreviouslythatLindsaywrotethatafive-wavereversalextendingthreemonthsor
morenearlyalwaysmeansthattheformationisaDomedHouse.Hedidn’tsaywhetherthereexistsaminimumormaximumtimeperiodforthefive-wavereversal(FirstFloorRoof),soathree-monthestimateisallthereistoworkwith.Adjustingthedurationofthe“count”(todeterminethefinaltopofthebullmarket)isnotassimpleasaddinganextramonthifthedurationoftheThreePeaksis
amonthshort.Fortunately,itisn’tcomplicatedeitherandisexplainedinChapter5.
DomedHouseBeforeThreePeaksTherehavebeeninstanceswhentheDomedHouseformationappearedbeforetheThreePeaksformation.Inthiscase,theSeparatingLine(explainedinChapter4)followstheDomedHouse.
“EverytimeaclearlydefinedDomedHousestartedatabearmarketlow,itwasfollowedinduecoursebytheThreePeaksbeforetherewasanothermajordecline.TherehavebeenonlyafewcaseswhenamajorbullmarkethightooktheformofaDomedHousefollowedbytheThreePeaks.WhentheThreePeaksfollowstheDomedHouse,acompleteretracementmaynotbemade
foralongtimebutit’salwaysmade.”ThisinversionofLindsay’smodelisrelativelyrareandthereaderwouldalmostcertainlynoticeitifitweretohappen.OtherthantheformationthatoccurredinApril1938toJune1940,thefewexamplesgivenbyLindsayofthisreversedpatternwereallinthelastdecadeofthe19thcenturyandfirstdecadeofthe20thcentury.SeeTable3.1for
examples.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter4.ThreePeaks
“Thechiefcharacteristicofthismovement,asofthewholechart,isthattheaveragemakesrapidupsideprogress,butkeepsgoingforonlyashorttime.Inbetweenbriefspurts,theaverage
goesthroughlongstretchesofconsolidation,orsidewaysmovements.”1—GeorgeLindsay
ItisveryeasytofindtheThreePeaksformationonachartgiventheSeparatingDeclinethatfollows.OnceyouunderstandtheThreePeaksformation,youwillbeginseeingiteverywhere.
“Itisnotundulytechnical.Allyouhavetodoisfixacoupleofshapesinyourmindandthenlookatthechartswithfresheyes.”Atthatpoint,thechallengewillbetomakecertainthattheThreePeakspatternyouhaveidentifiedfulfillstherequirements,orcharacteristics,ofthe3PDhformation.ThischapterintroducesthereadertoactualexamplesoftheThreePeaks
formationandpreparesthereaderforcertainirregularitiesthathaveappearedinthepast.
CharacteristicsandIrregularitiesOnecanclearlyseethethreepeakstowardtheleftsideofFigure4.1followedbyasharp,three-wavesell-off.TheThreePeakspatternusuallystartswithabase(not
shown),butLindsaymadeclearthatthebaseisnotimportantinidentifyingtheformation.Fromthebottomofthebase,theaveragerisessharplytotheFirstPeak.Lindsaywrotethat,typically,thetopofthepeakhasaratherflattenedshape.
Figure4.1.ThreePeaks.
“Thetopsofallthreepeaksareusuallyinthesamegeneralpricerange.Whiletherecanbeconsiderablevariationintheexactlevels,thesymmetryofthewholeformationisusuallyapparent.”The“same
generalpricerange”isarelativestatementanddependsonthetimeframeyouareexamining.Whenlookingonlyata3PDhformation,theThreePeaksmaynotappeartobeinthe“samegeneralpricerange.”Butwhenthereaderexaminesnotjustthe3PDhpatternbutalsotheentireadvancethatprecededthepattern,thephrase“samegeneralpricerange”takeson
adifferentmeaning.Aftereachpeakiscompleted,pricesreactmorethanyouwouldexpectaftersuchashortadvance.Normally,theretracementsafterpeaksoneandtwoareofequaldepth.Lindsay’sfirstexampleofa3PDhformationstartsatthebearmarketlowinOctober1946(seeFigure4.2).NotethattheperiodbetweenPeaksOne(February8,1947)and
Three(October10,1947)isthestandardeightmonths.Inthisexample,PeakTwoisabovebothPeakOneandPeakThree.
Figure4.2.ThreePeaks(1946–48).Chartcreatedby
MetaStock®.
AnirregularityintheThreePeaksformationin1947isthedeclinefromPeakOne.ThereactionafterPeakOnedeclinedmuchmoredeeplythanthedeclineafterPeak
Two.ThisirregularityiscausedbythefractalnatureofPeakOne.Thisparticularphenomenonisexaminedlaterinthischapter.Figure4.3isanexampleLindsaysharedofthe3PDhformationatabullmarkethigh.Inthiscase,itwastheFebruary1966bullmarkethigh.NotethattheadvanceintoPeakThreeonMay14,1965,wasprecededbya
shortconsolidationduringmostofFebruaryandMarchjustastheadvanceintoPeakOnewasprecededbyashortconsolidationfromlateSeptembertoearlyNovember.“Wheneverthemarketspendssomuchtimemovingsideways,welookforindicationsofaThreePeaks-DomedHousepattern.”LindsaymadenoteofthefactthatthetimebetweenPeakOneandPeakThreeinthis
casewassixmonths—theminimumduration.“Inamajorformation,thetypicaldurationfromthetopoftheFirstPeaktothehighoftheThirdisabouteightmonths.Ithasneverbeenlessthansixnormorethanten,andusuallyhasvariedbetweensevenandeight.”HealsonotedthatthetimeperiodbetweenthestartoftheconsolidationinlateSeptember(priortoPeak
One)andPeakThreewaseightmonths—thenormalduration.Hedoesn’texplainthis;hesimplymakesnoteofit.Butitisoneofmanyexamplesofhowcountscandifferandtheanalystmustshowflexibility,evensomeimagination,whenworkingwiththisgeometricformation.Oneparticularexampleofflexibility:IfthetimebetweenPeakOneandPeakThreeisshort(lessthan
sixmonths),looktoseewhetherPeakThreehasthe“flattenedshape”(roundedtop)discussedpreviously.Ifatradingrangeformsafterthehighestday(thepeak)ofthisroundedtopatPeakThree,andthereisapointattheendofthetradingrangewherepricefallsoffsuddenly,thenmeasuringfromPeakOnetothatpointusuallycausesthetimespanbetweenPeaksOneandThreetomeetthe
minimumrequiredtime—sixmonths.VariationincountsisdealtwithmoreinChapter3,“ThePhenomenon.”
Figure4.3.ThreePeaks(1964–66).Chartcreatedby
MetaStock®.
FractalsSometimesa3PDhformationwilloccurwithinasinglepeakofalarger(“major”)formation.Lindsayreferred
toa3PDhpatterninsideofasinglePeakasa“minor”formation.Modernreaderswillknowthismanifestationasafractal.Figure4.4breaksoutthefractalstructurethatcreatedPeakOneofthe1946–483PDhformation.ThehorizontallinehelpsdelineatethefactthattheSeparatingDeclineafterthefractal’sThirdPeakextendedbeloweitherofthereactionsfromPeaksOneorTwoasis
requiredforthe3PDhformation.SeparatingDeclinesarecoveredinthenextsection.Onecanjustmakeoutthehead-and-shoulderstopthatformstheCupola,butafive-wavereversalthatcreatesaFirstFloorRoofisdefinitelymissing.AftertheCupola,theindexreturnstothebeginning(bottom)oftheformationasisexpectedofany3PDhpattern.
Figure4.4.ThreePeaks(1946–48).Chartcreatedby
MetaStock®.
“AnyoneoftheThreePeaks(inamajorformation)candoubleastheDomedHouseofaminorformation.Asarule,itismorelikelytobetheThirdPeak,ratherthanthe
firstone,asinthiscase.”Recognizingpossiblefractalsiscrucialtotradingthe3PDhmodel.ArelativelyseveredeclinehasalwaysfollowedaThreePeak/DomedHousepatternevenwhenthepatterniscontainedwithinanotherpattern.AseveredeclineisexpectedafterPeakThreeofa3PDhpatternaswell.Ifthe3PDhpatternisafractal,arelativelyseveredeclinecan
beexpectedheretoo.A3PDhpatterninsideofoneofthepeaksisawarningthatabigdeclinemaybecomingbecauseitwillneedtoundercutoneofthepreviousreactionsfromapeak.Bybeingawareoffractals,onecanavoidbigdeclinesorevenprofitfromthem.
SeparatingDeclineAftertheThirdPeak,arather
severedowntrendbegins.ItiscalledtheSeparatingDeclinebecauseitseparatestheThreePeaksfromtheDomedHouseformationthatfollows(seeFigure4.5).TheSeparatingDeclineisathree-wavedeclineusuallycomposedofatleasttwodecliningwaves.ThebottomoftheseconddecliningwaveisalwaysatalowerlevelthanatleastoneofthereactionsfromPeaksOneorTwo,andoftenitis
lowerthanboth.Unlessatleastoneofthetworeactionlowsisbreached,theformationunderconsiderationdoesnotqualifyasaSeparatingDeclineand,byextension,thepreviousformationissimplythreerandompeaksandnotaThreePeakspattern.OneshouldhavenotroubleidentifyingtheSeparatingDeclinesinFigures4.2and4.3.Theyarethedeclinesthatimmediately
followtheThirdPeakineachchart.NotethatinFigure4.2,theSeparatingDeclineonlybreachesthereactionlowfollowingPeakTwoandnotPeakOne(duetothefractalcausinganabnormallydeepdeclineafterPeakOne),whereastheSeparatingDeclineinFigure4.3breachesbothreactionlowsfollowingbothPeaksOneandTwo.
Figure4.5.SeparatingDecline.
ImportantNote:Towardtheendofanadvancethathasproceededforayearorlongerwithasubnormalrateofgain,theconventionthatthe
SeparatingDeclinemustdipunderthelowofaprevioussell-offisnotrequired.ThisexceptionisexploredinChapter6,“TheTri-DayMethod.”
ConclusionTheSeparatingDeclinedroppingbelowareactionfromapreviouspeakmakesitappearasiftheadvanceisgettingtired.Onecan
imaginetradersandinvestorsexitingthemarketinexpectationofanextendeddecline.Perhapsitcanbeinterpretedasabearishhead-and-shoulderstop.Themarketparticipantwhoisawareofthe3PDhmodelisunlikelytobefooledbyafailedhead-and-shoulderstop.Evenacasualmarketparticipantacquaintedwiththe3PDhmodelwillnotonlyrecognizeafractalwithina
peakbeingformedandsuspectthata3PDhisunderconstruction,butalsobepreparedtoavoid,orprofitfrom,thecomingdownturnwithinthepeakbeingobserved,understandthatatimeiscomingtoreenterthetrade,continuetrackingtheformationofapossibleThreePeakspattern,againavoid(orprofitfrom)theapproachingSeparatingDecline,and,finally,bementallyprepared
toreenterthetradeforwhatispossiblythebiggestmoveofthebullmarket.Allthiswhileothertradersandinvestorshavebecomewornoutfromwhattheyperceiveasunprecedentedvolatility.Chapter5,“ADomedHouse,”examinestheDomedHousepatternanditsindividualbuildingblocks.
Endnote
1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter5.ADomedHouse
“ThemosttypicalThreePeak-DomedHouseformationsstartatabearmarketlow.Whenthishasbeentrue,thehighestpointinthepatternhasneverequaledthetopofthepreviousmajorbull
market.NotalloftheminorbullmarketsofthepasthavetakentheshapeoftheThreePeaksandDomedHouse,butmostofthemhave.”1—GeorgeLindsay
AftertheSeparatingDecline,theDomedHouseformationbegins(seeFigure5.1).LiketheThreePeakspattern,theDomedHousepatternis
“distinguishedbyadvancesanddeclineswhichtravelmanypointsinastraightline.Butthemovementsneverlastverylong.Inbetweenthefewexplosivemoves,themarketspendsmuchofthetimebackingandfillinginacomparativelynarrowrange.”Bykeepingthissimplerequirementofbothpatternsinmindatalltimes,theanalystwillavoidthemistakeofseeing3PDh
formationseverywhereandthelossesassociatedwithfalseattributionofthepattern.ThischapterbreaksdowntheDomedHouseformationintoitscomponentparts,identifiesanddiscussesthecharacteristicsofeachcomponentpart,andlaysoutthecountsandcountingmethodsnecessarytoidentifyandconfirmtheformation.
Figure5.1.DomedHouse.
BasesTheDomedHousebeginswithsomekindofbase.Itisimportanttodistinguishwhetherthebaseisirregularorsymmetrical.Tobea
satisfactorybase,whetherirregularorsymmetrical,thereshouldbeareboundfromthelowoftheSeparatingDeclineandthentwosecondarydipsafterthereboundfromthelow.Lindsaymakesitclearthatonedipdoesn’tsuffice;theremustbetwodips.Determiningthenumberofdips,however,issomewhatarbitrary,asonecanseeintheexamplesthatfollow.
Determiningthenatureofthebase(irregularorsymmetrical)wascriticaltoLindsaybecausethelabelingofthebasewilldeterminetheorigindateofthecount.AlsocriticaltoLindsaywasthedeterminationofwhetherthebasewaslongerorshorterthan“normal.”Unfortunately,Lindsayneverrevealedwhattimeperiodheconsideredtobenormal.Itdoesappear,fromtheexampleshegave,
thatabaselastingonemonthisshorterthan“normal”andabaselastingapproximatelytwomonthsistobeconsidered“normal.”Thecount(221–224calendardays)isusedtoestimatethefinaldayofthebullmarket—usuallytowithinthreedays.Counting221–224daysforwardfromthedeterminedpointoforiginwilldirectonetoeithertheexactdateofabullmarkettoporaneasily
recognizedanddefinedpointnearthebullmarkettop.Theuncannyabilityofthemodeltopinpointtheendofabullmarkettowithinsuchasmalltimeframeiswhatmakesthe3PDhmodelsoamazingandLindsay’sgeniussoobvious.LindsayneveractuallydefinesaSymmetricalBase,optinginsteadtoidentifybasesinhischartsassymmetricorirregular.The
baseintheidealizedchartexample(seeFigure5.2)isanexampleofaSymmetricalBase.WhenaSymmetricalBaseispresent,webeginourcountfromthebottomoftheseconddipfollowingtheSeparatingDecline,asshowninFigure5.2.
Figure5.2.Base—Symmetrical.
Ifthesecondarysell-off(thefinalsell-offinthebase)istooshallow(anascendingbase)tocallthebasesymmetrical,wecannotcountfromit.Thespanmustbecountedfromthelowofthe
base,thatis,thebottomofSeparatingDecline.Evenifanascendingbaseissymmetrical,thecountmustoriginatebeforethesecondarysell-off.Figure5.3,whichshowstheDomedHousein1938,containsanexampleofaSymmetricalBaseasidentifiedbyLindsay.Notehowthebaseisdescendingbutcontainedwithintwo
parallellines,givingitasymmetricpresence.
Figure5.3.SymmetricalBase.Chartcreatedby
MetaStock®.
CountsThetypicaldurationfromtheendofabase(bottomoftheFirstFloorWall)tothepeakofaDomedHouseis221–224calendardays(sevenmonthspluseighttotencalendardays,or32weeks).Notethatcountsaremadeusingcalendardays,nottradingdays.WhileexceptionscanbefoundtoallofLindsay’s“rules,”itishis
rulesconcerningthecountsthatseemtohavethemostexceptionsandtobethemostarbitrary.ForeveryruleLindsaylisted,anexceptioncanbefoundsuchthatonehastowonderhowLindsaydecidedwhichexamplewastobecomehis“rule”!Therulesthatfollowshouldbethoughtofmoreasrulesofthumb,heuristics,atbest.Lindsayevenlistsseveralexamplesthatcalledmarket
topsinthe20thcentury,noneofwhichmethisrequirementsforcounts.TheyareincludedinChapter3,“ThePhenomenon,”inTable3.1.“MovementsofveryirregulardurationhaveoccurredinthecourseofThreePeak-DomedHousepatterns.Wethengobytheshapeofthechart,andnotbythenumberofdays.”PartIIIofthisbookdescribestheLindsayTimingModel,
whichLindsayholdsoutasawaytomakesenseofalltheseemingcontradictionsthatfollow.Bypassingthefollowingheuristicswouldbeamistakeforthereader,however,asonemustnotonlybeacquaintedwiththem,butbeactivelylookingforeachofthesepossibilitiesinordertoascertainwhichcountiscorrectlyconfirmedbytheLindsayTimingModel.AsLindsaywrote,
“Themarketisneverexactlythesametwice.Tohaveachanceofapplyinganytheorysatisfactorily,astudentmustbefamiliarwithallpastexamplesofeachformation,sothatthevariationsineachrecurrencewillnotconfusehim.”
DomedHouseLongerThanNormalLindsaygaveonlyone
exampleofalonger-than-normalDomedHouse(seeFigure5.4).ThiswasaformationinwhichtheCupolaformedinDecember1968.FromthebottomofthebasetothetopoftheCupola,255dayspassed.Hegivestwoexplanationsforitsextendedperiod.
Figure5.4.LongDomedHouse.Chartcreatedby
MetaStock®.
1ADescendingBaseInsteadofaNormalAscendingBaseLindsay’sfirstexplanationforaDomedHousethatwas
longerthanthenormal221–224calendardayswasthatthebasewasofthedescendingvariety.ThereaderwillnoticethatthebaseinFigure5.3wasalsoadescendingbasebuttheDomedHousewasshorterthannormal,andcertainlyshorterthantheDomedHouseinFigure5.4.Lindsaydoesn’taddressthatapparentcontradiction,butwewillnotethattheformationin
Figure5.3wasareversedpattern,aDomedHousefollowedbyThreePeaks.
2TheBaseWasShorterThanNormalLindsaywrotethatthebasebeingshorterthannormalexplainedthelonger-than-normalDomedHousebasedonthe“principleofequalization.”Thebasemeasured37days.“Undertheprincipleofequalization,
thismeantthatthenextmovewouldprobablybelongerthannormal.”Itisworthhighlightingthatacountof227daysfromthebottomoftheFirstFloorWallpreciselytargetstheabsolutebottomoftheleftshoulderoftheCupola.Itisalsoofinterestthatacountof221daysforward,fromthetopoftheFirstFloorRoof(thebeginningofthefive-wave
reversal),targetsadate(December10th)intheheartofthetoppingformation(lookingforthe“centerofgravity”inatopformationisafavoritetechniqueofLindsay’s,andthisapproachisdealtwith,indepth,inPartIII,“TheLindsayTimingModel”).Theprecedingcountsareexamplesofaneasilyrecognizedanddefinedpointnearthebullmarkettop.
DomedHouseShorterThanNormalLindsayalsoaddressedthesituationofaDomedHousebeingshorterthannormal.Helistedtwoirregularitiesthatthereadershouldbeawareof.
1MissingFirstFloorRoofIfaDomedHouseisshorterthannormal,thecountwill
usuallyendatthepeakofeitherofthetworightshouldersfollowingtheabsolutetop.In1947,thebasewassymmetrical(seeFigure5.5)yetthecountextendedtotherightshoulderin1948.Lindsaynotesthatananalystshouldhavesuspectedashorter-than-normalDomedHouse,priortoitscompletion,becausewhereafive-wavereversalwasexpected,pricesimplyslid
offforsevendays.Lindsay,however,failedtoexplainhowananalystcouldknowwhereorwhenafive-wavereversalshouldbeexpected!ThetimerequiredtobuildtheFirstFloorWallvariesconsiderablybetweenformations.Inhindsight,theabsenceofaFirstFloorRoof(five-wavereversal)toldusthattheDomedHousewouldbeshorterthannormal.“Thefailureofthe5reversalsto
appearimpliedthatthiswouldbeanunusuallyshort-liveddomedhouse.”
Figure5.5.ShortDomedHouse.Chartcreatedby
MetaStock®.
2PatternsatSecularBullMarketTopsThischapter’sopeningquotefromLindsay,“ThemosttypicalThreePeak-DomedHouseformationsstartata
bearmarketlow,”doesnotmeantoimplythatmost3PDhformationsstartatbearmarketlows.Rather,theintentwastobringattentiontothefactthat3PDhpatternsthatbeginatbearmarketlowsnormallyadheretoLindsay’srulesmorefaithfully.Contrastthosepatternswiththepatternsthatappearattheendofsecularbullmarkets.“Thepatternswhichstartinthelatterpartofamajorbull
marketdonotnormallylastaslongasthosethatbeginatabearmarketlow,andtheyareoftenlesssymmetrical.”SinceaDomedHouseatthetopofabullmarketseldomlastsaslongastheformationthatbeginsatabearmarketlow,wecountthespantothepeakoftheDomefromthebottomoftheSeparatingDeclineorfromanevenearlierlowsuchasthebottom
ofthesell-offfromtheSecondPeakandsometimeseventheFirstPeaksell-off.Again,thepreceding“rules”aremore“rules-of-thumb”thanhard-and-fastrules.TheLindsayTimingModelexplainedinPartIV,“TheCounts,”givestheanalysttheconfirminginformationandconfidenceneededtosortoutanddeterminewhichofthepossiblecountsisthecorrect
one.“Variationsofthissortmustalwaysbeexpected.Theyarehardtopredict,butatechnicianfamiliarwiththeunderlyingprinciplesshouldhavenotroublerecognizingthemwhentheyoccur.”
FirstFloorWallOncethebasefollowingtheSeparatingDeclineiscompletedbytheseconddip,ortestofthebottom,priceis
thenexpectedtoshootupinafast,short-livedadvance.ThisiscalledtheFirstFloorWalloftheDomedHouse(seeFigure5.6).TheadvancefromthebottomtothetopoftheFirstFloorWallshouldbeextremelypowerful—almoststraightup.AwallthatappearstobebrokenintotwoadvancingwavesbyaninterveningwavemaycontainnoroofandberushingtoitscompletionattheCupola.
ThisimpliesthattheDomedHousewillbeshorterthannormal.Again,Lindsaydidnotsharehowtodeterminewhethertheroofismissingpriortocompletionofthepattern.Whileamissingroofmaybeknownwithcertaintyonlyinhindsight,thechancethataroofmaybemissingisanimportantpossibilityofwhichtobeaware.
Figure5.6.FirstFloorWall.
FirstFloorRoofThisFirstFloorWallisfollowedbyafive-wavereversalpatternthatservestoconsolidatethesharprise.Thefive-wavereversalisreferredtoastheFirstFloor
Roof(seeFigure5.7).Lindsaywrotethatafive-wavereversalextendingthreemonthsormorenearlyalwaysmeansthattheformationisaDomedHouse.Tohelpidentifythefivereversals,lookforaperiodinwhichtheaveragemakesnonetprogressoverasignificantperiodoftime.TheFirstFloorRoofissimilartoatriangleinthatitusuallyhasfivereversals.
Afterthefifthreversaliscompleted,themainuptrendisresumed.
Figure5.7.FirstFloorRoof.
CharacteristicsTheFirstFloorRoofisnotas
straightforwardastheFirstFloorWall.ThereaderwillfindithelpfultobeawareofboththecharacteristicsoftheRoofaswellastheanomaliesthathavebeenknowntooccur.RoofRallies
Lindsaywrote,“Usually,bothoftherallieswithinatriangleareofaboutthesameamplitude.”Thischaracteristiccanbeabig
helpinidentifyingtheFirstFloorRoofofa3PDhformation,particularlywhentheFirstFloorRoofisnotoftheshapeexpected.Oncetheroofisidentified,therestofthesuspectedformationiseasilyconfirmedorinvalidated.Figure5.8breaksouttheFirstFloorRooffromthe1968topformation.Notethatthefirstdeclineisafalsestart(tobediscussedlater).OncethehighoftheFirst
FloorWalliscomplete,however,wave1oftheroofbeginsitsdeclineinearnest.Waves2and4areofequallengthindistancecovered(price,nottime).Anotherinterestingaspectofthisparticularroofisthedeepdropmadeduringwave5.Atthetime,adeclineofthismagnitudewouldhavebeenfairlydisconcertingtotheanalyst.Buttheknowledgethat(theassumed)waves2
and4wereequalshouldhavegivenhimorherconfidencetostaywiththeinferredpattern.Otherthanthewave-5plunge,the1968FirstFloorRoofstaystruetotheidealizedformationinitshorizontalcharacter.
Figure5.8.RoofRallies.ChartcreatedbyMetaStock®.
DespitethehorizontalroofdepictedinFigure5.8andLindsay’sidealizedchart,itappearsthatanequalnumberofroofstendtodeclineasin
Figure5.3.Havingnotedthis,theanalyststillneedstobealertforvariations.
AnomaliesThefollowingtwoanomalies,whilenotcommon,haveoccurredenoughtimesthatthereaderwillfinditadvantageoustobepreparedtoseethemagaininthefuture.MissingRoof
Itisextremelyrare,butsometimesitdoeshappenthattheroofiscomposedofasimplepullback,orshortreaction,ratherthanthefivereversalswewouldnormallyexpect.Asdiscussedpreviously,ifthishappens,themissingroofimpliesthattheDomedHousewillbeunusuallyshort-lived.Anexampleofthisphenomenoncanbeseen
inthe1948formationinFigure5.5.FalseStarts
SometimeswhatisperceivedasthetopoftheFirstFloorWallisnotcorrect.Oftentimesweseealittledipafterthestrongadvanceofthewallanditistemptingtocountthatasthefirstreversaloftheroof.“Thisisapeculiaritywhichcomesupinmanytrianglesandsimilar
chartpatterns,bothintheaverageandindividualstocks.Ifthefirstsell-offinatradingrangeisshallowerthanthenexttwo,itmaynotcountastheFirstReversalatall,eventhoughitlinesupwiththemsymmetricallyonthechart.”Figures5.3and5.4bothshowfalsestartstotheensuingtriangles.Thisirregularityshouldnotprovideanythingmorethananannoyancetotheanalyst.
Beingawareofthepossibilityofthispeccadillowillhelptoavoidunnecessaryfrustration.
SecondFloorWallTheFirstFloorRoofissubsequentlyfollowedbyanothersharprise,referredtoastheSecondFloorWall(seeFigure5.9).TheSecondFloorWall,liketheFirstFloorWall,ischaracterizedbyanabruptspurtupward.
Lindsayalsosaidtowatchforhighvolumeduringthe“construction”ofthewallbecausethattooisacharacteristicofthewall.
Figure5.9.SecondFloorWall.
TheCupolaandtheDeclineOncetheadvancefromtheFirstFloorRoof(theSecondFloorWall)iscomplete,theaveragepullsbackslightly.Pricecanthenbeexpectedtomakearuntoyetanothernewhigh.“Normally,theaveragegainslessonthelastlegofamajoradvance(despitecontinuedhigh
volume)thanonmostofthepreviouslegs.Ifthisisnottrue,themarketisnotmakingatop.”Inotherwords,theadvanceslowsdownasitgetsolder.Thenewhighisnotheldandtheaveragequicklypullsbackagain,retracingtheentiregain.Oncethenewandfinalhighhasbeenpassedandpricesstarttodrop,theyusuallydonotdropveryfarbeforetheystarttorallyagainandformaclearcutright
shoulderortherightsideofthesecond-storyrooftop(seeFigure5.10).AhorizontallinedrawnthroughtheleftandrightshoulderoftheCupolasuggeststheroofofasecondstory.Thesemovementssuggestacupolaorasmalldomeonthetopofabuilding,hencetheformationiscalledaDomedHouse.Theentire3PDhformationiscappedbyasmallhead-and-shoulders
patternthatresemblesthecupolaofahouse.
Figure5.10.Cupola.
Anabruptdeclinethenfollowsthatrightshoulder.Thislargerdeclinefromthe
rightshoulderoftheCupolaprecedesanothershortrecovery.Thetopofthissecondrecoveryoftenendsatalevel,relativetotheFirstStoryRoof,whichsuggeststhatitistherightsideoftheFirstStoryRoof.Thisadvancecanalsobeinterpretedastherightshoulderofadifferent,largerhead-and-shouldersformation.Inthishead-and-shouldersformation,the
triangle-shapedFirstFloorRooffunctionsastheleftshoulder.“NotethattheFirstFloorWallisbalancedbythedropfromthefinalrightshoulder,andtherisefromtheFirstFloorRoofisoffsetbythedeclinefromthefirstrightshoulderintheCupola.Thisgivesthepatternasquareeffect.Atthesametimethereisaroundedeffectatthetopduetothehead-and-shoulderspattern.”
Afterthissecond,lower-rightshoulderiscompleted,theaveragedropsbacktotheultimatelowofthebasewheretheDomedHousebegan.“ButtherehasneverbeenanexceptiontotherulethattheentiregaininaDomedHousehaseventuallybeencancelled.”Theknowledgethattheentiregainoftheprevious(approximately)two-plusyearswillbewipedoutis
whatmakesfamiliaritywiththe3PDhformationsoempoweringandpotentiallyprofitable.EvenifatradermissesthetopoftheCupola,heorshestillhasplentyoftimetoprofitfromshortingthemarket,giventhesizeofthemoveahead.Thesizeofthatmoveiseasilyascertainedbymeasuringtheremainingdistancetothebottomofthe3PDhformation.
ConclusionInanewsletterdatedSeptember4,1968,LindsaysharedsometipsforrecognizingaDomedHousethatthereadershouldfindhelpful:“Here’showtheadvanceofJanuary1967couldhavebeenrecognizedasaDomedHouse.Alltechnicalmeasurementsofthemarketwereterrificallystrong;theadvance-decline
line,odd-lotindexes,volumeandmomentumstudies,etc.Theywereentirelytoofavorableforthemovetobejustarallyinabearmarket.Onthecontrary,theysuggestedamajorbullmarkethadbegun.Yetafterrisingonlythreeweeks,theDow-JonesIndustrialsstalled.Inagenuinebullmarketandaftersuchapowerfulstart,theaveragewouldhavekeptgoing.It
wouldn’thavehesitatedaslongasitdidbeforeandafter[thetopoftheFirstFloorWall].Itwasacombinationofabullishtechnicalpositionandasidewaysmovementwhichbeganprematurelyandlastedundulylong.TheonlywayofreconcilingthecontradictionswastoassumethataDomedHousewasunderway.”InhisAugust16,1972,newsletter,Lindsaywrotethatthemostimportant
long-termintervallastsabout15yearsorsomewhatlonger.“ItisneededtounderstandtheDomedHousefully.”The15-yearintervaliscoveredinPartIV.GeorgeLindsayismostwellknownforhisThreePeaksandaDomedHousemodel,nodoubtduetoitsdescriptive,ifawkward,name.Whilemanytechnicalanalystsarefamiliarwiththe
nameofthemodel,veryfewhaveanyexperienceusingit.Evenasuperficialfamiliaritywiththemodelshouldbeofgreatbenefittothemostpassiveinvestor.Whilethearrayofpossiblecountsmayseemconfusingatfirst,Lindsaysharedseveralexamples(seeTable3.1)inwhichonlythebasicformofthemodelwaspresentatseveralmarkettopsandthecountsthathehadestablished
weremissing.The3PDhmodelisoneofthosefewmethodsthatwillyieldresultstothebeginnerandcontinueyieldingasmoreeffortisexpendedonthepartofthestudent.PartIIIexaminestheLindsayTimingModel,whichisbothitsown,free-standingmodelaswellastheconcludingtechniquefordeterminingthecorrectcountforthe3PDhmodel.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter6.TheTri-DayMethod
“ItiscalledtheTri-DayMethodbecauseyouneedtoknowthepriceofthestockaverageonjustthreedaysinordertocomputethelevelofthefinalbottom.Thecalculationcanbemade
shortlyafterthebullmarkethigh.”1—GeorgeLindsay
LindsayexplainedhisTri-DayMethod(seeFigure6.1)inaseriesoffivesupplementstohisnewsletterfromMaytoSeptember1959.InthemhedescribedanewmethodofcalculatingthelevelofbearmarketlowsusingtheThreePeaksanda
DomedHouseformation.
Figure6.1.Tri-DayMethod.
Thename“Tri-DayMethod”comesfromthefactthattoforecastthepricelevelofa
bottom,whatisneededistheleveloftheaverageatjustthreepoints:
•PointF(thetopofPeakThree)•PointG(thebottomoftheSeparatingDecline)•PointN(thetopoftheDomedHouse)
Fromthesethreepoints,twovaluesareneededtogetstarted:
•(F–G):TheextentofthelossfromPeakThreetothebottomoftheSeparatingDecline.•(N–G):TheextentofthegainfromthebottomoftheSeparatingDeclinetothetopoftheDomedHouse.
SwingoverRatioTheratio(N–G)/(F–G)is
calculatedandreferredtoasthe“Swingoverratio”(S.O.).ThisSwingoverratioisusedasamultiplier.WhentheSwingoverislessthan2,theexactSwingoverbecomesthemultiplier.WhentheSwingoveris2orgreater,themultiplierissimply2.Themultipliercannotexceed2exceptinonecircumstance:IfthehighestpointinthewholeThreePeaksformation(itdoesnotmatterwhich
peakishighest)istenmonthsorlongerfromthetopoftheDomedHouse(pointN),then2.2becomestheupperlimitonthemultiplierinsteadofthecustomary2.
CalculationStepsThetargetpriceofthefinalbottomiscalculatedusingsimplemath.Thestepspresentedhereillustratetheprocessofdeterminingthe
targetedbottom:1.DeterminethelengthoftheSeparatingDecline(F–G).
2.DeterminethelengthoftherallyfromthebottomoftheSeparatingDeclinetothetopoftheDomedHouse(N–G).
3.Determinetheratiobetweenstepsoneandtwo(theSwingover,S.O.).
A.Ifitislessthan2,theratioisthemultiplier.B.Ifitisequaltoorgreaterthan2,then2isthemultiplier.C.IfthetimebetweenthehighestpeakandthetopoftheDomedHouseis10monthsorlonger,2.2becomestheupperlimitofthemultiplier.
4.[(N–G)×S.O.]–(F–G)
=thenumberofpointsthatcanbeexpectedtobelostfollowingthetopofthemarketatPointN.
Lindsaywrotethateitherintradayorclosingpricescanbeusedforthesecalculations.The3PDhof1915–16providesanexcellent,clearexampleoftheTri-DayMethod(seeFigure6.2).PeakThree,orPointF,intheDowwasat96.08onMarch
16,1916.TheSeparatingDeclinetookitdownto84.96atPointGonApril22ndforalossof11.12points(F–G).
Figure6.2.Tri-DayMethod.Chartcreatedby
MetaStock®.
DuringtherisefromPointGtoPointNat110.15,theDowgained25.19points.Dividing25.19by11.12resultsinaSwingoverof2.26.Giventhatthehighestpointinthe
ThreePeaksformation(PeakOneonDecember27,1915)wasmorethan10monthsfromPointN,theupperlimitonthemultiplierbecomes2.2.TheSwingoverof2.26islimitedto2.2.Multiply25.19(N–G)by2.2.Theproductis55.42.Subtract11.12(F–G)from55.42andthedifferenceis44.30.ThisisthenumberofpointstheDowwillbe
expectedtolosebetweenpointsNandS.Subtract44.30from110.15(N)andtheremainderis65.85.ThisisthepricetargetoftheTri-DayMethodandshouldbealowofmajorimportance.TheactualbearmarketlowonDecember19,1917,was65.95.
Model3Lindsayallowedforthree
variations,ormodels,ofthe3PDhformation.InModel1,thethreepeaksareaseriesofascendinghighs,withPeakThreeasthehighest.ThisistheThreePeaksexampleinFigure6.1.InModel2,PeakThreeisthelowestpeak.InModel3,thedeclinefromPointD(PeakTwo)toPointEisathree-waveaffairwithanupwardreaction,orwave2,separatingtwodecliningwaves.ThelowatPointE
liesbelowthefirstlowatPointC,fulfillingthe3PDhrequirementofareactiontoalowbelowapreviousreactionlow.Fromthere,pricesadvancetoPointF,whichisthehighestpointoftheentireformation.ThereactiontoPointGholdsabovethelevelofE.ThisistheonlymodelinwhichthereactionfromPointFdoesnotundercutoneoftheprevioustworeactions.WhentheFirstFloorWallis
retracedalmostallthewaybacktothebottomoftheSeparatingDecline,aModel3canbeassumed.InModel3,thedowntrendthatordinarilyrunsfromHtoJbecomestheSeparatingDecline.InthecaseofaModel3ThreePeaksformation,wecountfromthishigherbottomtothetopoftheDomedHousetodeterminetheSwingover(asopposedtocountingfromthe
reactionlow,whichundercutapreviouslow).The3PDhformationof1951–52(seeFigure6.3)providesanexampleofModel3whentheaveragedroppedfrom280.29atFinAugust1952to263.06atGinOctober,alossof17.23points.
Figure6.3.Tri-DayMethod—Model3.Chartcreatedby
MetaStock®.
TheDowthenroseto293.79atNonJanuary5th,againof30.73points.Divide30.73by17.23.Thedividendis1.78.
That’stheSwingover.Sinceitislessthantheupperlimitof2onthemultiplier,theexactSwingoverbecomesthemultiplier.Multiply30.73,thegainfromGtoN,by1.78.Theproductis54.70.Fromthatamount,subtract17.23,thelossfromFtoG.Theremainderis37.47.ThisisthenumberofpointstheDowshouldlosebetweenNandS.
Deduct37.47from293.79,thepriceatN.Theremainderof256.32isthecalculatedTri-DaypriceatS.TheactuallowofSeptember13,1953,was255.49.NotethattheintradaylowatEexceededthelowatCby0.30points.AlsonotethatthecountwasnotfromthislowbutfromahigherlowatG.
Complex
ArrangementUnlikethepreviousexamples,therearetimeswhenamorecomplicatedmethodmustbeused.AComplexArrangementoccurswhenanadditional3PDhisfoundcontainedintheFirstFloorRoof.Thissituationisoftenprecededbypricesrisinggraduallyintheearlystagesofanadvance.From1926tothemiddleof1928,
fromDecember1917toFebruary1919,andfrom1943tomid-1945,thepatternwasthesame.TheDowcreptupsteadily,buttherateofgainwasmuchlessthanisnormalinbullmarkets.SimilartotheModel3scenario,thereactiontoPointGholdsabovethelevelofE.Towardtheendofanadvancethathasproceededforayearorlongerwithasubnormalrateofgain,theconvention
thatoneofthedeclinesmustdipunderthelowofaprevioussell-offisnotrequired.WheneveraDomedHouseiscomplex,theSwingovermultipliermustbecomputedwithreferencetotheThreePeakscontainedwithintheFirstFloorRoof,theformationnearesttothefinaltop.Theentiremovement
betweenthelowinJune1928andthehighof1929isaComplexDomedHouse,aninitialThreePeaksformationfollowedbyasecond3PDhformationcontainedwithintheFirstFloorRoof(seeFigure6.4).TheDowmadeahighof327.08onMay4,1929.Itdroppedto293.42onMay27th.ThiswastheSeparatingDeclineoftheformationintheFirstFloorRoof.Thelosswas33.66
points.
Figure6.4.Tri-DayMethod,Complex
Arrangement.ChartcreatedbyMetaStock®.
TheDowthenroseto381.17onSeptember3rd,againof87.75points.Divide87.75by33.66.Theratiois2.61.That’stheSwingover.Less
than10monthspassedbetweenthehighestpointofthe3PDhformation(May4,1929)andPointNthefollowingSeptember,sotheupperlimitonthemultiplieris2.In1928,theDowwasat220.96atPointFonJune2nd.Itdroppedto201.96onJune18th,alossof19points.ThiswastheSeparatingDeclineoftheThreePeaks
patternthatprecededtheentireDomedHouse.From201.96atGonJune18th,theDowroseto381.17atPointNonSeptember3,1929,againof179.21pointsintheDomedHouse.Multiply179.21by2.Theproductis358.42.From358.42subtract19(thelossintheSeparatingDecline),andtheremainderis339.42.Thisisthenumberof
pointsthattheDowisexpectedtolosebetweenpointsNandS.Deduct339.42from381.17andtheremainderis41.75.ThatistheprojectedTri-DaypriceatpointS.TheactualbearmarketlowonJuly8,1932,was41.22.
Conclusion“Inanygiveninstance,theTri-DayMethodmayprove
moreaccuratewithoneaveragethanwithanother.Itisadvisabletomakeeachcalculationintwoormoreaverages.”NotallThreePeakpatternscanbeusedtocalculatealow.Someofthemmustsimplybeforgotteninthelightoflaterfluctuations.“Markethistoryshowsthataformationcanbediscarded(1)whenitissupplantedby
anotherpatternwhichprecedesorfollowsit,(2)whenitisshortorimperfectlyformed,or(3)whenitoccursataverylowlevel,historically,intheaverage.”Themoreflawsthereareintheshapeandcharacterofthepattern,thelessconfidencethatcanbehadintheforecast.ThepointsF,G,K,L,M,N,andsoonaretobeappliedto
actualmarketfluctuationsonlyinretrospect.Ifsomeonetriestolocatethematthetimetheyoccur,hewillalmostsurelybemistaken.Itmustbeemphasized:ProjectionsofpointScanbemadeonlyaftertheentireformationiscomplete.AssoonasitisdecidedthattheformationisaDomedHouse,itisknownthatthepriceaveragemustreturnto
thebottomoftheThreePeaks,regardlessofwhatthecalculatedpriceis.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,May–September1959.
PartIII.TheLindsayTimingModel
Chapter7:OverviewoftheLindsayTimingModelChapter8:KeyDatesChapter9:TheLow-Low-
HighCountChapter10:CombiningtheCounts
Chapter7.OverviewoftheLindsayTimingModel
“Mosttimingstudiesarriveatadecisiontobuyorsellthroughmethodswhichhavenothingdirectlytodo
withtimeitself.Theproceduredescribedbelowistimingintheliteralsenseoftheword—merelycountingthenumberofdays....Onitsface,itisforshort-termtraders.Butitcanalsobenefitinvestors:theywillsimplyuseitlessfrequently.”1—GeorgeLindsay
In1965,GeorgeLindsaypublishedanewslettertitledATimingMethodforTraders.Thegoalofthismethodormodelistoidentifytradabletopsinthemarkets.PartIIofthisbook,“ThreePeaksandaDomedHouse,”mentionsthattheTimingModelisthe“concludingtechnique”ofthe3PDhmodel.ItalsosaysthattheTimingModelisafree-standingtechniqueallbyitselfandisnotinneedofany
otherindicatorsormodels.Thetopsidentifiedbythismodelarenotonlythesecularorcyclicalbullmarkettopsidentifiedbythe3PDhmodel.ThetopsanticipatedbytheTimingModelrangefrombullmarkettopstotopsfollowedbycorrectionsofonlyafewdays.Chapter9,“TheLow-Low-HighCount,”explainshowtherelativedurationanddepthoftheexpectedcorrectioncanbe
anticipated.InhonorofLindsay(andinanattempttogivehismodelalessawkwardepithet),thisbookreferstothisworkas“TheLindsayTimingModel.”SimilartotheThreePeaksandaDomedHousemodel,theLindsayTimingModelcanbeusedbyserioustradersorpassiveinvestors.“Themostcasualuseoftheprinciplescanbeofsome
benefit.”Andlikethe3PDhmodel,theLindsayTimingModelwillyieldadditionalinsighttotheuserasheorsheinvestsmoretimeintobecomingfamiliarwithitandunderstandingit.Lindsaywrotethatthemodelcanbeappliedtoindividualstocks,stockmarketindexes,andcommodityfutures.Healsowroteinadifferentnewsletterthatthismodel
doesn’tworkverywellinabullmarket.ExperiencehasshownthatLindsay’scommentwasmoretheresultofmodestythanofaccuracy.Themodelcanprovequiteusefulinabullmarket,particularlywhenusedtoconfirmbearish,short-to-intermediate-termsignalsfromotherindicators.AllhisexamplesfocusedontheDowJonesIndustrialindex,butithasbeenconfirmedthatthe
modelworksonawidevarietyofassetclasses.Lindsayclaimedtohavetestedhistimingmodelbackto1861.Inthiscase,heexplainedthathetestedthemodelpriortotheinceptionoftheDowIndustrialsbycomputingadailyaverageof“sevenmarketleaders”from1861to1885.
Introductiontothe
LindsayTimingModel“VirtuallyeverybullmarkethighonrecordcameattheendofaTop-to-Topcount;andthekeydate,fromwhichthecountbegan,wassharplydelineatedonthechart.”Themodelitselfiscomposedofthreebasicconcepts:
1. The107-dayTop-to-Top
interval2. TheLow-to-Low-to-
Highinterval3. Theconvergenceof
thesetwointervals,whichgivesusourtargetedtoporhigh
TheLindsayTimingModelisunusualinthatwhilethecyclearchetypeattemptstoidentifytimeintervalsbetweenlowsinprice(thatis,a21-daycyclecounts21days
betweensuccessivepricelows),Lindsay’sapproachtothisparticularintervalusespricehighs.Acountof107calendardaysfromacorrectlydeterminedoriginshouldbeexpectedtoidentifyatopinprice(seeFigure7.1).Themodelallowsfora±5-daywindowoneithersideofthetargeteddate.Inotherwords,the107-dayintervalmaybeonlya102-dayintervaloritmayextendto
112days.Anotherdifferencebetweenthe107-dayintervalandthearchetypecyclethatmostreaderswillbeinclinedtothinkofisthatthe107-dayintervalisnotacycleatall.Itisreallyanintervaloftime.Oneshouldnotexpectaregularlyrecurringcycleof107daysfromthismodel.These“cycles”aremoreappropriatelyreferredtoas“intervals.”
Figure7.1.The107-DayTop-to-Topcount.
TheTop-to-Topcountisnotfromonehightoanotherbutfromalowwithinatop(RangeTop)toatop(the
intradayhighofanadvance).Theproblemofsemanticsbecomesincreasinglyclear.Oncethekeydateisidentified,itisaneasytasktocountforward107daystofindthetargeteddateforthehighoftheadvance.Countingisdonewithcalendardays,nottradingdays.Thisbecomesaneasytaskwiththeplethoraofonlinecalendarsanddatecountersavailable
freeofchargeontheInternet.Thetargeteddateforthehighoftenfallsonthesamedateasthetruehighofanadvance.Lindsayidentifiedthehighofanadvanceusingintradayhighsandnotclosinghighs.Heevenwentsofarastowrite,“Thehighdayattheendofthecountisdeterminedaccordingtotheintradayorhourlyprices.”Itcertainlyisn’tnecessarytouseintradayorhourlypricestoimplement
theLindsayTradingModel.AllexamplesLindsaysharedinhiswritinguseddailycharts.Thetruehighoftheadvanceisexpectedtobecontainedwithina5-daywindowoneithersideofthetargeteddate.Therefore,weshouldexpecttofindthetrue,orintraday,highanywherefrom102daysto112daysafterthekeydate.Lindsaytookthe
timetowrite,“ItiscomparativelyinfrequentforaTop-to-Topcounttolastaslongas111or112days.”Healsoexplainedthatoneexceptiontotheprecedingshouldbenoted:A107-daycountcanalsoexpireattheendofatradingrangeorcongestiononthechart.Itneednotbewithinthe5-daywindowifpricehasbeencontainedwithinatradingrangesincethetargetedhigh.
Oncethetargetdateofthe107-dayintervalisdetermined,theanalystwillthenattempttofindLow-to-Low-to-High(LLH)intervalsthatconvergewithit.TheidentificationandcreationoftheLLHintervalareexplainedinChapter9.Fornow,oneneedonlyunderstandthatanLLHintervaliscomposedoftwoequaltimeintervals,thefirstofwhichisbetweentwoprice
lows.Thesecondintervalisbetweenthatsecondlowandapossiblepricehigh.AsimpleexampleoftheLLHintervalcouldbealowpinpointedonthefirstdayofthemonthandanotherlowfoundonthefifthdayofthemonth.Thetimeperiodbetweenthesetwolowsiscountedasfourdays.Fourdayswouldthenbeaddedtothesecondlowtoidentifyapotentialhighontheninth
dayofthemonth.Clearly,countingforwardanumberofdaysfoundbetweentwolowsdoesn’talwaysidentifyahighinprice.Whatthemodelistryingtodo,bycombiningtheLLHintervalapproachwiththe107-dayTop-to-Topintervalapproach,istriangulateashorttimeintervalinwhichatradabletopisexpectedtooccur.Onecanthinkoftheconvergenceoftheseintervals,during
somewindowoftime,ascreatingamassthathasitsowngravity.Thegravitydrawsthepriceupwarduntilthatpointintimehaspassed.Oncethatpointintimehaspassed,theconvergencelosesitsgravityandthepricebeginstodrop.Mostmarkettimingmodelsinvolvefocusingoncurrentmarketaction.Thiscommonaspectofmostindicatorscan
causetheanalystortradertofeelpressuredandtosubsequentlymakeadecisionunderduress.OneofthemanyattractionsoftheLindsayTimingModelisthatthefocusoftheanalystisdirectedtopastmarketfluctuations.Thistendstorelievesomeofthepressureofbeingforcedtomakeadecisiontodaybasedontoday’s,orveryrecent,marketaction.Forexample,
inthecaseofthe107-daycount,theanalysthas107daysinwhichtoarriveathisestimate.Thisisaniceidiosyncrasyofthemodel.ModernreaderswillappreciatethefactthatthecountinginLindsay’stimingmodelusescalendardaysratherthantradingdays.Thisenablesthepractitionertouseanyoneofanumberofonline(Internet)datecountersand
calendarstoquicklycountthenumberofdays(“...merelycountingthenumberofdays”)betweenpricelowsinthepastandtofindthedatesoftargetedhighsinthefuture.
TerminologySemanticsquicklybecomesanissuewhenoneisreadingLindsay.Manyoftheostensiblysimpletermshe
usedapplytomorethanjustoneconceptandquicklybecomeconfusing.Forexample,whenLindsayreferstoa“top,”ishereferringtothetargeted,finaltopoftheadvance,orishereferringtothetopfromwhichwemeasuretheoriginpointofthe107-daycount?Isthefinal“top”hereferstoanabsolutehighinpriceoristhistopthetimespanofthe±5-daywindowthat
encompassestheintradayhigh?TheseareallconceptsthataresimpletounderstandbutneedtobedifferentiatedandlabeledinordertounderstandandapplytheLindsayTimingModel.Thisbookattemptstodifferentiatethesesimpleconceptsbyaddingafewtermstotheconventional“Lindsayvocabulary.”ReaderswhoarenotfamiliarwithLindsay’sworkwillnevernoticethese
additions.ThosereaderswhoarealreadyacquaintedwithLindsay’sworkwill,hopefully,notbedistractedbythenewterminology.Indeed,itishopedtheywillfindtheadditionalcategorizationandlabelingofconceptshelpful.
AFewSimpleRemindersEveryonesometimesloses
trackoftheforestwhileconcentratingonthetrees.Whenbeginningone’sstudyoftheLindsayTimingModel,astudentwoulddowelltorememberthisonesimpledollopofcommonsense:Inorderforthemodeltocalla“top,”themarketmustbeadvancing.Ifthemarkethadbeenadvancingpreviously,atargeteddateattheendofatradingrangeisacceptable,too.Butsometimesthe
targeteddateoccursduringamarketdecline.Topsdon’toccurinfallingmarkets!Don’texpecttheTimingModeltodotheimpossible.Afallingmarketisaneasywaytoruleoutthepossibilityofatopandthusisanothertooltobeused.Thatraisesaquestion:Howlongmustamarketbeadvancingbeforeatopcanbecalled?Theanswertothatquestionhasoftenbeen“lessthanaweek.”
Itissuggestedthatonebeginthisprocessusingaspreadsheetratherthanmarkingupapricechart.Whiletheresultofmarking107-dayintervalsonachartcanbelegible,thenumberofannotationsrequiredfortheLLHmodelwillmakeyourpricechartimpossibletoread.EvenLindsaydidn’ttrytofitalltheannotationsrequiredbythemodelontojustonechart.Rather,forhis
examples,heusedtwoseparatecharts(onechartforthe107-dayintervalsandonefortheLLHintervals).Thisapproachstillnecessitatedflippingbackandforthbetweenchartsondifferentpages.Tryingtomatchupdatesontwoseparatepricecharts,whilecertainlynotimpossible,doesn’taddanythingtothelearningexperienceotherthanamarginalleveloffrustration.
Usingaspreadsheettolistallthedatesrequiredofthisapproachismuchcleanerandsimpler.Finally,iftheanalystkeepshiseyespeeled,hewillnoticethatinflectionpointsinthemarketcanoftenbeidentifiedbythe107-dayintervalmeasurednotjustfromtopsbutfrombottomsaswell.Also,LLHcountsthatfailtoidentifyapricehighmaywell
havepinpointedapricelow.Theserealizationsmaynothelpwithimplementingthemodelbutdohelptofurtherthetheory,andourunderstanding,ofintervalsandcycles.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter8.KeyDates
“Thiswholetimingmethoddependsonlocatingthekeydatecorrectlyonthechart.”1—GeorgeLindsay
ThischapterexaminesLindsay’sapproachto
locatingtheoriginofthe107-dayinterval,thedatefromwhichwecountforward107days.Lindsayreferredtotheoriginasthekeydate.Thetargeteddateforthehighoftheadvanceis107daysafterthekeydate.Thetruedatecontainingtheultimate,intradayhighoftheadvanceisassumedtoliewithinatimewindowthatextends5daysoneithersideofthetargetdate.Thus,thetrue
datemaylieanywherefrom102daysto112daysfromthekeydate.Somewhereinthis5-daywindowisthetopoftherecentadvance.IfthistargetdateisnotconfirmedbyLow-to-Low-to-Highintervals,weshouldn’texpecttoomuchofadecline.Yetsomesortofdeclineisoftenwitnessed.TheproblemwithputtingtoomuchemphasisonthetimewindowwithoutconfirmationbyLLH
intervalsisthatwedon’thaveafeelforwhereinthetimewindowitisbesttogotocashortoshortthemarket.Withoutmoreassuranceofatradabledeclineemergingfromanarrowertimeframefromwhichtotimeourtrade,tradingwithnothingmorethana107-dayintervalcanoftenbe“lessthanprofitable.”Atradershouldnotexcludeothertechnicalsignalsasconfirming
indicators,butthatisbeyondthescopeofthisbook.
KeyRange“Mosttopformationsareeasytorecognizeonachartaftertheyhavebeencompletedwhichiswhenweusethem.”Thekeydate(origin)iscontainedwithinaToppingRange,whichweshallrefertoastheKeyRange.Lindsay
usedclosingpricestofindkeydatesandintradayhighstoclassifymarkettops.Lookforthelowestclosingprice(nottheintradaylowprice)whenselectingakeydate.Intheprecedingquote,the“topformation”LindsaywasreferringtowastheKeyRangeandnotthetargetrange107dayslater.Itisprobablyeasiertorecognizeatopformationthantodefineit.TheclosestLindsaycame
todefiningaKeyRangewasasfollows:“Pricesmovebackandforthoverthesamerange.Thefluctuationscanassumeanyoneofanumberofpatterns—itdoesn’tmatterwhich.Whentheaveragedropsunderthelowofthewholerange,atophasbeencompleted.”Lindsayalsowroteinoneexample:“ThefivemarketdaysfromJuly10to16...constituteaminortopformation,sincepricesbroke
sharplyfortwodaysafterwardandviolatedthepreviousminorlowpoint.”ThisbookidentifiesaKeyRangebyfindinganewhighfollowedbyaretracementtoalowthatislowerthanthefinalcorrectionprecedingtheidentifiedtop(seeFigure8.1).
Figure8.1.KeyRange.
Broadlyspeaking,therearetwotypesofKeyRanges:
•CompactTopformations•MajorTopformations
CompactTopsarethemostcommonofthetopformations.MajorTopformationsextendoveramultimonthperiodandarelikelytocontainseveralCompactTopformations.OnceCompactTopsareunderstood,MajorTopformationsareintuitivelyobvious—nothingmorethanabigCompactTop.
CompactTopFormations
“Thelowdayofthemostobviousdipinatopformationisthekeypoint.ThisiswhereeveryTop-to-Topcountbegins.”ThereareninevariationsofthiscommonframeworkoftheKeyRange,asexaminednext.Oncetheparticularvariationisidentified,findingthekeydateisstraightforwardandfairlysimple,thoughitsometimes
requiresabitofartisticlicenseandflexibilityonthepartoftheanalyst.Lindsay’sbackgroundasanartistisapparentbecausemanyofhismethodsrequiretheanalysttointerpretandgeta“feel”forwhatthemarketisdoingasopposedtoinsistingthatthemarketfitintoanypreconceivedformulas.DoubleTop
TheDoubleTopformationis
thebestformationtobeginanexaminationoftopvariationsbecauseitisthesimplest.“Wheneverthereisawell-defineddoubletop,orapproximatedoubletop,thelowdayofthedipbetweenthetwopeaksisnearlyalwaysthecorrectkeydate.”(SeeFigure8.2.)
Figure8.2.DoubleTop.
Thelowdateinatopformationcanbethoughtofasthe“centerofgravity”oftheToppingRange.Thinkinginthesetermsmayhelpthe
studenttogetafeelforwhatLindsaywasattemptingtodoinidentifyingkeydates.ExamplesofcountsfromDoubleTopscanbefoundinTable8.1.
Table8.1.Top-to-TopCountsatBullMarketHighs:DoubleTop
Formations
DoubleBottomTop
“Whenthedipendsatadoublebottom...thefirstlowisnearlyalwaysthecorrectone.”Whentherearetwoormoredipsofapproximatelyequaldepthinatopformation,thekeydate(fromwhichwe
count)islikelytobethefirstofthem.Itisalsolikelytobethedipthatcomesbeforethehighestpointofthewholetopformation.Thesecharacteristicsaregenerally,butnotinvariably,true(seeFigure8.3).
Figure8.3.DoubleBottom.
Head-and-ShouldersTop
GivenLindsay’scommentsonDoubleBottoms(previously),oneshouldn’tbesurprisedbyhisapproachtoHead-and-ShouldersTops:
“WhenthereisaHead-and-ShouldersTop,thekeydateisthelowofthedeclinethatcomesaftertheleftshoulderandbeforethehead.”(SeeFigure8.3.)FindingthekeydateinDoubleBottomsandHead-and-ShouldersTopsisagoodexampleoftheneedtogetafeelforthemarket.Isthekeydatethefirstdiportheseconddip?Luckily,asimple
solutionistocountfrombothdips.ThissimplesolutionissharpenedupusingtheexaminationofLow-Low-HighintervalsinChapter9,“TheLow-Low-HighCount.”FinalDip
AFinalDipisnotaKeyRange.ThelastdipbeforetheendofanadvanceoftenfunctionsasthekeydatewhenthereisnoKeyRangetoguideus.Thisisan
extremelycommonsituation(seeFigure8.4).“Whenatopformationisneitherahead-and-shouldersnoradouble(ortriple)top,pricesusuallyremainclosetothehighestpointonlyaveryshorttime....Insuchcases,thekeydateisnearlyalwaysthelastdiponthewayuptothehigh.Therewasnodipworthyofthenameinthosefivedays.Whenthisistrueofanytoppattern,wegobacktothelast
minordiponthewayuptothehigh.Thedipmaylastonedayorseveral.Thelowdayofthatdipbecomesthekeydate.”
Figure8.4.FinalDip.
InreferringtokeydatescomposedofFinalDips,Lindsaywrote:“Theyweresell-offslastingaboutonedaywhichcameonlytwoorthree
daysbeforethefinalhighoftheadvance.Others—likethoseofDecember1952andMay1959—weredeclineslastingfourorfivedays,whichcamefromonetothreeweeksbeforethefinalhigh.Thus,acertainamountofdiscretionisinvolvedinselectingthelastdiponthewayuptothehigh.”RangeDip
Onekeydatevariationthat
Lindsayalludedto,almostinpassing,butdidn’tattempttocategorizeissimilartotheFinalDip.ItactuallyisaFinalDipif,ratherthandefiningitasthe“lastdiponthewayuptothehigh”tradingday,onethinksofitasthelastdippriortotheKeyRange.“ThefivemarketdaysfromJuly10to16,shownatpoint9,constituteaminortop
formation,sincepricesbrokesharplyfortwodaysafterwardandviolatedthepreviousminorlowpoint.”The“previouslow”Lindsayreferredtoendedupbeingakeydateitself(seeFigure8.5).
Figure8.5.RangeDip.
UsingaRangeDipinconjunctionwithaFinalDipcannarrowthetargetrangeandprovideahigherlevelofconfidenceinthetargetdate.Thefinalhighofamove
oftenfallsbetweentargetdatesmeasuredfromthesetwokeydates.CaremuststillbetakentouseLLHintervals,however.LLHintervalsareexplainedinChapter9.BottomtoTopCounts(BTC)
“TheyareofthesamedurationasTop-to-TopCountsandarefrequentlyfoundinlongbullmarkets.Buttheybeginatanysortof
bottom,notjustatthelowpointwithinatopformation.TheyaremuchlesslikelytoresultinabigdeclinethanatrueTop-to-TopCount.”BottomtoTopCounts,orBTC,occurfairlyfrequently.TheyarethesimplestofallkeydatestorecognizebecauseoneneednotbotheridentifyingaKeyRange.Theyarenothingmorecomplicatedthancounting
forward107daysfromabottomtoapossibletop.Lookforthesecountswhenmarketsexhibitanextendedrise.Orrather,startcountingfromrecentbottomsduringanextendedrise.Whenananalyststartsaskinghimself,“WhereIStheKeyRange?”chancesaretheBTCistheappropriatecounttobeconsidering.WhenakeydatedoesnotfallwithinaKeyRange,thenthemarket
declinefollowingthe107-daycountisunlikelytobeanythinggreaterthanofintermediatescope(seeFigure8.6).
Figure8.6.BottomtoTop
SpecialClass
“Whenacountcanbetakenfromtheprimarylowofadecline,thesametypeofcountmayalsobetakenfromasecondarylowwhich
followsshortlyafterwardataslightlyhigherlevel.”CloselyrelatedtotheBottomtoTopCountisacategoryLindsayreferredtoasaSpecialClass.Lindsayexplainedthat107-daycountscouldbetakenfromeitherofthedipsafterthekeydateinFigure8.6.Countingforward107daysfromeitherofthosesubsequentdipstakesonetoa±5-daywindowinwhicha
bounceshouldbeexpectedinthedowntrendfromthehighcountedfromtheprimarylow.ThisissimilartokeydatesinMajorTops(seeFigure8.9).AkeydateinaMajorTopwilltimethestartofabiggerdeclinethatgetsunderwayfromalowerlevel.ThecountfromthesecondkeydateinaMajorTopisnotusedtoidentifyanewhigh.Thisidentified“high”shouldbeexpectedtobeashort-
livedbounceandapointfromwhichtoexpectareneweddecline.PostTopCounts(PTC)
“Thereare,however,instanceswhenthekeydatecomesafterthehighestpoint,eventhoughtherewasapossiblekeydatepriortoit.”ThePTCisdistinguishedbythetruekeydateappearingafterthehighoftheKeyRange(seeFigure8.7).A
PTCisalessfrequentphenomenonthantheothervariationsexaminedpreviously.Itshouldbethoughtofasananomalybutnotforgotten.Thetopin1929(September3rd)was113daysfromthekeydateofMay13,1929.ThekeydateinMayof1929occurredafterthehighoftheKeyRange.The113daysisunusualinthatitwasoutsideofthe102-to-112-daytargetrange,but
thedeclinefollowingthetargetdatewasunusualaswell.ExamplesofPostTopCountscanbefoundinTable8.2.
Figure8.7.PostTopCount.
Table8.2.PostTopCountsatBullMarketHighs
OnewouldbewisetowonderhowitcanbeknownwhichdipinaKeyRangeisappropriatewhenthisexceptionisalwayspossible.TheuseoftheLow-Low-Highintervalholdstheanswertosolvingthisriddle;itisexplainedinChapter9.SinkingKeyRange
TheSinkingKeyRangeconceptmightseemconfusinginachapter
concerningTop-to-Topcounts,butitisnotallthatdifficult.Inanextendeddowntrend,amarketisnotgoingtodevelopaKeyRangethatfitsthestereotype,butitnormallywillseeperiodsofconsolidationduringthedecline.Itisduringtheseconsolidationswecanlookforkeydates(seeFigure8.8).Often,thekeydatewilltaketheformofaPostTopCountasthe
marketwillexperienceasubstantialbounceafteranextensivedecline,pullbackfromthebounceprintingthekeydate,andthenbounceagainbutnotashighastheoriginalbounce.Thisconsolidationisthenfollowedbyareneweddeclineandpricesdroppingtonewlows.Thisbehaviorwouldcauseakeydatetoappearafterthehighoftheconsolidation,andtheensuingcountisreferred
toasaPostTopCount.Inthiscase,thePTCappearsinaSinkingKeyRange.
Figure8.8.SinkingKeyRange.
MajorTopFormations“Thesecondkindoftopformationisthelongdrawnoutone....Eachformationofthistypeusuallyhastwokeydates....Notethatthesekeydatesarefoundfarbelowthehighestlevelofthewholetoppattern.ATop-to-Topcountmustbetakenfrombothofthekeydatesinsuchaformation.Thecountfromthefirstoneissometimes
unimportant,ordoesn’tworkatall....Thecountfromtheseconddate...isusuallyimportantandresultsinadeepdecline.”MajorTopformationstendtoextendoveramultimonthperiodandarelikelytocontainseveralCompactTopformations.AMajorTopcanbeidentifiedusingtheconceptoftheRangeDip(seeFigure8.9).
Figure8.9.MajorTop.
AkeydateinaMajorTopformationwillmostlikelyneedtobefarunderthehighsofsuchalargeKeyRange.Thisisneededinorderto
identifythekeydatejustasinaCompactTop.AkeydateinaMajorTopwilltimethestartofabiggerdeclinethatgetsunderwayfromalowerlevel.Itmaybethatthetargetedtopisthesame,originalbounceintheconsolidationmentionedintheSinkingKeyRangeexamplepreviously.ThecountfromthesecondkeydateinaMajorTopisnotusedtoidentifyanewhigh.
Thisidentified“high”shouldbeexpectedtobeashort-livedbounceandapointfromwhichtoexpectareneweddecline.
ConclusionToppingRangesarecomposedofCompactTopsandMajorTops.Thetwotypesoftopsaredifferentiatedbythelengthoftimeinvolvedintheir
constructionandthefactthatMajorTopsusuallycontainseveralCompactTops.ThischapterhasidentifiedandlabeledtheninetypesofCompactTopsthatLindsaywroteofeitherexplicitlyorimplicitly.IncontrasttoCompactTops,MajorTopsextendoverseveralweeksandcanbeeasilymissediftheanalystisn’tlookingforthem.The
primaryuseofMajorTopsistoidentifyapointwhereanextendeddeclinebelowtheMajorTop,orToppingRange,istoberenewedandcanbeexpectedtoleadtoanevenlargerdeclinethanwhathasalreadybeenwitnessed.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,George
Lindsay’sOpinion,duringtheyears1959–72.
Chapter9.TheLow-Low-HighCount
“Low-Low-HighCountsareusuallyaccuratewithinamarginofoneortwodays.Thisistheirpointofsuperiority.Manyseemtoworktotheexact
day,orevenhour.”—GeorgeLindsay
IntheLindsayTimingMethod,theLow-Low-HighCount(referredtoasLLH)isusedtoconfirmthe107-dayTop-to-Topcount.UsingtheLLHintervalcountsharpensupthe107-daycountconsiderablybyeliminatingless-than-ideal107-daycounts.Theconceptisquite
simple.Onebeginsbyfirstdeterminingthenumberofdaysbetweenanytwo“lows,”thencountingforwardthesamenumberofdaystoarriveatahigh(seeFigure9.1).“Theindicatedhighmaybeeitherthelastdayuporthefirstdaydown.”1TheoperativewordinLindsay’squoteis“indicated.”Ahighisnotalwaystheresultofusingthis
procedureinisolation,butevenwhennohighisproducedthemethodisstilluseful.BycombiningtheLLHcountwiththe107-daycount,Lindsaydevelopedasystemthatdoesaremarkablejobofpredictinghighsinprice.Sometimesthechangesintrendpredictedbythemodelaremoreseverethanatothertimes.Lindsaygavesuggestionstohelpdeterminetherelativedegreeofasell-
offananalystshouldexpect,andtheyareincludedattheendofthischapter.
Figure9.1.Low-Low-HighCount.
Like107-daycounts,LLHcountsaremadeusingcalendardays,nottradingdays.Whenoneisusingcalendardays,theindicateddateofahighsometimesfalls
onaSaturday,Sunday,orholiday.Todeterminewhetherthetargetedhighshouldbeexpectedtofalloneitherthedaybeforeorthedayafteracloseddayinthemarket,Lindsaysuggestedcheckingbycountingmarketdays.Fortunately,ithasbeenfoundthatthesimplerprocessofassumingaFridaytargetdateforcountsendingonaSaturdayandaMondaytargetdateforcountsendingona
Sundayworksquitewell.
DeterminingLowsBeforetheanalystcanbegincounting,heorshemustdeterminefromwhichlowsthecountswillbemade.Likekeydatesinthe107-dayTop-to-Topcount,lowsaredeterminedbyclosingprices.“Indecidingwhichdayisthelow,wegobyclosingpriceswithveryfewexceptions.”
OneexceptionLindsaynotedwasforwhathedescribedas“extreme”intradaylows.Hereagain,hefailedtodefineexactlywhatshouldbeconsideredan“extreme”intradaylowanddependedonthereader’sjudgment.Atonepoint,hewrotethatthatitwould“violatecommonsense”tocalloneparticulardaythelowjustbecauseitwastheclosinglowwhenanadjacentdaycontainedan
extremeintradaylow.“Acountcanbetakenbetweenanytwolows,nomatterhowfaraparttheyare,orwhatfluctuationstakeplacebetweenthem.Thus,thereareanenormousnumberofLow-Low-Highcounts.Sinceweareinterestedonlyinworthwhiledowntrends,weuseasmallnumberofthetotalcounts.Theymustthereforebesorted
outsystematicallytoavoidconfusion.”The“system”Lindsayusedtosortthelowswastodifferentiatebetweenwhathecategorizedasimportantlowsandminorlows.“Firstminorlowsmustbedifferentiatedfromimportantlows.”Minorlowsareeasytoidentifyastheyareanylowotherthananimportantlow.Unfortunately,Lindsay
doesn’tdefineimportantlows.Theclosesthecametodefiningimportantlowsandminorlowsiswhenhewrote,“Thedistinctionshouldbeclearfromglancingatthechart.”Forthepurposesofthisbook,weshalldefineanimportantlowinanuptrendasaretracementthatdropslowerthanapreviouslowintheuptrendpriortothemostrecenthigh(similartofindingaKeyRange).Animportant
lowcanalsobethoughtofasachangeintrendfromdowntoup.Asfordowntrends,alltheexamplesofimportantlowspresentedbyLindsayindowntrendsappeartobeformsofthe“extreme”intradaylowsdiscussedpreviously.Healsowrotethata“violenceoffluctuations”cancauseanimportantlow.Aviolentfluctuationwouldbeexpectedtoprintanextreme(intraday)low.In
thisbook,amajorlowinadowntrendisalowthatprecedesanupwardretracementthatclimbshigherthanapreviousupwardretracementfoundinthesamedowntrend.
CountsOncetheimportantlowsandminorlowshavebeenidentifiedonapricechart,countingtheintervals
betweenlowscanbeginandtheresultingcountsanddatesrecordedinalog.Here,Lindsaydistinguishedbetweenimportantcountsandminorcounts.Healsotookcaretoexplainhowlongeachtypeofcountshouldbeexpectedtohaveaneffectonthemarket—thatis,thelongestintervaltheanalystneedstotrackforeachtypeofcount.Therearefourseparatecountstobeaware
of:twoimportantcountsandtwominorcounts.
ImportantCountsAcountfromoneimportantlowthroughanotherimportantlowisratedasanimportantcount.Animportantlowhasamaximumlifeoftwoyears.“Forthatlongafteritisestablished,takecountsbetweenitandeveryother
importantlow.”Thismeansthatanimportantlowcanbeexpectedtohaveaneffectonthemarketforthenextfouryearsbecausecountingforwardtwoyearsfromasecondimportantlow(identifiedtwoyearsafterthefirstimportantlow)wouldcoveratotaloffouryears.Ofcourse,itisonlythosedatesthatarepinpointedbythecounting,andnotthetimebetweenthedates,thatare
importanttobearinmind.Acountfromanimportantlowthroughaminorlowalsoratesasanimportantcountprovidedthattheminorlowisnotmorethanthreemonthslater.Thisthree-monthruleeliminateswhatcouldhavebecomeanoverwhelmingnumberofimportanttominorcountsduringtheprecedingtwoyears.
MinorCountsAcountfromoneminorlowthroughanyotherminorlowisratedasaminorcount.Acountfromaminorlowtoanimportantlowisalsoaminorcount.Thenumberofminorcountsiskeptmanageablebythefactthataminorlowisvalidfornomorethanfourmonths.“Duringthatperiod,
takecountsbetweenitandeveryotherlow,whetherimportantorminor.”“Severalcountsareoftenmadethroughthesamelow.”Acountcanbetakenbetweenanytwolowsnomatterhowfaraparttheyare.Thereadercaneasilyimaginehowthiscouldbecomeaterriblemessandthataspreadsheetisanecessarytool—evenmoresooncethe107-daycountsare
included.One’ssanityissaved,however,bythetimelimitsLindsayplacedonthecounts.
CombiningLLHCountswith107-DayCountsAtthispoint,the107-daycountshavebeendetermined,importantlowsandminorlowsidentified,andthedifferentcountsalltakenand
listedinaspreadsheet.Nowtherecordeddataisexaminedtodetectconvergingdatesanddateswithinthesamecluster.“Atfrequentintervals,comparethelistwiththeexpirationofanyfutureTop-to-Topcountswhichareapparent.RetainallminorcountswhichexpirewithinaboutaweekoneithersideofaTop-to-Topcount.Keepallimportantcountswhichexpirewithinfiveorsix
weeksofaTop-to-Topcount.”Thatlaststatementshouldcausethereadertopause.Itwouldseemtoinvalidatethe±5-daywindowofthe107-daycountifdatesasfarasfivetosixweeksawayaretobe“datesofinterest.”Lindsayappearedtocontradictthisinstructionhimselfwhenhewrote,“Low-Low-Highcountsareusuallyaccuratewithinamarginofoneortwodays—
unlike107-daycycleswiththeir5-daywindow.Thisistheirpointofsuperiority.Inallotherrespects,Low-Low-HighcountsarelessimportantthanTop-to-Topcounts.”IftheLLHcountsaretonarrowourtargetrangefroma5-daywindowtoa2-daywindow(oneithersideofthetargetdate),thenitisconfusinghowanimportantcountfiveorsixweeksawayshouldbeofconcern.The
chieffunctionofanLLHcounttellsuswhethertheTop-to-Topcountwilllast103,107,or111days.ThisconfusionisclearedupinChapter10,“CombiningtheCounts,”inadiscussionoftradingranges.Fornow,itisimportanttobeclearonLindsay’sbasicguidelines.
ExpectedSizeoftheDecline
“ATop-to-Topcountcanbeusedalone.ALow-Low-Highcountcannot.Itsonlyvalueliesinthewayitcombineswithsomeothercount.AnimportantLow-Low-Highcountshouldtheoreticallyresultinabiggerdeclinethanaminorone.ButtheextentofthedeclinedependsonhowcloselytheLow-Low-Highcountagreeswithsomeothercount.”
Togetabigdeclineinthemarket,thefirstrequirementisthattheremustbeaTop-to-Topcount.Thesecondrequirementisthatthe107-dayTop-to-TopcounteithermustapproximatelycoincidewithanimportantLow-Low-HighCount,or,asanalternative,mustexpirewhiletheaverageisinthesametradingrange.Lindsaycallsthistradingrangea“cluster.”Thethirdrequirementto
expectabigdeclineisthataminorcountmustcoincidewithboththemajorcountandthe107-daycount.Lindsayneverexplainedwhata“big”declinemeanttohim.Fromhiswriting,onecanassumethathemeantadeclinethroughwhichaninvestorwouldprefernottostayinvested.Amilddeclinecanbeexpectedwithamixofa
minorcountanda107-daycount.Thismatchupisnotexpectedtoproduceadeclineofinteresttoanyoneotherthanthemostnimbleoftraders.LindsaydidsuggestanexceptiontohisrulerequiringaTop-to-Topcount.Hewrote,“Therearecases,however,whenseveralLow-Low-Highcountscoincide.Theymaythenbeused
withoutconfirmationbyanyotherkindofcount.”ThatstatementisexploredmorefullyinChapter10.
ConclusionThefollowingisaquicksummaryofthischapterandcanserveasaquickreferenceguideinthefutureforthereader:TheLow-Low-HighCountisusedtoconfirmthe107-day
Top-to-Topcount.Importantlowsandminorlowsmustbeidentifiedandlogged.Countsmustbetakenbetweenallimportantlowswithintwoyearsofoneanother.Countsaretakenfromallimportantlowstoallminorlowsnotmorethanthreemonthslater.
Countsaretakenbetweenallminorlowswithinfourmonthsofoneanother.Countsaretakenfromaminorlowtoanyimportantlowsnotmorethanfourmonthslater.AbigdeclinecanbeexpectedonlyifaTop-to-Topcountispresent.
Endnote1Unlessotherwiseindicated,all
quotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter10.CombiningtheCounts
“Togetabigdeclineinthemarket,theremustfirstofallbeaTop-to-Topcount.Second,theTop-to-Topcountmusteitherapproximately
coincidewithanimportantLow-Low-Highcount;or,asanalternative,itmustexpirewhiletheaverageisinthesametradingrange.”1—GeorgeLindsay
Lindsaycreatedfour2categoriesofhowTop-to-TopcountsmightcoincidewithLLHcounts,andtheyarepresentedinthischapterwith
examples.Notallcategoriesshouldbeexpectedtoproducegreaterthanmarginalresults.Somecombinationsaremoreeffectivethanothers.Recognizingthedifferentcategoriesinrealtimewillaidinestimatingthedepthofanexpectedmarketdecline.Inhisoriginalnewsletter,Lindsayusedexamplesfrom1961and1962.Thisbookdrawsfromhisoriginalexamples.Alist
ofalltheTop-to-TopcountsinthisperiodcanbefoundinTable10.1.
Table10.1.PrincipalTop-to-TopCountsBetweenAugust1961andMarch
1965
CoincidentCounts“Whenseveralcountsjibesoperfectlywehavetheidealsetupforasharpdeclineimmediately.”Inthiscase,
Lindsaywasreferringtocountsexpiringwithin24hoursofeachother.ThefirsttaskistolocateaKeyRange(thereareseveralKeyRangesinthetimeframeshowninFigure10.1).TheKeyRangebetweenMay31,1962,andJune6thisanexampleofaSinkingKeyRange(aconsolidationinadecliningmarket).ThiskeydateisanexampleofaPost
TopCount(PTC)becausewehaveidentifiedJune5thasthekeydatebutthehighoftheKeyRangefellbeforehandonMay31st.Countingforward107daysfromthekeydatetargetsSeptember20th.ThistargeteddateistwodaysaftertheintradayorTrueHighonSeptember18th,whichiswellwithinthecount’sfive-daywindow.(AsforthehighofAugust23rd,workable
countshavebeenfoundforthishigh,buttheydon’tcoincidewithin24hours;hence,theyarenot“CoincidentCounts.”)
Figure10.1.CoincidentCounts.Chartcreatedby
MetaStock®.
Thenexttaskinourexampleistoidentifyimportantandminorlows.TheextremeintradaylowonMay29,1962,qualifiesasanimportantlow.Thereexist
severalimportantandminorlowsbetweenMay29thandthetargeteddateofSeptember20th.Theanalystwouldbeexpectedtotakecountsbetweenallofthem.ThedoublebottominlateJulyisagoodremindertonotsuccumbtothetemptationofexcludinganylowsbecausethesecondlowonJuly25thisthelowthatcompletesthepuzzle.Countingfromthedayoftheextremeintraday
low(May29th)totheminorlowinlateJuly(July25th)yieldsacountof57days.Countingforward57daysfromthatminorlowinJulyproducesthedateSeptember20th—theexactdateproducedbythe107-daycountandwithin2daysoftheintradayhighoftheadvance.Thiscountisanimportantcountbecauseitoriginatesatanimportantlow.
AnotherLLHcyclepointstoourtargeteddate.TheovertimportantlowonJune25,1962,counts43daystotheminorlowofAugust7th.Countingforwardanother43daysfromthesecondlowofAugust7thtargetsSeptember19th,only1dayafterthedateoftheTrueHighoftheadvanceand1daybeforethe107-daycounttargetofSeptember20th.ObservethatLindsayusedtheintraday
lowonJune25thinthisexample,buthechosetheclosinglowofAugust7th.InJuly,heusedtheintradaylow,againusinghisexceptionfor“extreme”intradaylows.ComparingLindsay’suseofintradaylowsversusclosinglowsbeginstogivetheanalystafeelforwhatLindsayconsidered“extreme”(sinceheprovidesnodefinition),butoneshouldnotfailto
countthroughalllows.Lindsayincludedafinalexamplethatdoesnotbelonginthiscategory(CoincidentCounts),butthereaderwoulddowelltoexamineitwhilefocusingonthisparticularTop-to-Topcount.ThistimehecountsfromtheimportantlowofJanuary29,1962,andlabelstheclosinglowofMay28th(ratherthantheextremeintradaylowadaylater)as
thesecondlow—acountof119days.Countingforwardanother119dayspointstoSeptember24th.Thisdateisafterthedeclinehasstarted(hence,thisLLHintervalfailstotargeta“high”)butiswithinthe5-daywindowoftheTrueHigh.ThisisanexampleofhowtheseconddateinanLLHcyclemaynotnecessarilybea“high”butcanplayaroleinpinpointingatop.
Clusters“Whenthelastcountofaclusterexpires,pricesbegindroppingatafasterpace—ifanimportantdeclineiscomingatall.”Forthiscategory,Clusters,LindsayusedexamplesfromtheMajorTopformationof1961–62(seeFigure10.2).MajorTopformationstendtoextendoveramultimonth
periodandarelikelytocontainseveralCompactTopformationsasthisonedoes.“Thesecondkindoftopformationisthelongdrawnoutone....Eachformationofthistypeusuallyhastwokeydates....Notethatthesekeydatesarefoundfarbelowthehighestlevelofthewholetoppattern.ObservehowfarthekeydatesofSeptember25,1961,andJanuary29,1962,dipbelowtheformation.
Figure10.2.Clusters.ChartcreatedbyMetaStock®.
WebeginbyfindingKeyRangesandthekeydateswithinthoseKeyRanges.ThemostobviouskeydateoftheMajorTopformationliesinaCompactFormation/Double
TopandfallsonNovember30,1961.Itcounts107daystoMonday,March19,1962.TheTrueHighwasprintedtheprevioustradingday,Friday,March16th.TrueHighsina107-dayTop-to-Topcountaredeterminedbyintradayhighs.Afteridentifyingkeydatesandtargetdates,importantlowsandminorlowsaredetermined(usingclosing
prices).TheminorlowofFebruary26,1962,countsninedaystotheminorlowofMarch7th.CountinganotherninedaysforwardtargetsthesamedateastheTrueHigh,March16th.ThisisnotanexampleofcountscoincidingimperfectlybecauseitisaperfectmatchwiththeTrueHighandonlyatradingdayawayfromthetargeteddate.Aminorcount,however,isnotreliablewithoutan
importantcounttoconfirmit,andthefollowingimportantcountisanexampleofcountscoincidingimperfectly.January29,1962,isanimportantlowthatcounts28daystoFebruary26th.Counting28daysforwardfromFebruary26thtargetsMarch26th.Lindsaycalledthisimperfectconvergenceofa107-daycount,withminorandimportantlows,acluster.
“ButaTop-to-TopcountmusteithercoincidewithsomeimportantLow-Low-Highcount,orelseformaclusterwithone.”Inacluster,thelowsthathavebeenidentifiedneednotfallinasymmetricaltradingrangebutdoneedtoremaininthesamegeneralarea.Aclusterseldomlastslongerthanfiveorsixweeks.Aclusterrequiresanexpiringimportantcount,asdoall
successfultargetranges.LindsaydescribedthepriceactionoftheDowaftertheexpirationoftheTop-to-Topcountasmerely“driftingoff”untilMarch26th,whentheimportantcountexpiredandthefirstsignificantdeclineoccurred.“Whenthelastcountofaclusterexpires,pricesbegindroppingatafasterpace—ifanimportantdeclineiscomingatall.”Pricesshoulddropinearnest
oncethefinalcountinaclusterexpires.Additionally,inthisMajorTop,weseeimportantlowsonbothSeptember25,1961,andJanuary29,1962.Theyshouldbeexpectedtoformanimportantcountandare126daysapart.Countingforwardanother126daysarrivesatJune4,1962.Thistargeteddateiswithin2tradingdaysoftheSinkingKeyRange’s
intradayhighonMay31st.June4,1962,sawaviciousbreakinpricebutnofollow-throughwasseenuntilJune11th.Whywasthat?“PricesneverbreakshortlybeforeaTop-to-Topcountisduetoexpire.”Counting107daysfromthekeydateofFebruary26,1962,pinpointsJune13th,puttingJune11thwithinits±5-daywindow.“PricesalwaysrisejustbeforeaTop-to-Topcountends.”When
severalcountscombine,thischaracteristiccouldcausetherangetobecomeanonsymmetricalcluster.
LLHCountsOnly“Therearecases,however,whenseveralLow-Low-Highcountscoincide.Theymaythenbeusedwithoutconfirmationbyanyotherkindofcount....Abigdeclinewithinashorttimenormally
occursonlyafteraTop-to-Topcountexpires.”LindsaywasquitedefiniteabouthisrulethatfindingonlyoneLLHcountwasworthlessandthatitmustbecombinedwithaTop-to-Topcount.ThechartLindsayusedisnotincludedhereastheconceptisquitesimplebutbearsrepeating:“Abigdeclinewithinashorttimenormallyoccursonlyaftera
Top-to-Topcountexpires.”HisearlierstatementassertsthataconfluenceofLLHcountswithoutaTop-to-Topcountmaybeused,butbothhisexampleandhisstatementmakeitclearthatanyexpecteddeclinewillbeabbreviated.
TradingRanges“Whenseveralimportantcountsfailtocoincide,but
expirewithinafewweeksofoneanother,theresultisusuallyatradingrange.Wheneverthisistrue,thepresumptionisthattheaveragewillfallunderthelowestlevelofthetradingrangeassoonasthelastimportantbearishcountexpires—eventhoughtheexactdayofthebreakmaybedeterminedbyaminorcount.”
Lindsaymadenoteofthisidiosyncrasyatothertimestoo—thetendencyofpricetoholdupuntilthelastminorcounthasexpired.Thischaracteristicappliestoallcategories.Anotheruniversalcharacteristicthathefeltwasworthyofmention:“Whenakeydateoccursinaperiodofdecisivepricefluctuations[1/29/62],wecanhavemore
confidencethattheresultingcountwillproduceadeepdecline.”AkeydateinaMajorTopwilltimethestartofabiggerdeclinethatgetsunderwayfromalowerlevel.ThecountfromthesecondkeydateinaMajorTopisnotusedtoidentifyanewhigh.Thisparticular“high”shouldbeexpectedtobeashort-livedbounceandapointfromwhichtoexpectareneweddecline.InFigure10.2,
counting107daysforwardfromJanuary29,1962(thesecondkeydateinaMajorTop),targetsMay16th—1dayaftertheintradayhighoftheshortconsolidationfoundthere.LindsayalsowrotethatcountsfromthefirstkeydateinaMajorTopareusuallyofnosignificance,butthecountmustbetakenanywaybecausethisisnotalwaysthecase.
Conclusion“IsitpossibletodetermineinadvancewhichoneofthemanyTop-to-Topcountswillresultinamajorbullmarkethigh?Thisproblemhasnotyetbeensolved,buttherearevariouswaysofarrivingatapartialsolution,oneofwhichwillnowbedescribed.”Lindsay’s“partialsolution”wastoexplainthe
CumulativeAdvance-DeclineLineandthenshowexamplesofhisTimingModelgivingsignalsduringdivergencesbetweentheA-DLineandtheDowJonesIndustrialindex.“Accordingtoourtheory,thegreatestprobabilityofamajordeclinewillcomewhenthereisadivergencebetweentheAdvance-DeclineLineandtheDowJonesIndustrials;and,atthesametime,thereisaclearcut,
easilyrecognizableTop-to-TopCount.”Lindsaydidn’tmeantoimplythatthiswastheonlymethodfordeterminingabullmarkettop,justthatitwasamethod,usingatraditionaltechnicalindicator,thathadworkedwellforhim.“Everytechniciandreamsofonesimplemethodwhichwillalwaysbeaninfalliblekeytothetrendofthemarket.No
singlecure-allhasyetbeenfound.Itispossible,however,toachieveahighdegreeofaccuracybycombiningseveralmethods.”
Endnotes1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
2Lindsaylistedfivecategories,notfour,buthisfifthcategory,“The
Top-to-TopCountinBullMarkets,”wassimplyareviewofwhathehadalreadywritten,withmoreexamples.
PartIV.TheCounts
Chapter11:Long-TermCyclesandIntervalsChapter12:BasicMovementsChapter13:CountsfromtheMiddleSectionChapter14:CaseStudy:The1960s
Chapter11.Long-TermCyclesandIntervals
“Myversionofcyclesisdifferent.Icallthemintervals.Theyarecountedfromalowtoahighorfromahightoa
low.Iprojectamovementtoapointinthefuturewhichexistsonlyintheory,thesameasincycles.ButwhenIcometocalculatethemovementafterthat,Idon’tbeginfromthetheoreticalcrest.Istartcountingfromahighwhichthemarkethasactuallymade.That’sthedifferencebetweencyclesandintervals.”1
—GeorgeLindsay
Lindsay’scountingmethodcanbestbedescribedasafunnelapproach.Hisanalysisstartswithalong-termintervalthatprovidesawiderangeoftimeasatarget.Hethennarroweddownthattargetusingother,shorterintervalsthatprovidedshortertargettimerangeswithinthelargerranges.Duringan
appearanceonLouisRukeyser’stelevisionprogramWallStreetWeekonOctober16,1981,whenLindsaywasasked,“Whendowegetoutofthisbearmarketandintothatbullmarket?”hereplied,“Theendofthebearmarket;theearliestIcancountitisaboutAugust26,1982.”TheintradaylowofthebearmarketoccurredonAugust9,1982.ThemethodsinPart
IV,“TheCounts,”arethosemethodsheusedtomakethatcalculation.
Long-TermCyclesLong-termcycleswereLindsay’sattemptatclassifyingthemarket’smajorlowsthroughouthistory.Figure11.1isLindsay’scharacterizationoftherecurringpatternofeachofthreelongcycleshe
believedthemarketexhibitedbetween1798and1949.Therehavebeenvariationsfromonecycletoanotherbuttheywereminor.Lindsayheldthattheessentialpatternwasremarkablypersistentfor150years.Theshapeofthepatternsmayappeardifferentlyinachartbutthetimingremainsthesame.Itisonlytheshapeofthechartpatternsthatlooksdifferent.
Figure11.1.Longcycle.
TheperiodfromAtoElastsroughlysevenyears.Itisanentityinitself.Itisthefirstsectionofwhathecalledthelongcycle.Notethatthetwo
advancesfromAtoBandfromCtoDareseparatedbyonlyashallowdecline.NextcomesabigdeclinefromDtoE.ThelowatpointEisadividingline.ThesecondsectionofthelongcyclerunsfromEtoM.Thedurationofthesecondsectionisvariable,butismuchlongerthanthefirst.Asarule,the3PDhformationhasoccurredattheendof
eachlongcycle.ItrunsfromKtoM,whichisalwaysalowofthefirstimportance.Thelowfollowinga3PDhpattern,pointM,thenbecomespointAtobeginthenextcycle.Lindsayallowedformultiple(two,andsometimesthree)longcyclestorunsimultaneously.Atanypointintime,thecycleswouldbeatdifferentpointsintheirprogression.
ThefirsttwoadvancesafterpointAarenormallystrongmoves,andoneofthetwohasinvariablybeenextremelystrong.FollowingpointAin1962,thereweretwoverystrongadvances,thefirstendingin1966andthesecondin1968.Accordingtoadifferent,simultaneouscycle,the1962lowwaspointI.AdvancesfollowingpointIareonlymoderatelystrong.Accordingtothisstrain,the
nextadvancefrom1966to1968wastobethe3PDhformation.Noticethatthefirst(B–C),third(F–G),andfourth(H–I)declinesaremildandthesecond(D–E),fifth(J–K),andsixthdeclines(L–M)aresevere.Allofthebearmarketsbetween1949and1966occurredwhenonlyoneoftwosimultaneouscyclespredictedadeepdecline.This
wastruein1957,1960,1962,and1966.Ineachofthesecases,onecycleindicatedaseveredecline,whiletheothershowedamilddeclineatthesametime.Notuntil1969didbothofthediagramsindicateaseveredeclineatthesametime.That’swhythe1969bearmarketwasthemostseveresincebeforeWWII.Lindsaydidn’texpectanotherdeepdeclineinthemarketsuntil1977–78(and
againin1980–81).Itisnotknownhowherespondedtothedeclineof1973–74.2Lindsaydidcorrectlywrite,“Butagreatchangewillcomein1975.Fromthenuntil1981,bothlineswillberelativelyweakmostofthetime.Therewillneverbeanyoneyearasbadas1969[obviouslyincorrect],buttakingthefiveyearperiodasawhole,theoutlookismore
bearishthananythingthemarkethasseensincethe1930’s.”Figure11.2labelstwosimultaneouscyclesrunningfrom1962to1982.
Figure11.2.Longcycle.ChartcreatedbyMetaStock®.
Thelong-termcyclepatternhasoneprimarypurpose:torecognizelong-termintervals.Therearethreelong-termintervalstokeep
trackof.Thefirstlasts8years,anditrunsfromalowtoahigh.The8-yearintervalstartsatpointEandendsatpointJ.RememberthatJmaybelowerthanH.Thatmakesnodifference.Anintervalisnotatrend.Itneednotendatthehighestpointofthewholesequence.The8-yearintervalcanstartatanyotherpointsfromAtoMbutoccursmostfrequentlyfromEtoJ,CtoH,andKtoD.Thelattertwo
countsoccurfrequentlybutarenotasreliableasfromEtoJ.Thesecondlong-termintervallasts15yearsandalsorunsfromalowtoahigh.TheelapsedtimefromAtoJisnormally15years.ThespanfrompointEtopointDinthenextcycleisalsoabout15years,butinthisposition,theintervalcanstretchto16years.Youcanalsocountthe
15-yearintervalfrompointKtopointHinthenextcycle.Thethirdlong-termintervalistheonlyintervalofthethreethatrunsfromahightoalow.Itvariesbetween12years,2monthsand12years,8months.Therearetwohighpointsfromwhichitnormallyworksquitewell.Thatis,itiseasytorecognizeandendsatanimportantlow.Countthe12-yearintervalfrompointD,
anditusuallyendsatpointM(seeMarch1937–June1949).The12-yearintervalalsorunsfrompointJtopointEinthenextcycle.
Long-TermIntervals“Buttheintervalshavebeenexaminedallthewaybacktotheeighteenthcentury.Thefirstoneuncoveredranfrom1798to1813.”An“interval”issimplythe
elapsedtimefromanimportantlowtoanimportanthighorfromahightoalow.Itiscalledanintervalbecauseweignorethefluctuationsinbetween.Itdoesn’tmatterwhatitsoveralltrendwaswhiletheintervalwasinprogress,orhowmanytimesitchanged,orwhetheritendshigherorlowerthanthelevelatwhichitbegan.Thetwomostimportantlong-
termintervalshavealwaysconsistedof15years(fromabottomtoatop)and12years(fromatoptoabottom).Thespansarenotexact.The12-yearintervalhasusuallyvariedbetween12years,2monthsand12years,8months.Thelatitudeofthe15-yearintervalhasbeensomewhatwider:anywherefrom15yearsto15years,11months.Allthingsbeingequal,15years,2monthsto
15years,4monthsmaybeconsideredthenorm.Thisdoesnotmeanthatthetrendofpriceswasupduringa15-yearintervalordownduringa12-yearinterval.Anintervalisconsidereddownifitrunsfromahightoalowandviceversa.Therelativelevelofpricesattheturningpointshasnobearingonthismatter.Forexample,a12-yearintervalstartsatahighandendsatalow,butthe12
yearsmayhaveevolvedoveralongbullmarketandtheensuinglowcouldbehigherthantheoriginalhigh.
15-YearInterval“Themostimportantlong-termintervallastsabout15years,orsomewhatlonger.Itiscountedfromeverybearmarketlow,andoccasionallyfromanintermediatelowwhichstandsoutonthechart
oftheaveragewithmorethantheusualprominence.The15-yearintervalalwaysendsatahighofsomesort.”Westartcounting15-yeartimespansfromanyimportantlow.Thereshouldbeahighattheendofthecount.Thelong-termintervalsdonothelpmuchinfixingtheexacttimereversals.Theirvalueliesinestimatingtheimportance
ofthenextmove.AnimportanthighoccurredonJuly12,1957.Weknowitwasimportantbecauseitappeared15years,2½monthsaftertheepochallowonApril28,1942.Theselongintervalsdonottrytopicktheexact“address”ofahighoralow.Rather,theyattempttoidentifythecorrect“zipcode.”Sixteenyears,3monthswasthelongest15-yearintervalonrecord,and
14years,9monthswastheshortest.“Thereisalatitudeof11monthsormorebetweentheshortest15yearintervalandthelongest.Onemayask“whatgoodisameasurementsoinexactthatitmaybeoffbyasmuchas11months?”Theansweristhatthe15yearintervalisusedtogainperspectiveandnottodetermineexacttiming.To
narrowdownthetimespaninwhichthehighmustfall,wecomparethe15yearintervalwiththeshorter-termcounts.”AspartofhisAnnualForecastfor1972(publishedintheStockTradersAlmanac),Lindsaywrote,“Onelong-termmeasurementcallsforamajortop15years,oralittlemore,afterthebearmarketlowof
October22,1957.Itisawayofcountingwhichhasusuallyprovedreliable,butitisnotexact.SincethisisbeingwritteninJuly1971,sixteenmonthsbeforeElectionDay,themoredetailedtimingmethodsarenotyetavailableforuse.ButoneofthemcanalreadybeappliedanditplacesanimportanthighaboutNovember10,1972,thuscoincidingwiththe15-yearintervalandthe
election.”Itisapparent,fromFigure11.3,thatthehighofthebullmarketcamejustshyof15years,3monthsafterthe1957lowandonly2monthslaterthanLindsay’sforecastbasedona15-yearinterval.Examplesofthe15-yearintervalcanbefoundinTable11.1.
Figure11.3.The15-yearinterval.Chartcreatedby
MetaStock®.
12-YearIntervalThecorrespondingintervalfromanimportanthightoalowis12yearsplusafewmonths.Alowusuallyliessomewherebetween12years,
2monthsand12years,8months.Examinethelong-termintervalfromhightolowthatbeganonDecember13,1961.Accordingtoprecedent,itshouldhaveendednotlaterthan12yearsand8monthsafterward.ThatwouldplaceitinAugust1974.Therehavebeenonlytwooccasionsinthepast100yearswhenitexceededthatduration
materially.Onewasin1970andanotherin1974.Inbothcases,thetimeelapsedwas12years,10months.So,thelowof1974came2monthslaterthanitshouldhave.Anoverrunof2monthsisnotexcessivewhenwearereferringtoaspanof12yearsorso.Important:Ataminimum,a12-yearintervalisfollowedbyarallylastingseven
monthsoralittlemore.Figure11.4isapartialre-creationofachartthatLindsaypresentedinoneofhisnewsletters.ItillustratesboththePrincipleofContinuity(whenanupwardintervalof15yearsends,adownwardintervalof12yearsmustbegin,andviceversa)andhowmultipleintervalsaresimultaneouslyfunctioningandoverlapping.3
SeeTable11.1forasamplingof12-yearintervals.
Figure11.4.Long-termintervals.Chartcreatedby
MetaStock®.
Table11.1.Long-TermIntervals
Table11.1isnotmeanttobeacompleterecordofalllong-termintervalsduringthisperiod.ThistableisacollectionoftimespansfoundthroughoutLindsay’swriting.Sometimespansappeartohavebeenaltered
slightlybyLindsayastimepassed.
8-YearInterval“Ifwecount,notjustfromanordinarybearmarketlow,butfromareallyepochalbottom,therehasalwaysbeenasharpbreakeightyearslater—abreaksodeepandrapidwecansaythatbothanimportanthighandanimportantlowcamewithin
twoorthreemonthsofeachother.Thecrashof1929cameeightyearsafterthe1921low.Eightyearsaftertheall-timelowof1932,themarketreallyplummetedinMay-June1940,whenGermanyinvadedFrance.Thelowof1942markedtheendofafiveyearbearmarket,andstocksplungedinJune-July1950,whentheKoreanWarbrokeout.Thebreakof1957cameeight
yearsafterthemajorlowof1949.Whenwecounteightyearsfromthelowof1962,wecometothespringof1970,andagainthemarkettookanosedive.Thedistinguishingfeatureofallthesedeclineswasnotsimplytheirdepth,butthefactthatanimportanthighandimportantlowappearedonlytwoorthreemonthsapart.”The8-yearintervaldoesn’t
trytopinpointbullmarkethighsnecessarily;rather,itattemptstofindpointsatwhichasizabledropshouldbeexpected.Thetargeteddropmaybeatthetopofabullmarket(1929)oritmaybethelastdropofabearmarket(1970)oranywhereanyinbetween(seeFigure11.5).Therehasalwaysbeenasharpbreakthatlastsonly2to3months,andthenaquickrecoverythat
continuedforsometime,usuallyatleast5months.AllofLindsay’sexampleswerecontainedwithinaperiodof7years,9monthsto8years,2months.Aruleofthumbsaystocount8yearsto8years,2months.Althoughitisnaturaltousethisparticularlong-termintervaltohelpfindmarketsell-offs,oneshouldnotoverlookapointthatLindsaytookcaretoemphasize:“In
everycase,animportanthighandanimportantlowappearedinthespanofonlytwoorthreemonths.”
Figure11.5.The8-yearinterval.Chartcreatedby
MetaStock®.
SomelowshavethecharacteristicsofbothapointAandapointEinthelong-termcycle.Eightyearsafteronepairofthese
simultaneouslows,bothamarkettopandbottominrapidsuccessionarefound,andbothofthemarereversalsofsomeimportance.Forexample,1929cameeightyearsafter1921,andthe1921lowhadsomeofthecharacteristicsofbothapointEandapointA.TherewasadrasticbreakfromSeptember3toNovember13,1929.Astrongadvancebeganimmediatelyandcontinued
forfivemonths.Thus,animportanthigh(September)andanimportantlow(November)bothappearedjustabouteightyearsafterthe1921low.Therearemanyexamplesofthis.Thespringof1970cameeightyearsafterthelowofJune1962,whichhadsomeofthefeaturesofapointAandalsoapointI.Basically,anylowinthelong-termcycle,otherthanalowduringa3PDh
formation,isusuallyfollowedbyahigheightyearslater—providedthatthelowisdecisivelyformedonachart.The12-and15-yearintervalsaremerelyawayofroughlycalculatingthelong-termprobabilitiesofthemarket.Theyarenotexact.Therearetwootherwaysofestimatingfutureturningpointsonthebasisoftimealone.OneisCountsfromtheMiddle
Section,whichiscoveredinChapter13.TheotheriscalledtheBasicMovementsandiscomposedoftheStandardTimeSpans.Theyarecalled“standard”simplybecauseapproximatelythesamenumberofdayshaskeptcroppingup,timeaftertime,throughoutmarkethistory.TheStandardTimeSpansarenotasaccurateasthecountsfromtheMiddleSection(whentheyoccur)butmuch
moresothanlong-termintervals.TheBasicMovementsarecoverednextinChapter12.
ConclusionThefollowingisaquicksummaryofthischapterandcanserveasaquickreferenceguideinthefutureforthereader.
Long-TermIntervals
Itdoesn’tmatterwhattheoveralltrendwaswhiletheintervalwasinprogress,orhowmanytimesitchanged,orwhetheritendshigherorlowerthanthelevelatwhichitbegan.
15-YearIntervalRunsfromalowtoahigh.The15-yearintervalvariesfrom15yearsto15years,11months.
12-YearIntervalRunsfromhightolow.The12-yearintervalhasusuallyvariedbetween12years,2monthsand12years,8months.Ataminimum,a12-yearintervalisfollowedbyarallylastingsevenmonthsoralittlemore.
8-YearIntervalRunsfromalowtoahigh
andattemptstofindpointsatwhichasizabledropshouldbeexpected.Animportanthighandanimportantlowappearinthespanofonlytwoorthreemonthsapart.The8-yearintervalhasvariedbetween7years,9monthsto8years,2months.Thesell-offisfollowedbyaquickrecoverythatcontinuesforsometime,usuallyatleast
fivemonths.
Endnotes1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
2Lindsaywrotethepaperfromwhichthisinformationderivesin1970.HehadexpectedpointsF&Btoarrivein1972,G&Cin1973,H&Din1975,I&Ein1976,J&Fin1977,K&Gin1978,L&Min1980,andM/A&Iin1981.The
authorhasrealignedthedatesusingLindsay’sThreePeaksandaDomedHousemethod.
3LindsaymistakenlylabeledpointS,February11,1926,as15years,4monthsafterthe1911lowwhenitwasactually14years,4months.Unfortunately,wehavenowayofknowingwhetherrecognizingthismistakemighthaveaffectedhisanalysis.HealsolabeledpointMMas15years,2monthsafterthelate1946lowwhenitwasonly15years,andpointCCas12years,4monthsafterthe1950higheventhoughitwas12yearsexactly.
Chapter12.BasicMovements
“Theunderlyingideaisthatstockpricesriseforapproximatelytwoyears,declineforaboutayear,thenriseforanothertwo-yearspananddropfora
year.Andsoonindefinitely.Theadvancesoftwoyears,eachonefollowedbyadeclineofoneyear,comprisewhatIcallthemedium-termcounts.”1—GeorgeLindsay
Along-termintervalprovidesatargetrangeofdatesbutthatrangeisverybroad.“Buttheremustbeatleastone
additionalwayofcountingbeforeanyhighorlowcanbeestablishedasofprimeimportance.”Formoreexacttiming,werelyontheBasicMovements.BasicMovements(basicadvancesandbasicdeclines)arecomposedofvariousmedium-termcounts,alsoreferredtoastheStandardTimeSpans.Medium-termcounts(whose
durationsaregivenindays)andlong-termintervals(of8,12,and15years)aretwoclassesofintervalsthatmustbecombinedinordertomakeaforecast.Whentwocountsagreeclosely,itincreasestheprobabilitiesofaseveredecline.WhentheendofaBasicMovementandtheendofalong-termintervalcoincideintime,thereisadecisiveandoftenviolentmovementinthemarket.
Theprincipaltimespansarecalled“basic”andlastanywherefrom10monthstothreeyears.Thereaderhasalreadybeenexposedtooneparticularbasicadvanceinthe3PDhformation.Fortunately,theremainingbasicadvancesandbasicdeclinesaremuchmorestraightforwardandarecharacterizedbythelengthoftime(countedindays)forwhichtheadvanceordecline
persists.ThedurationoftheBasicMovementsvariesbutthevariationshaveheldwithincertainlimits.Lindsay’sRuleofContinuitystatesthatwhenadowntrendends—eitherabasicdeclineoralong-termintervalfromahightoalow—anuptrendofthesameclassmustbeginimmediately,andviceversa.Wecanalwaysbegincountingthestandardbasic
durationsfromanybasichighorlow.WecanalsocountBasicMovementsfrom“important”highsandlows—thehighsandlowsthatjumpoffthepageatyou.
StandardTimeSpans“Peoplesay,‘Timeshavechanged,’or‘Conditionsaredifferentnow.’StandardTimeSpanshaveremainedthesamefor190years.They
havealwaysbeenmorenearlyuniformthananypossiblearrangementofthepricemovementcouldbe.”StandardTimeSpanshavebeentracedbackto1861indetailandallthewaybackto1798.TheyarecalledStandardbecausethesamedurationshaveoccurredoverandoveragain.Theyarenotidentical,ofcourse—theyvarywithincertainlimits
becausetheyaremodifiedbyshort-termtimespans(i.e.,107-dayinterval,3PDh).Thecountsthatmakeupeachcategoryoftimespans(longbasicadvance,shortbasicdecline,etc.)arenotidentical,buttheytendtoclustertogether.Thenumbersarenotthesamebutvaryonlywithincertainlimits.Throughouthistory,virtuallythesamenumberskeepcroppingup
againandagain.TheBasicMovementsmethodisbasedonthisphenomenonoftimespans.Lindsayidentifiedeightsegmentsoftime,whichhetermedBasicMovements:
BasicAdvances
Anadvanceofabouttwoyearsisfollowedbyadeclineofaboutoneyearorasidewaysmovement.Anewadvanceimmediatelyfollows,andsooninunendingsuccession.Butthemovesarenotallequalinlengthoramplitude.Table12.1showsthevariationsinlength.All3PDhformationsare“basicadvances”butabasicadvanceneednottaketheparticularshapeofa3PDh.
Notethatabasicadvanceisoftenthesamethingasabullmarket,butitmayalsobeonlyonesectionofanunusuallylongbullmarket.
Table12.1.BasicAdvances
Therehavebeenonlythreegenuineadvancesthathavebeensubnormal:thoseof1932–34(577days),1946–48(615days),and1960–61(414days).(ThisobservationofLindsay’sisveryinterestingbecauseittendstoimplythatothersubnormaladvancesthathehadlistedinvariousappendixeswereonlytemporary“workingcounts”usedforeducationalpurposes,asopposedtobeing
hisfinalcount.)Ashortbasicadvanceisabouttwoyearsoralittlelessandtheaveragedurationis683days.Ashortadvancetypicallyvariesbetween630and718days.Mostshortadvancescontinueforabout700days.Thetypicaldurationoflongbasicadvanceisroughlytwoyearsandtwomonthsor775–805daysandhasanaverage
durationof795days.Itvariesbetween715and830days.Extendedbasicadvancesarethelongestcontinuousadvancesthatareuninterruptedbyabearmarket.Extendedadvancesrangefrom929to968daysandhaveanaveragedurationof953days.Noadvancehaseverexceededtheextremeof968days.PriortoDecember1972,
therehadbeeneightextendedadvancessince1877.Itshouldbenotedthatthemaximumsidewaysmovementis348daysor11months.Thehighestpointofasidewaysmovementcancomeatthestart,inthemiddle,orattheend.Thetrendissuspendedduringasidewaysmovement.Examplesofsidewaysmovementscanbefoundin
Table12.3.Remember:Whenabasicadvanceends,anewbasicdeclinemustbeginonthatsameday.
BasicDeclinesThesubnormal(orirregular)basicdeclineusuallyvariesbetween222and250daysandisalwayslessthan300days.Shortbasicdeclineshave
variedbetween317and364daysforanaveragedurationof345days.Thetypicaldurationofashortbasicdeclineis340to355days.Longbasicdeclinesrangefrom376to446calendardays.Thetypicaldurationofalongbasicdeclineis395to425daysor13–14months.Theaveragedurationis408days.Lindsaymadenoteofthe
tendencyofbasicdeclinestoincludetworalliesinsuccessioninroughlythesamepricerange.LindsaydescribedtheralliesduringthebasicdeclinefromJune1931toJuly1932thisway:“TheywerejustthewaythetworalliesinthemiddleofaBasicDeclineshouldlook.”HealsonotedthatthetworalliesintheApril1930—June1931downturndidnotoccurinapproximatelythe
samepricerangeastheytheoreticallyshouldhave.Inthemajorityofcases,thetwoorthreeralliesmakeaseriesofdescendingtops.ThesubnormalBasicMovementappearsregularlyindeclinesandonlyoccasionallyinadvances.Mostoftheadvancesinmarkethistoryhavebeenofjustaboutnormalduration,whilemanydeclineshave
beenirregular.WhileitscountvariesasmuchastheotherStandardTimeSpans,itisinterestinghowoftenthe221-to224-daycountappears.Readerswillrememberthatthisisthesamecountasisfoundinthe3PDhformation.“Theinterval221-224runsallthroughhistory.Itcanextendfromahightoalow,fromalowtoahigh,fromahightoanotherhigh,orfromalow
toalow.”Remember:Assoonasabasiclowoccurs,anewbasicadvancemustcommenceimmediately.WheneveroneBasicMovementisextralongorextrashort,itismuchmorelikelytobeadeclinethananadvance.Thisisanimportantpointtoremember.Therehavebeenmanysubnormaldeclines.Thisiswhysomany
ofthebasicdeclineshaveendedatsecondarylows.Therewasaspecialreasonforeachonethatcouldhavebeencalculatedaheadoftime.ExamplesofbasicdeclinescanbefoundinTable12.2.
Table12.2.BasicDeclines
InTables12.1and12.2,thefiguresrepresentthenumberofcalendardaysinthemarket’smainmovementssince1876.Thetimespans
forbothadvancesanddeclinesaredividedintofourgroups.Thenumbersineachcolumnvaryinlength,butonlywithinfairlynarrowlimits.Alloftheadvancesonrecordseemtohavebeencastfromjustafewmolds.Soonafterabasichighhasbeenestablishedandpricesareonthewaydown,wewatchforsignsofamarketlow.Assoonasaprobable
lowbecomesevident,notethelengthoftimethatstockshavebeendroppingsincethelastbasichigh.IftheelapsedtimeagreescloselywithoneoftheStandardTimeSpans,itisacceptedwithoutquestionasabasiclow.Itdoesn’tmatterwhetherthatpointisattheverylowestlevelofthewholedeclineornot.Thepracticalruletofollowisthis:Whenthemarketisfallingfromahigh,
watchitcloselywhenthedowntrendisbetween340and355days(thetypicaldurationofashortbasicdecline)or395and425days(thetypicaldurationofalongbasicdecline).Ifmarketactionsuggeststhatabottomisbeingformed,acceptthatasprimafacieevidencethatabasiclowisathand.Thesameholdstrueforidentifyingmarkethighs.
OnceaBasicMovement(advanceordecline)persistsforlongerthantheextremeofthatparticularStandardTimeSpan,itshouldbeassumedthatitwillcontinueuntilthenexttimespan.Forexample,ifwhatappearedtobeashortdeclinehaspassedthe364-daymark,itshouldbeassumedthatitwillcontinueuntilatleasttheshortestcountofalongdecline(376days).Oncealongadvance
continueslongerthan830days,itcanbeexpectedtobecomeanextendedadvancethathasaminimumlengthof929days.
ThePrincipleofAlternationThePrincipleofAlternationhelpsanswerthequestionastowhetherweshouldexpectthenextadvanceordeclinetobelongorshort.Since1798,
whenonedeclinewaslong,thenextdeclinewasshortandtheoneafterthatwaslong,andsoforth.Therehavebeenveryfewexceptionstothisprinciple,andthesameholdstrueofadvances.(The1973–74bearmarketwasanexception.)
MatchingBasicMovementstoLong-TermIntervals
BycomparingtheBasicMovementswiththelong-termintervalsintheforeseeablefuture,itcanbedeterminedwhetherthecurrentmovementshouldbesubnormal,short,long,orextended.MatchingBasicMovementstolong-termintervalscanalsohelpustodeterminetheendofthecurrentmovementbydecidingwhenthenext
movementshouldend.Forexample,ifthecurrentmovementisadecline,thenitmustendintimeforthenextbullmarkethigh(15yearsafteralow)toarriveafteraStandardTimeSpan.Thatis,thecurrentdeclinemustendsoonenoughforabasicadvance(usingtheStandardTimeSpans)torunitstypicaldurationandbecompletedinthetargetedtimespanofa15-yearinterval.
SpecialRule:DeclinesFollowingExtendedBasicAdvancesOnenormallystartscountingabasicdeclinefromthebullmarkettop.Inthecaseofadeclinefollowinganextendedadvance,however,aSpecialRuleapplies,arulethathasworkedconsistentlyallthroughhistory:Afteran
extendedadvance(lastingfrom929to968days),thebasicdeclinedoesnotbeginimmediately.Thereisapreliminarysell-off,thenanefforttoregainthehigh.InFigure12.1,thebasicdeclinedoesnotbeginatthebullmarkethigh.NotehowpricesfellofffromJanuarytoAugustin1973,makingseveralsmallrecoveriesonthewaydown.Theaveragethenmadeaconcertedeffort
toregainitsoldhighonthemovefromtheAugustlowtoOctober26th.TheOctoberhighiscommonlycalledthe“RightShoulder.”Asarule,theRightShoulderdoesnotequalthebullmarkethigh,buttherehavebeentwocaseswhenaRightShoulderoccurredatalevelhigherthantheHead.
Figure12.1.SpecialRule.Chartcreatedby
MetaStock®.
FromTable12.2,itisseenthatshortbasicdeclineshavevariedbetween317and364days,foranaverageduration
of345days.ThelowofOctober4,1974,was343daysafterthecountfromOctober26,1973—2dayspriortotheaverageshortdeclineandwellwithinthetypicalrange.Asanalternative,supposewestartedcountingalongbasicdeclinefromOctober26,1973.Longdeclinesrangefrom376to446calendardays.Theaveragedurationis
408days.Countingforward408daysfromOctober26,1973,arrivesatDecember8,1974.TheDowIndustrialsmadetheirlowjust2dayspreviouslyonDecember6th.Howcouldwehaveknownthepeculiaritiesofthe1973–74bearmarketaheadoftime?Thekeytothisenigmalayinthedistancebetweenthebullmarkethigh(theHead)andtheRight
Shoulder.Ifthedistancebetweenthemismorethanfivemonths,thewholedeclinehasoften(butnotalways)beenverylong.SeethefollowingforexamplesofcountsfromaRightShoulder:
SecondaryLows“Iamamazedbecausefewtechniciansrecognizethatthelengthoftimethatmarket
movementslasthasalwaysbeenmuchmorenearlyuniformthanthenumberofpointswhichtheaveragesgainorlose.Perhapsitisbecause,atleastinmyversionofit,Isometimesstartcountingfromsecondaryhighsandlows.Butsuchcountsaremadecomparativelyseldom.”Thetypicallengthofamajorbearmarkethasalwaysbeen
between13and14months.Someareshorterandsometimesitlastslonger,butthesegmentofthedowntrendthatcomesafterthe14-monthlimithasbeenbrief.Nomatterhowlongitlasts,thereisusuallyanobviouslowbetween13and14monthsafterthebullmarkethigh—“notjustanysecondarytoporbottom.Butthesecondaryhighorlow,theonethatfairlyjumpsoutat
youfromabarchart.”Whenthisisthecase,thatlowbecomestheimportantone.Thisneednotbethelowestpointofthewholebearmarket.Itmustsimplybeanobviouslowthatstandsoutonachart.Wemuststartcountingthenextadvancefromthelowthatoccursaroundmonth13or14.Whenabearmarketlastsmorethan14months(in
responsetoalong-termintervalthatdoesnot,andcannot,coincidewiththebasiclow),westillcountfromthelowthatcame13or14monthsaftertheprevioushigh.Thelowatthe13thor14thmonthisthekeyinestablishingthecontinuity.Everytimethe13/14-monthlowhasoccurredpriortotheultimatebottom,thelengthofthefollowinglongbasicadvancehasvariedbetween
775and805days.Inthiscase,thedurationofanyrallyaftermonth13/14isvariable;itcancontinueaslongas5months.Thedurationoftherallyisarelativelyminormatter.Theimportantpartisthis:Oncetheperiodofralliesendsandthemarketagainturnsdown,theactivepartoftheremainingdeclinehasalwaysbeenbrief—notmorethanabout3months.Thedeclineleadingdowntoa
secondarylowhasrarelylastedlongerthan101days.Sometimesthebearmarketwilllastonly8or10monthsandthereisnowell-definedlowatthemonth13/14atall.Inthatcase,wemustusethelowasitoccursandletitgoatthat.Thiswasthecasein1966whenthebearmarketlastedonly8monthsandtherewasneveraclearlydefinedsecondarybottom
afterthat.Whilebasicdeclineshaveoftenendedatasecondarylow,abasicadvancenearlyalwaysendsattheextremetop.Theneedtouseasecondaryhighasthetopofabasicadvancehasoccurredonlyonceinthepast80years.
SecondaryLowSequence
Focusingonthedirectionandtimeofthemarket,ratherthanthenumberofpointsgainedorlost,thepatternfollowingeveryoneofthesecondarylowshasbeenverysimilar.Figure12.2isacompositeoftheformationsthathavebeencompletedsofar.
Figure12.2.Secondarylow.
Point1representstheendofastandardbasicdecline,whetherlongorshort.AccordingtoLindsay’sRuleofContinuity,itautomaticallybecomesthelowofanewbasicadvance.Point2isthe
topofthefirstrallyafterit.PointArepresentsthebreaktoanewlow.ThemovefrompointAtopoint3alwaystooktheaveragewellabovethelevelofpoint2.Afterpoint3,therehasalwaysbeenaratherdeepdecline(byintermediatetrendstandards)topoint4.Frompoint5onward,therehasalwaysbeenanextendedperiodofverynarrowfluctuations.Theperiodbothjustbeforepoint
5andjustafterhasalwaysbeenmarkedbyslowandhaltingmovement.Point5goesonlyslightlyabovepoint3,andpoint7alsoexceedspoint5byarelativelynarrowmargin,althoughtherisefrompoint6topoint7hasusuallybeenofintermediatescope.Thebasicadvancehasnormallyrunfrompoint1topoint7,andendsthere.Thebasicadvancehascontinuedpastpoint7onlywhenthere
isadefinitereasonforit.Ithasendedatpoint3onlyunderunusualcircumstances,suchas1943.Thiswasbecausethedeclinefrompoint2topointAlastedanextremelylongtime—overninemonths.
InallofLindsay’sexamples,point10liesafteralongbasicdecline(1year,1–2months)
afteraprevioushighinhissequence.Thosetopsarenotlimitedtopoint9butincludepoints3,5,7,and9.“Iconsidertheactionin1923-1924asthemosttypicalexampleofwhatthe9to10movementshouldbe....”Figure12.3showsstocksdropped414daysor13½months(atypicallongbasicdecline)aftertheNovember3,1919,bullmarkettopto
bottomonDecember21,1920,atpoint1.Stockshadtorallyandtheydid,formorethan4months—longerthantheyusuallydoduringthecourseofasinglebasicdecline.Finally,theysanktoanewlowinAugust1921(pointA),decisivelyunderthelowofDecember1920.Themarkethigh,atpoint7,wasaperfectbasiclongadvanceasitcounted819daysfromthesecondarylow
atpoint1.Thedropfrompoint7topoint10wasanotherlongbasicdeclinecounting420days.Notethatthebasicadvanceof819daysismarginallylongerthanLindsay’sestimateof775–805daysfollowingasecondarylowthatoccursbeforeafinallow.
Figure12.3.Secondarylow.ChartcreatedbyMetaStock®.
SidewaysMovementsOccasionally,anadvanceendsattheappointedtime,butthereisaninterimperiod
beforethenextdeclinesetsin.Thisisaninterveningperiodwhenthetheoreticaltrendisneitherupnordown.Lindsaycalledthemarketactionduringthistheoreticallyneutralperiodasidewaysmovement.Duringthistimeperiod,theoverallresultofpricemovementisapproximatelysideways—regardlessofwhatpricemaydointheinterim.Asidewaysperiodmaybethoughtofas
“apauseintheactionwhilethemarketisregroupingforthenextsustainedtrend.”Asidewaysmovementmaybebetterdescribedas“extratime”thatmustbesandwichedinwhiletheaveragefluctuatesbackandforthwhilewaitingfortherightmomentwhenacontinuoustrendcanbegin.ThisisthechiefwayinwhichthePrincipleofContinuityisinterrupted.
Sidewaysmovementshavealmostalwaysoccurredatatop.Asidewaysmovementstartswithabreak,arathersharponeinnearlyeverycase.Thenthereisarecoverybacktotheapproximateleveloftheoldhigh.Sometimestheaveragefallsshortofthehighandsometimesitexceedsit.Thisisnotimportant.Elevenmonthshasbeenthemaximumdurationofsidewaysmovements.
Therehavebeenshorterones.Itisusuallybesttostartcountingthenextbasicdecline(notthe12-yearinterval)fromthetopofthelastrallyinasidewaysmovement.ExamplesofsidewaysmovementscanbefoundinTable12.3.
Table12.3.SidewaysMovements
Lindsaywrotethat,since1842,therehadbeen40basicadvances.Ofthese,31were
followedbyrecognizablebasicdeclinesand5werefollowedbysidewaysmovements.Therehavealsobeenseveralminorsidewaysmovements.ImportantRule:Thebasicdeclinefollowingasidewaysmovementbeginsattheveryendofthemovement,regardlessofwhetherthatwasthehighestpoint.Butwhenwecounta12-year
intervalfromasidewaysmovement,italwaysbeginsfromthehighestpoint,nomatterwhereitislocated.Itisessentialtoknowwhentherewillbeasidewaysmovement.Thelong-termintervalsarethebestguide.FollowingthebullmarkethighofDecember3,1968,theDowdroppedfor14monthsuntilJanuary30,1970(seeFigure12.4).This
wasthekeypointfromwhichtocounteventhoughtheDowralliedfor2monthsafterthat,untilApril,andthencontinueddeclininguntilarrivingatalowerlowonMay26th.
Figure12.4.Sidewaysmovement.Chartcreatedby
MetaStock®.
ThenextimportanthighwasexpectedsomewherebetweenMarch14thandApril14,1972,775–805daysaftertheJanuary30thsecondarylow.
Asitwas,thehighwas4dayslateonApril18th.Thewayinwhichtheshort-andlong-termsegmentsoftimefittogethersuggestedthattherewastobeasidewaysmovementin1972.Countingthe15-yearintervalforwardfromthelowofOctober22,1957,targetsaperiodbetweenOctober23,1972(15years)andSeptember22,1973(15
years,11months).Ourruleofthumbcount,15years,2months,targetsDecember22,1972,andtheactualhighwasprintedonJanuary11,1973—15years,2months,and20daysafterthe1957low.
MovingUpwardOutofaSidewaysMovement“Onlytwiceinhistory—in1880andin1927—hasa
basicadvancestartedupwardattheendofamajorsidewaysmovement.Onbothoccasions,itwasfollowedbyadrasticbearmarket,eachoneconsistingoftwocompleteBasicDeclines,whichfollowedoneanotherwithonlyabriefrallyinbetween.”Normallythemarketdeclinesafterasidewaysmovement.Onlytwiceinhistoryhasa
newbasicadvancebegunattheendofone.Itwastheformationin1926thatinspiredLindsaywiththeconceptofthe“sidewaysmovement.”ThebreakinFebruaryandMarchofthatyearwasmuchtooshorttoconstituteabasicdecline.Thefirsttimewas1880;themarkethadrisentoabasichighonNovember12,1879,andthenmovedsideways
untilOctober11,1880,whenstockswerestillbelowthe1879top.ThemarketthenmovedupwardfromthesidewaysmovementandthebullmarkethighwasprintedonMay26,1881.ButthebasicadvancedidnotenduntilSeptember14,1882,whenmanymarketleadersmadenewhighs.Thiswas704daysaftertheendofthesidewaysmovement—thetypicaldurationofashort
basicadvance.“Myindexofsevenmarketleadersthendeclineduntil1/21/1884,makingthedowntrendlast494days,thelongestBasicDeclineonrecord.Until1927,thiswastheonlycasewhenaBasicAdvancebeganattheendofaSidewaysMovement.”Bearinmindthatitwasthesidewaysmovementsof1880and1926thathintedatwhat
layahead.Disasterloomswhenabasicadvancestartsattheendofasidewaysmovementthatlasts11months.
ConclusionThefollowingisaquicksummaryofthischapterandcanserveasaquickreferenceguideinthefutureforthereader:TheRuleofContinuitystates
whenadowntrendends—eitherabasicdeclineoralong-terminterval—anuptrendofthesameclassmustbeginimmediately,andviceversa.Basicdeclineshaveatendencytoincludetworalliesinsuccessioninroughlythesamepricerange.Afteranextendedadvance(lastingfrom929to968days),thebasicdeclinedoes
notbeginimmediately.IfthedistancebetweentheHeadandtheRightShoulderismorethanfivemonths,thewholedeclinehasnormallybeenverylong.ThedeclineiscountedfromtheHeadwhentheelapsedtimebetweentheHeadandtheRightShoulderisaboutfivemonthsorless.WhentheelapsedtimefromtheHeadtotheRightShoulderis
morethanfivemonths,theprobabilityisthatweshouldcountthenextbasicdeclinefromtheRightShoulder.Thereisusuallyanobviouslowbetween13and14monthsafterthebullmarkethigh.Everytimethe13/14-monthlowhasoccurredpriortotheultimatebottom,thelengthofthefollowinglongbasicadvancehasvariedbetween
775and805days.OnceaBasicMovement(advanceordecline)persistsforlongerthantheextremeofthatparticularStandardTimeSpan,itshouldbeassumedthatitwillcontinueuntilthenexttimespan.Elevenmonthshasbeenthemaximumdurationofsidewaysmovements.Twelve-yearintervalscountfromhighseveninsideways
movements.Itisusuallybesttostartcountingthenextbasicdeclinefromthelastrallyinasidewaysmovement.Disasterloomswhenabasicadvancestartsattheendofasidewaysmovementthatlasts11months.
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretaken
fromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter13.CountsfromtheMiddleSection
“ThefirstoriginalideaIeverhadonthestockmarketremainsthebest.In1950,Ipublishedacopyrightedpamphlet‘AnAidtoTiming’which
introducedtheconceptofthe‘MiddleSection.’ThepamphletsoldwellandIreceivedsomanylettersthatIwasencouragedtostartamarketletterofmyownthefollowingyearonacapitalof$600.SinceIhaveneverbeenabigadvertiser,itisremarkablethatIhavelastedinthebusinessfor23years.Icouldneverhavedoneitwithoutthis
method.Inalltheyearssincethen,Ihavementionedtheprinciple[oftheMiddleSection]onlyonceinmyadvisoryletter.CountsfromtheMiddleSectionaremyprizewayofcalculatingtimeinthemarket.”1—GeorgeLindsay
Nearlyeverymajoradvanceinthestockmarkethasa
“MiddleSection.”Thismethodhasbeentracedbackto1861.ThemajorityofMiddleSections(AscendingandDeclining)havecontinuedfor20weeksorevenmore.ButtherehavebeenshortMiddleSectionsinthepast,too,especiallywhentheyareusedtoprojectalow.AMiddleSectionisdefinedbytworeactionsthatinterrupttheuptrend.InFigures13.1
and13.2(Lindsayreferredtotheseas“typicalschemes”),thesetwodeclinesaremarkedaspointBtoDandfrompointGtoH.Inbetweenthetworeactionsareseveralsmallerrallies.Theremustbeatleasttwoofthem,andtheremaybemore.
Figure13.1.AscendingMiddleSection.
Figure13.2.DescendingMiddleSection.
OneprimerequirementofaMiddleSectionisthattheoverallpace—therateofgainduringtheadvance—mustslowduringthecourseofthesesmallrallies.Theslopeofthetrendlinemustdecrease
duringaMiddleSectionascomparedtowhatitwasbeforeandafter.DuringaMiddleSectionthemarketmustgainlessgroundthanitdidbetweenpointsAandBandbetweenpointsHandJ.ThewholemovementfromAtoJisa“basicadvance.”PointBisthetopofanimportantadvance.Theaverageusuallyspendsseveraldaysmakingaminor
topformation.PointCisthe“firstreallyweakdayafteratop.”Onthisday,theaverageusuallyfallscleanlyunderthelowoftheminortopformationtoformabottomatpointD.Duringthefollowingadvance,thethreerallies(E,F,andG)needtobeclearlydemarcatedfromoneanother.PointGisthelastrally,pointFisthenext-to-the-lastrally,andpointEisthesecond-to-the-lastrally.Thedecline
frompointGtopointH(inanAscendingMiddleSection)istypicallylongerthanthereactionfollowingpointF.ItcanbecomeaDescendingMiddleSectioninitsownright,providedthatitcontainstworalliesataboutthesamepricelevelonthewaydown.PointHistheendoftheMiddleSection.PointJmayormaynotbethetopofacompletebullmarket.Lindsayneverindicatedifthe
remainingpointsinhis“typicalschemes”heldanysignificance.WhenthesmallrallieswithinaMiddleSectionexceedthehighatpointB,itiscalledan“AscendingMiddleSection,”asshowninFigure13.1.WhenthesmallralliesfallshortofthelevelatpointB,itiscalleda“DescendingMiddleSection,”asshowninFigure13.2.
NotethatinaDescendingMiddleSection,pointFbecomesabottomratherthanatopasintheAscendingMiddleSection.ThismakespointEthenext-to-the-lastrallyinaDescendingMiddleSection,ratherthanthesecond-to-lastrallyasinanAscendingMiddleSection.ThesamebasicadvancemaycontaintwoseparateMiddleSectionsthatareentirely
disconnectedfromeachother.Itdoesn’tmatterwhetheroneisascendingandtheotherisdescending,orwhetherbothareofthesamevariety.TheMiddleSectioncannotbeusedtocomputethehighofthebullmarketinwhichitoccurs.Itmustbeusedtocalculatethetimeofthenextbearmarketloworthehighofthebullmarketafterthat.Thesecountsareusedtotargetlowsandhighsfarinto
thefuture.Thesecountsdon’talwaysworkbut,whentheydowork,theydosowithamazingaccuracy.AllcountsfromMiddleSectionsareequaldistancesintime.Ifthetimespanoriginatesatalow,theresultwillbeahigh.Ifitoriginatesfromahigh,theresultwillbealow.WhencountingfromaMiddleSection,countingfromeitherpointCorpointE
iscorrect,butneverbothinthesameinstance.ThecorrectcounthasoriginatedatpointEinthegreatmajorityofcasessoitalwayspaystostartthere.Whencounting,Lindsaynormallyusedclosingpricesbuthenotedthatclosing,orintradayprices,tendtoworkequallywell.AcountfrompointsCorEinaMiddleSectionmustconcludeontheabsolutehighorlowofabasicadvanceor
decline;thereisnouseofsecondarylows.
CombiningStandardTimeSpanswithCountsfromtheMiddleSection“WheneveranequidistancefromaMiddleSectionhascoincidedwithoneofthetimespanslisted[inTables12.1and12.2]Ihave
automaticallyconsideredthatpointastheendoftheBasicAdvance(orBasicDecline).”TheStandardTimeSpanscanbeusedalone,butitismuchmoreaccuratetocombinethemwiththecountsfromtheMiddleSectionandwiththelong-termintervals.TheStandardTimeSpansaremorereliablethancountsfromtheMiddleSection,butthelatter,ifcomputed
accurately,aremuchmoreexact.Bothshouldbeusedincombination.Thetargetderivedfromacountor“equidistance”frompointCorEinaMiddleSectionisvalidonlyiftheresultfallswithinthetargetedrangeofoneoftheBasicMovements.Sometimes,neitherthecountfrompointCnorthecountfrompointEinthesameMiddleSection
worksatall.Inthatcase,wesimplyhavetorelyonthelessexactbasicadvancesandbasicdeclines.TheStandardTimeSpansareoftenuseful,evenessential,indecidingwhethertocountfrompointCorEinaMiddleSection.
AscendingMiddleSectionsThebreakfrompointBtopointDisalmostalways
deeperthanthebreakthatterminatesatpointA.Whenthatisnotclear,lookforaclearlydefinedpointC.WhenonerallyismuchsmallerthantheothersinanAscendingMiddleSection,itisalmostinvariablythefirstrallyofthethree(rallyE).ThebreakfrompointGtopointHshouldlosemorepointsthanthebreakfollowingpointF.IftheadvancefrompointEtopointFisanextremelylong
one,thenadeclinefrompointGtopointH,whichislongerthanthebreakfollowingpointF,isverylikelytobecomeaDescendingMiddleSectionitselfwhenconsideredinisolation.Figure13.3showsadailychartfrom1951andaMiddleSectionindetail.ItisanAscendingMiddleSectionbecausepointGexceededthelevelatpointB,thetopofthe
previoussustainedadvance.IneveryMiddleSection,therearealwaystwopossiblepointsfromwhichwecounttime.OnesuchpointispointE.InanAscendingMiddleSection,pointEisalwaysthesecond-to-the-lastrally.ThatdaywasApril6,1951.
Figure13.3.MiddleSection,1951.Chartcreatedby
MetaStock®.
CountingfromEtothenextimportantlow,September14,1953,is892days.Referringtothetableofbasicadvances(seeTable12.1),itcanbe
seenthatnomarketadvancehaseverlastedanythinglike892days.Onegroupofadvanceshascontinuedfrom765to830days,whileanotherhaslastedfrom929to968days—butnothinginbetween.Inthiscase,pointCistheotherpossiblemeasuringpointintheMiddleSectionof1951.PointBisthetopofanimportantadvance.The
averageusuallyspendsseveraldaysmakingatopformation.InFigure13.3,pointBwasFebruary13,1951.TheDowheldanarrowrangeforthenextfourdays,creatingaminortopformation.TheaveragehadarelativelylargelossonFebruary19thandfellcleanlyunderthelowoftheminortopformation.ThiswasaperfectexampleofpointC,thefirstreallyweakdayafter
atop.PointCwas938daysbeforethebearmarketlowinSeptember1953.Countingforwardanother938daystargetsMonday,April9,1956,asatopforthebullmarket.TheDowmadeitsintradaybullmarkethighthatMondayanditsclosinghighthepreviousFriday(seeFigure13.4).
Figure13.4.MiddleSection,
1956markettop.ChartcreatedbyMetaStock®.
DescendingMiddleSectionsADescendingMiddleSectionisessentiallyadowntrendina
longbullmarket.Thedowntrendmustbeinterruptedbytwosmallralliesataboutthesamelevelandmustthencontinuestilllower.Whentherearethreerallies,oneofthem(usuallythelast,butitwasthefirstin1937)iseitherbrieforinconsequential.AfterfallinguntilJune10,1965,theDowroseoneday,felloneday,andthenrosefor
threedaystoculminateonJune17th.Twodistinctralliesinthesamepricerange,andtheaveragesubsequentlyfelllower(seeFigure13.5).ThisfulfillstheessentialrequirementsofaDescendingMiddleSection.Asarule,theralliesinaMiddleSectionlastlongerbuttheessentialrequirementisasharpbreakbetweenthetworalliesofaDescendingMiddleSection.
Figure13.5.DescendingMiddleSection,1965.ChartcreatedbyMetaStock®.
CountingfrompointEoftheDescendingMiddleSectiontothetopofthemarketadvanceonFebruary9,1966,is243days.Counting
forwardanother243daystargetsalowonMonday,October10,1966(seeFigure13.6).ThatMondaywastheexactdateoftheintradaylowandthepreviousFridaywastheclosinglowofthe1966bearmarket.
Figure13.6.DescendingMiddleSection,1966marketbottom.ChartcreatedbyMetaStock®.
ConclusionThefollowingisaquicksummaryofthischapterandcanserveasaquickreferenceguideinthefutureforthe
reader:Theoverallpace—ortherateofgainduringtheadvance—mustslowdownduringthecourseoftheMiddleSection.PointEisthesecond-to-the-lastrallyinanAscendingMiddleSectionandthenext-to-the-lastrallyinaDescendingMiddleSection.ThecorrectcounthasoriginatedatpointEinthegreatmajorityofcases,soit
alwayspaystostartthere.Normally,thecountfromeitherpointCorpointEworks—butnotbothofthem.ADescendingMiddleSectioncontainstworalliesataboutthesamelevelpriortothebottom.InanAscendingMiddleSection......whenonerallyismuchsmallerthantheothersinan
AscendingMiddleSection,itisalmostinvariablyE....thebreakfrompointBtopointDisalmostalwaysdeeperthanthebreakthatterminatesatpointA....thebreakfrompointGtopointHshouldlosemorepointsthanthebreakfollowingpointF.
Endnote1Unlessotherwiseindicated,all
quotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,GeorgeLindsay’sOpinion,duringtheyears1959–72.
Chapter14.CaseStudy:The1960s
“Theexpirationofthe15-yearintervalisthepointwhereallthemovementsevenuptemporarily.Theycomeintoasortofbalance.Eventhoughit
won’tlast,ithelpsustolookbackandfindoutwhathasreallyhappened,anditenablesustobeginanewseriesofforecasts.”1—GeorgeLindsay
IntroductionWhentheendofastandardbasicmoveandtheendofalong-termintervalcoincidein
time,thereisa“decisiveandoftenviolentmovement”inthemarket.Thiscanbeseenatseveralpointsintime,includingthehighsofSeptember1929,March1937,andDecember1968,andthelowsofJuly1932andJune1949.Inthiscasestudy,andfinalchapterofthebook,asingledecadeisexaminedwiththeintentofillustratingtheconceptscoveredinpreviouschapters.
1960–61AdvanceItwouldhavebeenniceifthedecadehadstartedwithsomethingmoretraditional,butinsteaditchosetobeginwithtwoanomalies:asubnormaladvancethatisquiteunusualandatimeperiod(August1959toDecember1961)thatLindsayconsideredanexampleofa3PDhpatterntakingtheplaceofabearmarket.Theanalysis
startswiththelonger-termcountsasitshould.The15-yearintervalfromtheOctober1946lowimpliedthatweshouldhavelookedforahighsometimebetweenDecember1961andFebruary1962.Inhindsight,wecanseethattheNovember1961(intraday)highcounts15years,1monthfromtheOctober1946lowand8years,2monthsfromthe
September1953low.TheDecember1961(closing)high,ofcourse,countsto1monthlater.Butwhenlookingforamedium-termintervalofabouttwoyears,awidediscrepancyisfound.ThecurrentbullmarkethadbegunOctober25,1960.Eveniftheadvanceweretobeoftheminimumduration,610days,thehighwouldn’tcomeuntil
June1962attheearliest.CountingthebasicadvancefromOctober25,1960,totheintradayhighonNovember15,1961,isonly386days—anirregularadvance.ThesameistrueifthecountistakentotheclosinghighonDecember13th.Therehavebeenonlythreegenuineadvancesthathavebeensubnormal:thoseof1932–34,1946–48,and1960–61.To
sumupthematter:MostmarketmovementshavealwaysfollowedtheStandardTimeSpans:short,mean,long,extended.Afewmovementshavenot,andthenthetimingnormsareworthless.Butinthesecases,youhavetheshapeofthemovesonacharttogoby.Whena3PDhappears,actaccordingtoitsshape,notthenumberofdays.
The1961highwasanalmostuniquecase.Findingthetopwasnotproblematic,however,asthetimeperiodfromAugust1959toDecember1961unfoldedasaThreePeaksandaDomedHousepattern(seeFigure14.1).WhenyoulookatthechartoftheperiodfromAugust1959toDecember1961,itishardnottorecognizetheshapeofthe3PDh.Apatternofthiskind
cansimplytaketheplaceofaregularadvance.Inordertotargetthetopofthepatternwiththe221-to224-daycount,inthiscaseitmustbecountedfromthetopoftheFirstFloorRoof.FromMay19,1961,toDecember13,1961,counts208days,13daysshortofthetypicalcount.Whilenotunprecedented,countingfromtheFirstFloorRoofisunusual.
Figure14.1.1960–61advance3PDh.ChartcreatedbyMetaStock®.
A107-dayTop-To-TopcountstartsAugust24,1961,andcounts111daystotheDecember13thtop—wellwithinthe±5-daywindow
surroundingthetargetdate4daysearlier(seeFigure14.2).AminorLow-Low-Highintervalof13daysstretchesfromthelowsofNovember17thtoNovember30thandontothehighofDecember13th.AmajorLow-Low-HighintervalcanbecountedusingthemajorlowofDecember5,1960,andtheminorlowofMay26,1961.Theycount171daystoSunday,November12,1961
—3daysofffromthealternatehighofNovember15,1961(seeFigure14.1).
Figure14.2.1960–61advanceLindsayTimingModel.Chartcreatedby
MetaStock®.
1961–62DeclineThedropfromDecember1961tothemarketlowinJune1962wasonly194days
—tooshorttoconstituteabasicdecline,sowelookforasecondarylowthatoftenfollowssuchabreak(seeFigure14.3).ItcameonOctober23,1962.ItwashigherthantheJunelowandonly10monthsafterthehigh(notthe13–14monthsthatwenormallyexpect),butthatdoesn’tmatter.ThesecondarylowofOctober23,1962,came314daysaftertheDecemberhigh—barely
enoughtimetoqualifyasashortbasicdecline.Sometimesitismoreaccuratetouseintradayfiguresthanclosingprices.TheintradayhighcameonNovember15,1961.Fromthere,thelowinOctobercameanideal342dayslater.So,thedeclineof1961–62isconsideredashavingendedinOctober1962andthenextbasicadvancemustbeginonthesameday.The12-year
intervalcounts12years,4monthsfromthehighofJune1948toOctober1962.
Figure14.3.1961–62decline.Chartcreatedby
MetaStock®.
1962–66AdvanceWhentheDowstarteduponOctober23,1962,itwasknown,fromthePrincipleofAlternation,thattheadvance
wouldbelongbecausethepreviousadvance(October1960–November/December1961)hadbeenashortbasicadvance.Whatwasn’tknownisifitwouldbeextended.Iftheadvancehadbeenmerelylong,itwouldhavelasteduntilDecember1964(2years,2months).Notethe12-yearintervalstartingatthehighofJanuary1953.Itcalledforalow
sometimebetweenMarch(12years,2months)andSeptember(12years,8months)1965.TakingfulladvantageofthetimespanandcountingtoSeptember1965wouldstillmeanadeclineofonlyabout8monthsfromapossiblehighthepreviousDecember.Thatwouldhavebeenbarelylongenoughforasubnormalbasicdecline.
Inthisscenario,anewbasicadvancewouldthenbegininSeptember1965.Lookingahead,theendofthenext15-yearintervalfromSeptember1953targetedamajortoptowardtheendof1968(ruleofthumb:15years,2months).IfabasicadvancebeganinSeptember1965,itwouldneedtorunfor3years,3months.ThattimespanismuchtoolongforabasicadvanceusingtheStandard
TimeSpans.ThemarketcontinuedtoadvancethroughDecember,andbymid-May1965,theadvancefromthelowofOctober1962hadenduredfor934days.Thatisjustaboutthemaximumdurationofanextendedbasicadvance.Noadvancehaseverexceededthelimitof929to968days.Theadvancehadtoendsoon,yet,otherthananinterim
correction,afull-fledgedbearmarketwasnotinthecards.Withthe12-yearlowmentionedpreviously,expectednolaterthanSeptember1st,anydeclinebeginningthepreviousMaycouldthereforelastonlyabout110days.Thatisn’tnearlylongenoughtoconstituteabasicdecline.Anotherproblemisthatanyadvancethatbeginsin
responsetoa12-yearintervalusuallylastssevenmonthsorlonger,andthat’swhathappenedhere.Sevenmonthsistoolongforarallyinabearmarketthat,inthisscenario,wastohavestartedinMay1965.Theonlyotheralternativeisthatthelatterpartof1965willbeasidewaysmovement.The12-yearlowactuallycameattheendofJune1965.
SevenmonthsfromlateJune1965placesthefinalhighatabouttheendofJanuary1966.ThebullmarketendedinFebruary1966,andthatwastheendofthesidewaysmovement(seeFigure14.4).ThehighinFebruary1966washigherthanithadbeeninMay1965whenthesidewaysmovementstarted.Itdoesn’tmatter.Thehighestpointofasidewaysmovementmaycomeatthestart,inthe
middle,orattheend.Thetrendissuspendedduringasidewaysmovement.Itresumesassoonasitends.
Figure14.4.1962–66advance.Chartcreatedby
MetaStock®.
AnotherwayoftargetingtheFebruary1966topisa3PDhthatextendedfromlate1964tothetoponFebruary9,1966(seeFigure14.4).The
threepeaksareseeninNovember1964,February1965,andMay1965.Peak3evenbreaksdownintoafractalofacomplete3PDhformation.Withthemajor3PDhhavinganonsymmetricalbase,the221-to224-daycountoriginatesatthebottomoftheSeparatingDecline,June28th,andcounts226daystotheFebruaryhigh.
TheFebruary9thhightothebullmarketwasanexact107daysfromthekeydateofOctober25,1965,adippriortoatop.The107-dayintervalcountisconfirmedbyamajorLLHintervalconsistingof101daysfromJuly22,1965,toNovember1,1965.Countingforwardanother101daystargetsFebruary9,1966.AnothermajorLLHintervaloriginatesatthebottomofthereactionfrom
Peak1andcounts227daystothebottomoftheSeparatingDecline.Countingfromtheretothebullmarkethighwas226days.
1966DeclineAfterthemarkettoponFebruary9,1966,theDowfellfor97daystoMay17th.Thiscouldnotbetheultimatebottomofthedeclinefortwoimportantreasons.First,the
declinefromFebruarytoMay,at97days,wasmuchtooshortforanyoftheStandardTimeSpans.Second,thenextbullmarkethighwasnotdueuntilsometimebetweenNovember1968andJanuary1969.Thisestimatecamefromcounting15years,2monthsand15years,4monthsfromtheSeptember1953low.ThecountfromMay1966to
November1968was915days.Thatwouldhaveputtheadvanceintothe“noman’sland”betweenalong(830days)andanextended(929days)basicadvance.Januarywouldhavebeen2yearsand8months,or976days.Extendedadvancescancontinueforasmuchas2yearsand7months.Notethat976daysisbeyondthe968-daylimitand,inaddition,the
marketjusthadanextendedadvancein1962–65.Twosuchadvanceshaveneverfollowedoneanotherinsuccession(PrincipleofAlternation).Ifthedeclinewastocontinue,atsomepointthereshouldbetworalliesinsuccessioninroughlythesamepricerange.Thisdeclinesawthreerallies,ratherthantwo,fromthelowofMay17thtothehighof
July8th(seeFigure14.5).Inmajorbearmarketsofthepast,thetwoorthreerallieshaveoftencontinuedfor15to18weeks.Theserallieslastedonly52days,lessthantwomonths.Whentherearethreerallies,oneofthem(usuallythelast,butitwasthefirstin1937)iseitherbrieforinconsequential.
Figure14.5.1966decline.Chartcreatedby
MetaStock®.
ThedeclinefromFebruary9,1966,toOctober7,1966,wassubnormalasitlastedonly239days.Thebrevityofthethreerallieswasahint,but
notconclusiveevidence,thatthedeclinewouldbeshorterthanusual.Therewasanother,morespecificwaytotimethebasiclowinlate1966,however.Lookingallthewaybackto1965,theDowfellfromMay14thtoJune10th.TheDowthenroseoneday(June11th),felloneday,andthenroseforthreedaystoculminateonJune17th.Twodistinctrallies
inthesamepricerange,andtheaveragesubsequentlyfelllower.ThisfulfillstheessentialrequirementsofaDescendingMiddleSection.Asarule,theralliesinaMiddleSectionlastlonger,buttheessentialrequirementisasharpbreakbetweenthetworalliesofaDescendingMiddleSection.ThisisthesameDescendingMiddleSectionthatwasexaminedinChapter13,“Countsfromthe
MiddleSection,”soitwon’tberepeatedhereexcepttoaddthatthisMiddleSectionalsofunctionsastheSeparatingDeclineinthe3PDhmentionedintheearlierdiscussionofthe1962–66advance(seeFigure14.4).
1966–68AdvanceReturningtothelong-termintervalcountfromthemajorlowonSeptember14,1953,
thiscounttargetsahighinthevicinityofNovember1968,15years,2monthslater.Remember:The15-yearintervalstretchesfrom15yearsto15years,11months.TherehadbeenanotherimportantlowonOctober25,1960.Counting8yearsforwardtargets1968.ThiscountplacesahighbetweenOctoberandDecember1968(8yearsto8years,2
months).Thetwolong-termcountscoincide,andtheveryfactthattheyagreedsocloselyincreasedtheprobabilitiesofaseveredecline(seeFigure14.6).
Figure14.6.1966–68advance:long-term
intervals.ChartcreatedbyMetaStock®.
Totimethetopmoreclosely,refertothemedium-termintervalofabout2yearsandthebearmarketlowofOctober7,1966.Countthe
typicaldurationofalongadvance,775–805days.ThisplacedtheprobabletimeofthetopsomewherebetweenNovember21andDecember21,1968(seeFigure14.7).ThebearmarketlowinOctober1966didnotbeginata12-yearintervalwherenearlyallmajoradvanceshavetakenoff.Theyear1966wasnot12yearsafteranyimportanttop.Thegainfrom1966to1968wastherefore
onlyaminorbullmarketintermsoftheDowIndustrials.
Figure14.7.1966–68advance,basiclong
advance.ChartcreatedbyMetaStock®.
A3PDhpattern(seeFigure14.8)canalsobeseenduringthisperiod.Peak1(May5,1967)andPeak3(January8,1968)areeightmonthsapart.TheFirstFloorWalltakes
placeMarchthroughMay1968andevenhastheinitialfalsepullbackinAprilthatisfairlycommon.TheFirstFloorRoofhasfivereversals.Theonlytrickyitemhereisthatinordertogetacountof221–224daystotimethetop,itmustbecountedfromthatinitialfalsepullbackinApril—whichcounts225days.Giventhatthecountisonly1daymorethanperfect,anditoriginatesatthebottomofa
pullback,thissuggeststhatthetopwouldhavebeencaughtbytheobservant(andpatient)analyst.
Figure14.8.1966–68advance:3PDhpattern.
ChartcreatedbyMetaStock®.
1968–70DeclineAlowcouldhavebeenexpectedinlate1969/early1970.Thatisbecausethe12-
yearintervalfromthehighofJuly12,1957,placedalowsomewherebetweenSeptember1969(12years,2months)andMarch1970(12years,8months).Asitturnedout,thelowarrived12years,10monthslater,inMay1970.SometimeduringthedeclinefromDecember1968,tworalliesinroughlythesamepricerangewouldbeexpectedtoform.Thetwo
ralliesbeganonJuly29thandlasteduntilNovember10th,104daysoralmost15weekslater.Thesecondrallywashigherthanthetopofthefirstrally.Inthemajorityofcases,thetwo(orthree)ralliesmakeaseriesofdescendingtops.ThesubsequentdeclinefromNovember10thtoJanuary30thlasted82daysandwasshorterthanmostmajorbearmarketlegs(seeFigure14.9).
Figure14.9.1968–70decline.Chartcreatedby
MetaStock®.
January30,1970,came423days(1year,2months)afterabullmarkethighinDecember1968,thetypicaldurationofalongbasicdecline.Therefore,14months
afterthetop,January30,1970,becomesabasiclow.Unlike1966,itdidnotcoincidewithabearmarketlow,astheultimatelowcamelaterinMay.Abasiclowthatprecedesthefinalbearmarketlowisveryimportantinthissystem.Anewbasicadvancemustbecountedfromit.ThefluctuationsbetweenBandHin1967–68constitutedanAscendingMiddleSection
(seeFigure14.9).PointEfellonJune13,1967,andcounts539daysuntilthebullmarkethighonDecember3,1968.Counting539daysfromtheDecemberhightargetsMay26,1970—theexactdateofthebearmarketlow.Notethat539daysislongerthanthetypical“long”bearmarket.Theyhaverangedbetween386and448days.Declinesaremorelikelytobeirregularintheirdurations
thanadvances.Notethatinthisexample,thedateLindsaylabeledwiththeletterJisabullmarkettop.PointJisn’talwaysabullmarkethigh.Beforeconcludingthiscasestudy(andthisMiddleSection),examinethemovementsbetweenpointGandHalone.Ordinarily,theywouldbemerelytheseconddeclineinanAscending
MiddleSection.ButwhenthedeclinefromGtoHcontainstworalliesataboutthesamepricelevel,itbecomesaDescendingMiddleSectioninitsownright.ThedeclinefrompointGtoHinFigure14.10didcontainthenecessarytworallies,althoughthedipthatseparatedthemwasnotassharpasitshouldhavebeen.Thisdipwasthereaction
fromDecember7thtoDecember15th.Ideally,pricesshouldhavebrokenundertheintradaylowpostedonDecember1st.Thedemarcationbetweenthetworallieswouldthenhavebecomeunmistakable.Nevertheless,thehighsofDecember7,1967,andJanuary9,1968,mustbeconsideredthetopsoftwoseparaterallies.December7th,thehighofthenext-to-
the-lastrally,becomespointE.WealwayscountfrompointEfirstsinceithasworkedmoreoftenthanpointC.
Figure14.10.DescendingMiddleSection,1967-68.
ChartcreatedbyMetaStock®.
CountingfrompointEonDecember7,1967,wefindthat901calendardayselapseduntilthebearmarketlowonMay26,1970(rememberthatcountsfrom
theMiddleSectionalwayscenteronabsolutehighsandlowsanddonotusesecondarylows).HereisanotherexampleofalwaysneedingtocomparethecountfromtheMiddleSectionwiththeStandardTimeSpans.InTable12.1,wefoundthatlongadvanceshavecontinuedanywherefrom775to830days,andextendedadvanceshavelastedanywherebetween929and968days.
Butnouptrendsince1877haseverendedanywherebetween830and929days.Giventhehistoricalrecord,anadvanceof901dayswasveryunlikely.WeabandonpointEandgobacktopointC,thelessfrequentlyusedmeasuringpoint,toseeifacountfromtherewillfitbetter.TheDowformedasmalltopbetweenSeptember14,1967,and
October9,1967.Thefirstveryweakdayafterthehigh,October10th,becomespointC.Itwas959daysbeforethebearmarketlowofMay26,1970.Counting959daysforwardfromthere,wearriveatJanuary9,1973.Noticethat959daysfallwithintherangeofextendedbasicadvancesasshowninTable12.1.EarlyJanuary1973wasalso15yearsand
about2½monthsafterthebearmarketlowofOctober1957.Thethreewaysofcountingtimecoincidedaswellastheyeverdo.Asitturnedout,thebullmarkethighcameonlytwodayslaterthanthecountfrompointCindicateditshouldhave—thatis,onJanuary11,1973.
ConclusionItishopedthatthiscasestudy
willhelpthereaderassimilatethematerialintheprecedingchapters.Itcanbeseenthat,intherealworld,thecountsarerarelyexactlywhatLindsayhadprescribed,yettheyaresurprisinglyclose,andoftentimestheyareexactlyashehadwritten.AsnotedintheIntroduction,itisimportanttolearntherulesandspecificcountsLindsaylaidoutinhisyearsofwritingnewsletters.Oncethose
guidelinesarefirmlyinmind,youcanusethemasananchorfromwhichtodriftwiththemarket’sebbsandflows.Itiswiththisfootingthatyoucanthendeclarethatyoutrulyhavea“feelforthemarket.”
Endnote1Unlessotherwiseindicated,allquotesinthischapteraretakenfromGeorgeLindsay’sself-publishednewsletter,George
Lindsay’sOpinion,duringtheyears1959–72.
Glossary
107-dayintervalAnintervalof107calendardaysusedtoforecasttheintradayhighofanadvancingmarket.Thekeytousingtheintervaliscorrectlydeterminingitsorigin.
agitationThestarting
pointofaseriesoftimeintervals.Anagitationmaybeanepisodeofviolence,eruptionsofanemotionalnature(religious,economic,orpolitical),oracreativeconcentration(books,paintings,plays,music,etc.).
ascendingbaseAbasethatformsaftertheSeparatingDeclineinaThreePeaksandaDomed
Housepattern.Thisbaseischaracterizedbyaseriesofhigherhighsandhigherlows.
ascendingmiddlesectionTheperiodinabullmarketwhentheadvanceslows(relativetowhatprecededandfollowedthistimeperiod),typicallyfor20weeksormore.Theformationisusedtotargettopsandbottoms.Whenthe
ralliesinthemiddlesectionexceedthetopofthepreviousadvance,itisreferredtoasanAscendingMiddleSectionandcontainsatleastthreerallies.
baseThebase-buildingphaseofaThreePeaksandaDomedHousepatternpriortotheFirstFloorWall.
basicadvancesDifferentcategoriesofmarketadvancesofvaryinglengthbutalllastingapproximatelytwoyears.
basicdeclinesDifferentcategoriesofmarketdeclinesofvaryinglengthbutalllastingapproximatelyoneyear.
basicmovementsEitheradvancesordeclines
composedoftheStandardTimeSpans.
bottomtotopcountApossibleoriginofa107-daycountintheLindsayTimingModel,priortoanextendedrise.
clusterAtradingrangenear,orjustafter,theexpirationofa107-daycount.
coincidentcountsIntheLindsayTimingModelthisisanalignmentofa107-daycountwithvariousLLHcountswithin24hoursofeachother.
compacttopformationThecommonframeworkoftheninevariationsofaKeyRange.
countThenumberofcalendardaysbetweenthe
originandendingofatimeinterval.
cupolaThetopoftheThreePeaksandaDomedHousepatternthatresemblesthecupolaofahouseorhead-and-shoulderstop.
descendingbaseAbasethatformsaftertheSeparatingDeclineinaThreePeaksandaDomed
Housepattern.Thisbaseischaracterizedbyaseriesoflowerhighsandlowerlows.
descendingmiddlesectionEssentially,adowntrendinalongbullmarkettypicallyfor20weeksormore.Theformationisusedtotargettopsandbottoms.Whentheralliesinthemiddlesectionfailtoexceedthetopofthepreviousadvance,itis
referredtoasaDescendingMiddleSectionandnormallycontainsonlytworallies.
doublebottomtopAKeyRangeintheLindsayTimingModelcharacterizedbythreehighsseparatedbytwolows,thefirstofwhichisusuallythekeydate.
doubletopAKeyRange
intheLindsayTimingModelcharacterizedbytwohighsseparatedbyalowthatisoftenthekeydate.
extendedadvanceThelongestBasicAdvance,varyingbetween929and968days.
finaldipAvariationoftheKeyRangeconceptintheLindsayTimingModelinwhichthekeydateisthe
finaldipinpricepriortothehighoftheadvance.
firstfloorroofOften,butnotalways,asidewayspatterncharacterizedbyafive-wavereversalfollowingtheFirstFloorWallinaThreePeaksandaDomedHousepattern.
firstfloorwallAsharprisefollowingthebaseinaThreePeaksandaDomed
Housepattern.
fractalAgeometricshapethatcanbesplitintoparts,eachofwhichisareduced-sizecopyofthewhole.
importantcount1Acountfromoneimportantlowtoanotherimportantlownotmorethantwoyearslater.2Acountfromanimportantlowtoaminorlownotmorethanthreemonths
later.
importantlowDuringanuptrend,alowinaLow-Low-Highintervalthatdropslowerthanapreviouslowintheuptrendprecedingthemostrecenthigh.Animportantlowcanalsobeachangeintrend.Importantlowsindowntrendsprecedeanupwardretracementthatclimbshigherthana
previousupwardcorrectioninthesamedowntrend.
irregularbaseAbasethatformsaftertheSeparatingDeclineinaThreePeaksandaDomedHousepattern.Thisbasecannotbecontainedwithinparallellines.
keydateTheoriginofthe107-daycountusedintheLindsayTimingMethod.
keyrangeThepricerangewithinwhichthekeydateislocated.AKeyRangehasninepossiblevariations.
lindsaytimingmodelAtimingmethodusedtoidentifytheintradaypricehighofamarketadvanceusingboththe107-dayintervalandtheLow-Low-Highinterval.
longadvanceAbasic
advancethatvariesbetween715and830days.
longdeclineAbasicdeclinetypicallylasting13or14months.
long-termintervalsTheelapsedtimefromanimportanthightoanimportantloworviceversa.Thetwolow-to-highintervalsareapproximately8yearsandapproximately
15years.Thehigh-to-lowintervallastsapproximately12years.
low-low-highintervalTwopricelowsseparatedbyanintervaloftimeequaltotheintervaloftimeseparatingthesecondpricelowfromasucceedingpricehigh.
M-patternAseriesofhistoriccycleslasting
almost400yearsfrombeginningtoend.Thepatterndescribestheexpectedtimingofanation’sgoodandbadfortune.
majortopformationAtopformationthatextendsoverseveralmonthsandnormallyincludesseveralCompactTopformations.
medium-term
intervalsCountedindaysandreferredtoastheStandardTimeSpansorBasicMovements.
minorcount1Acountfromoneminorlowtoanotherminorlow.2Acountfromoneminorlowtoanimportantlow.Aminorlowisvalidfornomorethanfourmonths.
minorlowsAlowinthe
Low-Low-Highintervalthatisanylowotherthanan“importantlow.”
posttopcountsA107-daycountintheLindsayTimingModeltakenfromakeydateafterthehighinaKeyRange,ratherthanthemorecommonapproachofakeydatepriortothehighoftheKeyRange.
principleof
alternationTheprincipleholdsthatBasicMovementsofthesameclassanddirectionalternateinlength.Alongadvanceisfollowedbyashortadvance.
principleofequalizationInaThreePeaksandaDomedHousepattern,whenoneformation(theThreePeaksortheDomedHouse)falls
shortofthenormalduration,theotherpatternequalizesthetotalelapsedtimebybecominglongerorshorter.
rangedipSimilartoafinaldipintheLindsayTimingModelexceptthatthefinaldip,ratherthanbeingintheKeyRange,isthefinaldippriortotheKeyRange.
retrogrademovementAnattempttochangethecourseofeventsinhistorythatusuallyoccursbeforetheexpirationofthe40-yearintervalinLindsay’sTechnicalHistoryandservestoconfusetheoutlook.
ruleofcontinuityWhenalong-termormedium-termtrendends,anoppositetrend,ofthesameclass,
mustbeginimmediately.
secondfloorwallAsharprisefollowingtheFirstFloorRoofinaThreePeaksandaDomedHousepattern.
secondarylowAtemporarybottominadeclinethatoccurs13–14monthsafterahighinthemarket.
separatingdeclineThesell-offfollowingthethirdpeakinaThreePeaksandaDomedHousepattern.Thedeclinemustterminateatapointbelowatleastoneofthereactionsfollowingpeaksoneortwo.
shortadvanceAbasicadvanceoflessthantwoyears.
shortdeclineAbasic
declinetypicallyvaryingbetween340and355days.
short-termintervalsThecountsintheThreePeaksandaDomedHouseandLindsayTimingModels.
sidewaysmovementAninterveningperiodwhenthetheoreticaltrendisneitherupnordown.
sinkingkeyrangeAKey
RangeintheLindsayTimingModelthatappearsasaconsolidationinadecliningmarket.
specialclassAkeydateintheLindsayTimingModelsuchasadipsucceedingaBottomtoTopCount.Any107-daycountsoriginatingatsuchanoriginshouldbeexpectedtotargetashort-livedbounceinanalreadyexistingdecline.
standardtimespansThevariousdurationsofmarketmovesthathaverecurredthroughouthistory.
subnormaladvanceAnextremelyshortandrelativelyrarebasicadvance.
subnormaldeclineAnextremelyshortbasicdeclinevaryingbetween222and250days.
swingoverIntheTri-DayMethodaratiofoundbydividingthedistancefromthebottomoftheSeparatingDeclinetothetopoftheDomedHousebythedistancefromPeakThreetothebottomoftheSeparatingDecline.
symmetricalbaseAbasethatformsaftertheSeparatingDeclineinaThreePeaksandaDomed
Housepattern.Thisbasecanbecontainedwithinparallellines.
targetdateThe107thcalendardayafterthekeydateintheLindsayTimingModel.
technicalhistoryThetermLindsayusedtodescribethemethodsinhisbookTheOtherHistory.
threepeaksandadomedhouseAgeometricpatternusedtofindtheendofabullmarket.
top-to-topcountAmethodusingthe107-dayintervaltotargetthetopofamarketadvance.
tri-daymethodAseriesofcalculationstodetermineapricetargetforabottomafterthetopofaThree
PeaksandaDomedHousepattern.
truedateTheactualintradayhighofanadvancenormallycontainedwithina±5-daywindowsurroundingtheTargetDateintheLindsayTimingModel.
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Index
Numbers3PDh(ThreePeaksandaDomedHouse),478-yearintervals,155–15912-yearintervals,152,15915-yearintervals,149–150,158107-daycounts,combining
withLLH(Low-Low-HighCount),124–125107-dayintervals,LindsayTimingModel,100107-DayTop-to-Topcount,951960scasestudy
1960-1961advance,204–2051961-1962decline,2081962-1966advance,
208–2111966decline,213–215
1966-1968advance,215–2161968-1970decline,220–
224
AAdams,Brooks,24Adams,Henry,24TheAdvisor,16advisoryservice,16agitation,25
CreativeConcentration,31–32
emotional,29–31unsuccessfulrevolts,26–
28“AnAidtoThinking,”12Alphier,James,16,18AmericanCivilWar,26analyst,13–14appearanceofGeorgeLindsay,14artist,9–10AscendingMiddleSection,191,194–196
Bbases
DomedHouseformation,60–61
SymmetricalBase,62longer-than-normal
DomedHouse,66basicadvances,163–166
declinesfollowingextendedbasicadvances,171–174
extendedbasicadvances,164longbasicadvances,164shortbasicadvances,
164basicdeclines,166–170BasicMovements,161
basicadvances,163–166basicdeclines,166–170long-termintervals,171secondarylowsequence,
176,179secondarylows,174–
176sidewaysmovements,
181–183movingupwardout
of,183–185StandardTimeSpans,
162–163bearmarkets,48BottomtoTopCounts(BTC),111Brown,John,16–18BTC(BottomtoTopCounts),111
bullmarkets,48shorter-than-normal
DomedHouse,67
Ccalculationsteps,Tri-DayMethod,81–82CampaignGM,15casestudy:the1960s
1960-1961advance,204–2051961-1962decline,2081962-1966advance,
208–2111966decline,213–2151966-1968advance,
215–2161968-1970decline,220–
224characteristics
identifyinginThreePeaksandaDomedHouse,42–47ofThreePeaks
formations,50–51,54ChicagoBoardofTrade,10
Christianchurch,founding,29Clusters,133–136CoincidentCounts,130–133CompactTopformations,105–106
BTC(BottomtoTopCounts),111Clusters,134DoubleBottomTop
formations,107DoubleTopformations,
106
FinalDip,109–110Head-and-ShouldersTop
formations,108PTC(PostTopCounts),
113–114RangeDip,110SinkingKeyRange,114SpecialClass,112
ComplexArrangement,Tri-DayMethod,86–89counts
CoincidentCounts,130–133
DomedHouseformation,62–64expiring,130importantcounts,LLH
(Low-Low-HighCount),123LLH(Low-Low-High
Count),122,137medium-termcounts,
161MiddleSection,189,
192StandardTime
Spans,193–194minorcounts,LLH
(Low-Low-HighCount),123
CreativeConcentration,31–32Cupola,DomedHouseformation,75–77cycles,143
long-term,144–148
Ddates,keydates,103
KeyRange,104–105CompactTop
formations,105–114MajorTop
formations,105,115–116deathofGeorgeLindsay,20declines,166–170
DomedHouseformation,75–77expectedsizeofLLH
(Low-Low-HighCount),125–126followingextendedbasic
advances,171–174DescendingMiddleSection,191,196–198difficulttoeasy,26DomedHouseformation,48,59,77
bases,60–61counts,62–64Cupolaandthedecline,
75–77FirstFloorRoof,70
falsestarts,74missingroofs,72
roofrallies,71–72FirstFloorWall,69–70longer-than-normal,64
descendingbases,66shortbases,66
SecondFloorWall,74shorterthannormal,67
DoubleBottomTopformations,107DoubleTopformations,106DouglasAircraft,12
E
easytodifficult,28Einstein,Albert,32Elliott,R.N.,1emotionalagitations,29–31Enlightenment,CreativeConcentration,32Esty,William,10expiringcounts,130extendedbasicadvances,164
Ffalsestarts,FirstFloorRoof
DomedHouseformation,74
familyhistoryofGeorgeLindsay,7–8FinalDip,109–110FirstFloorRoof,45
DomedHouseformation,70
falsestarts,74missingroofs,72roofrallies,71–72
missing,shorter-than-normalDomedHouse,67
FirstFloorWall,45DomedHouse
formation,69–70fractals,54–56funnelapproach,143
GGeorgeLindsay’sOpinion,16Georgel,Gaston,24Germany,unsuccessfulrevolts,28Granville,Joe,17–18
HHead-and-ShouldersTopformations,108Hirsch,Yale,13,18Hitler,Adolf,28
Iidentifyingcharacteristics,“ThreePeaksandaDomedHouse,”42–47importantcounts,LLH(Low-Low-HighCount),123
intervals,143long-term,146–149,162
8-yearintervals,155–159
12-yearintervals,152,159
15-yearintervals,149–150,158
BasicMovements,171
irregulartiming,3PDh(“ThreePeaksandaDomedHouse”),46
irregularities,ThreePeaksformation,50–51,54
Kkeydates,103
KeyRange,104–105CompactTop
formations,105–114MajorTop
formations,105,115–116KeyRange,104–105,130
CompactTopformations,105–106
BTC(BottomtoTopCounts),111
DoubleBottomTopformation,107
DoubleTopformation,106
FinalDip,109–110Head-and-Shoulders
Topformation,108PTC(PostTop
Counts),113–114RangeDip,110SinkingKeyRange,
114SpecialClass,112
MajorTopformations,105,115–116
LLindsaySr.,George,8LindsayTimingModel,64,93–94,100
introductionto,95–98Top-to-Topcount,96tops,99
Lindsay,AlbertLoftus,7Lindsay,FrankLoftus,8Lindsay,George,1–3
analyst,13–14artist,9–10deathof,20familyhistory,7–8
Lindsay,NellieVictoriaMeyer,7LLH(Low-Low-HighCount),119–120,137
combiningwith107-daycounts,124–125
counts,122determininglows,121–
122expectedsizeofdecline,
125–126importantcounts,123minorcounts,123
LLH(Low-to-Low-to-High)intervals,103longbasicadvances,164longbasicdeclines,167long-termcycles,144–148long-terminterval
12-yearintervals,152,15915-yearintervals,149–
150,1588-yearintervals,155–
159long-termintervals,146–149,162
BasicMovements,171longer-than-normalDomedHouse,64
descendingbases,66shortbases,66
LosAngeles,12lostmanuscripts,33Low-Low-HighCount(LLH),119–120,137
combiningwith107-daycounts,124–125counts,122determininglows,121–
122expectedsizeofdecline,
125–126importantcounts,123minorcounts,123
Low-to-Low-to-Highintervals,103lows
LLH(Low-Low-HighCount),121–122secondarylowsequence,
176,179secondarylows,174–
176
MM-Patternofhistory,33MajorTopformations,105,
115–116Clusters,133tradingranges,138
McKinley,President,27medium-termcounts,161MiddleSection,189–191
AscendingMiddleSection,191–196DescendingMiddle
Section,191–198StandardTimeSpans,
193–194MiddleSections,counts,192
minorcounts,LLH(Low-Low-HighCount),123minorformations,54–56missingroofs,FirstFloorRoof(DomedHouseformation),72Model3,Tri-DayMethod,84–86movingupwardoutofsidewaysmovements,183–185
N–O
Nader,Ralph,15OnBalanceVolumeindicator,18“OneYearLater:AFollow-UpoftheThreePeaksandDomedHouse,”40TheOtherHistory,23
PParker,Charlie,3patternsatsecularbullmarkettops,shorter-than-normal
DomedHouse,67physicalappearance,14politicalviews,15–16PostTopCounts(PTC),113–114PrincipleofAlternation,170PrincipleofEqualization,47PTC(PostTopCounts),113–114
RRangeDip,110
retrogrademovement,26revolts,unsuccessful,26–28RightShoulder,172roofrallies,FirstFloorRoof(DomedHouseformation),71–72roundedeffectatthetop,46Rukeyser,Louis,19RuleofContinuity,162
SSecondFloorWall,45
DomedHouseformation,74
secondarylowsequence,176,179secondarylows,174–176SeparatingDecline
ThreePeaksformations,56–57
shortbasicadvances,164shortbasicdeclines,166shorter-than-normalDomedHouse,67sidewaysmovements,164,
181–183movingupwardoutof,
183–185SinkingKeyRange,114SpecialClass,112SpecialRule,declinesfollowingextendedbasicadvances,171–174squareeffect,46StandardTimeSpans,162–163
MiddleSection,193–194
StockTrader’sAlmanac,18subnormal,164subnormalbasicdecline,166–170Swingoverratio,80SymmetricalBase,62
Ttargetdates,LindsayTimingModel,96technicalhistory,23Teisch,Stuart,17
terminology,tops,99“ThreePeaksandaDomedHouse,”39
identifyingcharacteristics,42–47
ThreePeaksformation,49characteristicsand
irregularities,50–51,54minorformations,54–56SeparatingDecline,56–
57timeintervals,25–26
agitation,25
ATimingMethodforTraders,93TimingModel,64,93–94,100
introductionto,95–98Top-to-Topcount,96tops,99
Top-to-Topcount,125LindsayTimingModel,
96Top-to-Topcounts,129ToppingRange.SeeKeyRange
ToppingRanges,117tops,99trackrecord,17,19tradingranges,137–138Tri-DayMethod,79–80
calculationsteps,81–82ComplexArrangement,
86–89Model3,84–86Swingoverratio,80
U–V
unsuccessfulrevolts,26–28Victoria,Nellie,8violenceoffluctuations,122vonReichenbach,Stromer,24
W–X–Y–Z`WallStreetWeek,19–20Yates,James,9