Behavior of Prices on Wall Street

Citation preview

1- 3

1-5

BEHAVIOR OF PRICES

"

ｾｉＧｃ

ON WALL

STREET

ARTHUR A.MERRILL

MARKET lHELP

INCLINATIONS PREDICTION

LpRODUCE

PROFITS

Published by The Analysis Press. Chappaqua. New York

1-7

All rights reserved including the right of reproduction in whole or in part in any form. Copyright 1965 by Arthur A. Merrill. Printed in the United States of America. Published by Analysis Press, Chappaqua, New York.

©

Library of Congress Catalog Card No. 64-25611.

DEDICATION: To ELSIE Always helpful; always inspiring.

1-9

THE BEHAVIOR OF PRICES ON WALL STREET CONTENTSPART I - INTRODUCTORY Chapter 1. How can you use this book for profit? Z. Can you forecast the market weather? PART II - BEHAVIOR AT CERTAIN TIMES Chapter 3. When are the best times in the year to buy? To sell? (Including the Market Almanac for every day in the year.) 4. When are the best times in the month to buy? To sell? 5. When are the best times in the week to buy? To sell? 6. When are the best times in the day to buy? To sell? 7. Are there profitable seasonal differentials? 8. How does the market behave near holidays? 9. How does the market behave near income tax time? 10. How does the market behave after bad news? 11. How does the market behave after margin changes? PART III - BEHAVIOR IN CYCLICAL SWINGS: Chapter 12.. Does the market have trends? 13. Are there patterns of behavior in the weekly swings? 14. What is the Dow Theory? Is it profitable? 15. What is the Elliott Wave Theory? 16. How long should you expect a Bull Market to last? A Bear Market? A Primary Swing? A Secondary Reaction? (Including Life Expectancy tables. ) 17. Is the market influenced by earnings? 18. Is trend following profitable? 19. Are some prices preferable to others for purchase? For Sale? PART IV - CONCLUSIONS Chapter ZOo Conclusions.

PART V - APPENDIXES FOR STUDENTS: ANALYSES FOR STUDENTS: Appendix AI: Are the D-J Industrials representative? AZ: Is the market random? A3: How should turning points be measured? A4: In Elliott's Theory. what are the variations? A5: Can the Elliott Theory be made specific? A6: How should swings be classified? A7: How do swings vary with price? DATA FOR STUDENTS: Appendix A8: The D-J Averages 1928-1964 A9: Dow Theory dates AIO: Data and charts primary swings 1897-1963 All: Bibliography

- weekly bar chart and data. Bull and Bear Markets, and secondary reactions.

TOOLS FOR STUDENTS: Appendix A12: How to make the Chi Squared test A13:Elapsed Time Calculator A14: P!E Calculator A15: 300 Year Calendar

1-11

IN APPRECIATION The suggestions made by the following friends have been especially helpful: A. Hamilton Bolton, Robert W. Breiling, Dr. Edward R. Dewey, Jack A. Dorland, Dernell Every, Devin A. Garrity, Floyd L. Hogan, Christopher R. Landmann, S. Jay Levy, William D. Merrill, Francis N. Millett, Richard Russell, George Seager, William P. Short, George E. Tener.

"I often say that when you can measure what you are speaking about, and express it in nurnbe r s, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the stage of Science, whatever the matter may be. " Sir William Thomson, Lord Kelvin

1-13

(p.l-l)

Chapter i. HOW CAN YOU USE THIS BOOK FOR PROFIT? Should stocks be bought today? delayed for a lower price?

Should purchase be

Should stocks be sold now? Should sale be postponed for a higher price? This book will concentrate on these four questions. There are two problems in investment; selection and timing. The latter problem, which is dealt with in this book, is considered by many to be the more important. Poor stocks will rise in a rising market; good stocks will fall in a declining market. There is profit in timing. This book is addressed to both the long term investor and to the short term speculator. All of the conclusions are in the twenty chapters. which are written for the non-mathematical investor. For serious students. the fifteen appendixes will supply analyses. data for research and some tools for further work. A body of folklore has been built up ar-ound the market through the years. Too often this folklore has not been put to the test. This book will try to separate fact from folklore, by the simple but laborious method of consulting the record. It isn It surprising, except to the scientific man in another field, that the material hasn't been thor.oughly sifted, for the size of the undertaking is frightening. But modern methods and the computer are now available.

1-15

(p.1-2)

Chapter s 3. through 11. will deal with the behavior biases of the market at certain specific times. You will find many unsuspected tendencies in the market, and corresponding suggestions for profit. The market will be found to behave with the characteristics of a warped roulette wheel. Sometimes it has a definite bullish or upward bias - at these times you should move with celerity in purchase, and should delay sale. At other times it has a definite bias downward; at these times sell promptly and delay purchase for profit. Chapters 12. through 19. deal with the behavior of the market in swings and trends. There are some suggestions for profit from this knowledge. This book doesn't deal with individual stocks, but with the averages. However, most stocks tend to move with the spirit of the market. The Dow-Jones Industrial Average is used as an index. (An analysis of this selection is in Appendix AI) This is a picture book. To paraphrase the old Chinese saying: One chart tells more than a thousand statistics! To make it easier for you, we have inserted a few blank pages, to bring the charts next to the corresponding text. May your profit increase.

(p. Z-l) Chapter 2: CAN YOU FORECAST THE MARKET WEATHER? The conclusion of this book is that there are certain inclinations or leanings in the behavior of the market. A knowledge of these inclinations is very useful in the improvement of timing of purchase or sale. We will be dealing with probabilities, not with certainties. But these probabilities, if known, can be used for profit. A bent roulette wheel may be biased toward the even numbers; despite this bias it will produce many odd numbers. But the bias is profitable to the acute customer. The casinos at Monte Carlo employ statisticians to check the accuracy of the wheels from the record. They would like to replace a wheel before a customer discovers the bias! The knowledge of bias in the stock market is rarely sufficient, in itself, to justify a short term speculation. However, this knowledge can help the speculator and the investor by improving timing and profit. It is important to consider significance. All of the biases noted in this book could have occurred by pure chance. If you throw a handful of a hundred coins on a table, it is pos si ble to find them all "heads ". However, if this score occurs, you would have some reason to suspect some double-headed coins! To measure the significance of a score, statisticians compare the actual score with the expected score, and ask themselves "How many times would I have to repeat this experiment to expect such a difference by pure chance?" There are mathematical means of obtaining the answer; one of the simpler methods is outlined in Appendix AIZ. In our text, which is addressed to non-mathematicians, we will use the following words: "Probably Significant": The bias would be expected by chance only once in twenty repetitions of the experiment. "Significant"; The bias would be expected by chance only once in a hundred times. "Highly Significant": The bias would be expected by chance only once in a thousand repetitions of the entire experiment.

1-16

(p.3-1)

IS EASONAL --1896 -1963 I 80

(Pere ent ot years in which 0 -J Industrials Increased in the month.)

70

60 48

4S"l.

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Sep. Oct. Noy. ｄ･｣ｾ

Mar. Apr. May June July Aug. 51% 5Z%

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Fig.3A

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63'70 81%

40 '--

-

.......... Fig.3B

(p.3-2)

Chapter 3. WHEN ARE THE BEST TIMES IN THE YEAR TO BUY? TO SELL? Figure 3A summarizes the seasonal tendency of the market for the 67 years from 1896 through 1963. The most favorable month is December. In this month the market increased in 75% of the 67 years. The summer rally months, August and July win the second and third prizes. August rose 70% of the time; July increased in 68% of the years. For maximum profit, of course, one should try to buy before the strong months and sell before the weaker months. Figure 3B presents the record for the 16 presidential ebecti on years from 1900 through 1960. There are some interesting differences between these years and the total in the preceding c ha r t; January, April and September have been significantly weak in election years; March, August and October are notably strong.

1-14

(p.3-3)

Figure 3C applies the microscope to the summer rally. The behavior by days is charted. Two periods are included, to verify the conclusions, and to note changes in characteristics. The principal difference between the two curves is in the middle of July. This period did not appear weak in the 1922-1942 period; it is notably weak in the 1943-1963 period. The agreement between the two curves is more significant than the differences. The strength in the early part of July and in the middle of August is present in both curves.

'I(,

100

THE 90

TWO

21-YEAR (5 Ooy centered

80

average)

1943-1963

10

60

40

30

JULY

AUGUST

Fig.3C

(p.3-4)

The next two charts (Figs. 3D, 3E) extend the microscopic view to the entire year. Here is a Market Almanac for every day in the year, based on the performance on each of 19.253 trading days in the last 67 years. On any day in the year. you can consult the chart and find the average market weather for that time of the year. For example, note January 31. The bar extends to 580/0. which means that the market at that date rose 580/0 of the time and declined 42% of the time. There are many interesting and significant points on these charts. We will highlight some of them in the chapters which follow. Note the summer rally in July and August; note the year-end rally in December. Footnotes for students: (1) The data have been smoothed by a five day centered average. (2) The bars are measured from the 500/0 level. but should also be compared with the average for the entire period (530/0), which is indicated by a horizontal line. (3) The significance levels are marked on the right hand scale (See Appendix AI2).

1-12

(p. 3- 5)

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(p.3-6)

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(p.4-1)

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FEB. APR,JUNE, 1 16 17181920212223242526272829 SEPT.,NOV.r-'6 17 18 19 20 21 2223 24 2526272829 3 OTHERS.-IB 17 18 19202122232425262728293031 -- - DAY

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Fig.4A

(p.4-2)

Chapter 4. WHEN ARE THE BEST TIMES IN THE MONTH TO BUY? TO SELL? Does the market have a bias based on the day of the month? The record has been examined - every day from 1897 through June. 1964. The result is presented in Fig. 4A. The chart has been split in the middle. Because of the important beginning-of-the-month behavior. the first of the month has been placed in the center of the chart. The conclusion is clear. There is a definite bias in the market near the beginning of the month. Note the strong market on the first two days. Here is a bullish bias which is highly significant.

If behavior is typical, then, one should try to buy for profit before the last three days of a month, and sell for profit after the first three days of a month.

1-8

(p. 5-1)

Fig.5A

(p.5-2)

Chapter 5. WHEN ARE THE BEST TIMES IN THE WEEK TO BUY? TO SELL? The market prior to 1952 was open on Saturdays. The span since that time, with a five day week, has been reported in Figure 5A. The result is interesting. Monday is truly a blue day. The market rose only 43.3% of the time, which is a highly significant amount below the average for all days in the period. Friday, on the other hand, is highly significant in a bullish direction. This is contrary to the lore of the market, since Friday is supposed to be a day when traders "unload to free their minds for the weekend. " These tendencies through the week will be examined hour- by-hour in the next chapter.

1-6

(p.6-1)

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Appendix A7: HOW DO SWINGS VARY WITH PRICE? Stocks with low prices seem to move up and down, percentagewise, more rapidly than high priced stocks. Some observers have concluded that the variations tend to change with the square root of the price. In Figure A7A, the monthly percentage changes of the D-J Industrials, for each month in the last 43 years, have been charted against the D-J average. The percent changes tend to be higher at the lower price levels, as expected. A median line (dashed) traces this tendency. The relationship isn't close, however, and the data are scattered widely. A least- squares regression line (the solid line) casts some doubt on the square root relationship, when applied to a stock average. This calculation results in a 0.7108 root rather than the O. 5 root.

5-11

(App. A8-p. 1)

Appendix A8: THE DOW JONES AVERAGES - WEEKLY BAR CHART 1928-1964 The charts which follow present some interesting history. The swings can be compared with the text of this book. The scales are logarithmic, so that equal percentage changes on all of the charts are comparable.

If you would like to compare the current situation with preceding history. you can trace the last chart on a thin piece of paper. This can be transferred to the earlier charts for a definite visual comparison.

5-13

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i

. ,l

250

•

50

!\

-

200

601------------+

40

(5)

(6)

11/3119- 8124/21 (4)

660

9/3/29-11/13/29

6117101· 1119/03

Days

875

87.20%

71.Days

Days

85.67%

9. Primary Legs

9. Primary Legs

91.84% I. Primary LegS

IE

;

..ｾＭ ..... .,

160 150

14 0

13 0

｜ｾＡ

9

\1 ｾ

D

ｾ

;\\:\,

.J

I

r. r \ f\

:,,"ｾ \.ｾ .

I

120

, I

ｾ

..... , z., ｾ "z

I

0:

;;;10 ii:z

...

mO

100

.. . WI

ｉｾ Ｚｾ

S

I

II ｾ

,,I

6

tic ｾ

1001-1-. .- -

;;:

1\ ,I

",:l

Oz

110

110

:E

90 f-lL--\+--"---t--t---+

80 f - - - - - - ' - - t - -

ｾ 701---------i'+-i

.

ii! 90

(7)

11/10/38 -4/28/42

1265. Days

Fig. AIOJ

6-7

(8)

11/21116 - 12119117 394. Days

70.48 %

67.02%

II. Prj mary Legs

5. Primary Legs

(App AIO-p. 12) Bear Markets:

80

,l

1\

70

I

70

ｾ

ｾ

Ｌｾ

ｾ

t

,,

70

,'.1

ｾ

I

I

K

I

Xｾ

I I

60

50

8

II'

i\

i'"

&

110/---------1

8

\9

8

ｾ

ｾ

I

6

60

70f----------1

50

50 (II)

50

(12 )

11/15/61-

11/19/09 - 9125111

6/25/62 (10)

(9)

9/5/99 - 9/24/00

9/8...32 - 2/27/33 172.

385.

Days

Days

37.83%

40.03%

5. Primary

I. Leg.

60.85 %

46.54%

5. Pri mary Legs

5. Primary Legs

220

675. Days

222.Days

540

100 Q

200 190

180

\ｾ

500 90

ｾ

ｾ ｾ

:k " ｾ ,," " & " H • ｾ "

17 0

16

II I,o •: \ " ,

Y'i

,I

0

ｾ

0

Q

V\

... .... .... -" . ... N

\

400

ｾ

- .. .. N

-

ｾｷ

... on

150

(13 )

5/29/46 -6/14/49 1112

Days

31.91 %

6. Primary Legs

(14) 9/30/12 -7130114 668. Days 3183% 5. Primary Legs

( 15)

4/9/56-10/22/57 56 I.

Oays

24.39% 5. Primary Legs

Fig. AIOK

Legs

(App. AIO-p. 13)

The dates and prices are tabulated in the figures which follow. These data may be useful to readers with computers - please send me a copy of your findings! These data, incidentally, are not easy to obtain. While the Dow averages are a matter of record, the terminal dates for swings, under any specific set of definitions, require a careful review of the record. The prices used in the tabulations are closing prices from 1897 until the publication of the hourly average February I, 1932. From that point onward, the hourly figures are used for all terminal points.

6-9

(App. AIO-p. 14)

T

DATA - Bull and Bear Markets. Primary SWings,

4 /1 9/ 97

9/10/97 11/8/97 tll 1/7/98 3/Z5/98

E:

4/1Z/98 4/Z1/98 8/Z6/98

10/19/98 4/Z5/99 5/31/99 6/1Z/99 6/ZZ/99 9/5/99

10/Z!99 11/18/99 vz! 18/99 tll 1/Z/00 (1l ...III 1/11/00 Z/5/00 3/9/00 4/6/00 6/Z3/00

7/Z3/00 9/Z4/00 11/ZO/OO lZ/8/00

Secondary Reactions

38.49 55.8Z 45.65 50.67 4Z.00 46.3Z 43.Z7 60.97 51. 56 77. Z8 67.51 73.08 68.84 77.61 70.95 75.93 58.Z7 68.13 63.Z7 68.36 61. 11 66.15 53.68 59.0Z 5Z.96 69.07 63.98

lZ/Z7/00 71.04 g' 1/19/01 64.77 ::: Z/15/01 70.78 Z/Z8/01 67.00 5/01/01 75.93 67.38 ＵＯｾ ＰＱ 6/l7/01 78.Z6 7/15/01 69.46

ｾ

ｾ

tll

E: I

7/Z9/01

n.94

8/6/01 8/Z6/01 lZ/1Z/01 4/Z4/0Z 6/Z4/0Z 9/19/0Z lZ/15/0Z z/16/03 4/13/03 4/Z1/03 8/8/03 8/17/03 10/15/03 10/Z7/03 11/9/03 lZ!Z9/03 1/6/04 I/Z7/04 3/11/04

69.05 73.83 61. 61 68.44 63.67 67.77 59.57 67.70 60.79 64.56 47.38 53.88 4Z.Z5 45.41 42.15 49.35 47.07 50.50 46.41

I 4/7/04

49.98 47.43 ::: IZ!5/04 73. Z3 IZ/1Z/04 65.77 4/14/05 83.75 5/ll/05 71. 37 8/Z3/05 8Z.82 9/7/05 78.60 1/19/06 103.00 9Z.90 3/5106 4/3/06 98. 19 5/3/06 86.45 6/6/06 95.21 7/13/06 85. 18 96.75 ｾ 10/9/06 ｾ 3/Z5/07 75.39 5/3/07 85.0Z 77.30 5/Z7/07 8Z.5Z 7/6/07 8/ZI/07 69.Z5 9/6/07 73.89 11/15/07 53.00 lZ/6/07 61. 77 lZ/17/07 56.85 1/14/08 65.84 Z/10/08 58.80 85.40 tll 8/10/08 § 9/Z2/08 77.07 11/13/08 88.38 Z/23/09 79.91 94.46 6/5/09 6/Z1/09 89.66 10/Z/09 100.50 10/Z3/09 95.70 11/19/09 100.53 85.03 Z/8/10 3/8/10 94.56 5/3/10 84. n 5/ZI/10 89.66 8Z.05 ｾ 6/6/10 ｾ 6/ll/10 86.Z8 7/Z6/10 73.6Z

g' 5/18/04

-1-'0/'8/10 86.02 lZ/6/10 79.68 ztct i:

3/4/11 6/19/11 9/Z5/ll ｾ 10/14/11 - 10/Z7/ll 9 / 3O/1 Z 3/Z0/13 tll 4/4/13 ｾ 6/11/13

t

... 9/13/13

86.0Z 81.80 87.06 n.94

78.66 74.82 94.15 78.Z5 83.19 n.1I 83.43

ｾ

12/15/13 z/3/14 4/Z5/14 6/10/14 7/30/14 IZ/14/14 12/24/14

75.Z7 83.19 76.97 81. 84 71. 4Z 56.76 (a) 53.17 1/23/15 58.5Z Z/z4/15 54.ZZ 4/30/15 71. 78 5/14/15 60.38 6/ZZ/15 71.90 67.88 96.46 11/9/15 91. 08 J2/Z7/15 99.Z1 3/z/16 90.5Z 3/16/16 96.08 4/Z2/16 84.96 6/1z/16 93.61 7/13/16 86.4Z 10/5/16 104.15 10/13/16 98.94 II/ZI/16 110. 15 lZ/Zl/16 90.16 1/3/17 99. 18 Z/2/17 87.01 Z/ZO/17 94.91 91. 10 IJ:I 3/1/17 ｾ 3/Z0/17 98.Z0 ... 5/9/17 89.08 6/9/17 99.08 81. ZO 9/4/17 9/Z5/17 86.0Z 11/8/17 68.58 II/Z3/17 74. Z3 lZ/I9/17 65.95 Z/19/18 8Z.08 4/11/18 75.58 5/15/18 84.04 6/1/18 77.93 10/18/18 89.07 tll 79.87 E: II/Z5/18 lZ/10/l8 84.50 79.15 Z/8/19 6/5/19 107.55 6/16/19 99.56 7/14/19 lIZ. Z3 8/Z0/19 98.46 11/3/19 1I9.6Z IZ/ZZ/19 103.55 109.88 tll 1/3/Z0 (1l 90.66 III Z/II/ZO ... Z/ZI/ZO 95.63 Z/Z5/Z0 89.98 ｾ

§ ｾ［ＱＵ

Fig. AIOL

6-

(App. AIO-p. 15) DATA - Bull and Bear Markets, Primary Swings, Secondary Reactions.

ｾＹＯＱＷ ＲＰ ｾ

4/8/20 5/19/20 7/8/20 8/10/20 11/19/1.0

12/4/20 1l/21/20

2/ 16/21 3111/21

5/5/21 6/20/21 8/2/21 8/24/21 5/29/22 6/12/22 9/11/22 9/30/22 10/14/22 11/27/22 3/20/23 5/21/23 5/29/23 7/31/23 8/29/23 10/27/23 2/6/24 5/20/24 8/20/24 10/14/24 3/6/25 3/30/25 11/6/25 11/24/25 2/13/26 bl 3/3/26 ｾ 3/10/26 3/30/26 4/24/26 5/19/26 8/14/26 10/19/26 12/18/26 1/25/27 10/3/27 10/22/27 1/3/28 2/20/28 6/2/28 6/18/28 11/28/28 12/8/28 2/5/29 2/16/29 3/1/29

6-11

I

105.65 3/25/29 87.36 bl 5/4/29 94. 51 §: 5/27/29 83.20 18/3/29 89.95 8/9/29 73.12 9/3/29 77.63 B=;r 11/13/29 66.75 ｾ 12/7/29 ::: 12/20/29 77.14 72.25 4/17/30 80.03 5/3/30 64.90 5/29/30 6/24/30 69.95 63.90 7/28/30 96.41 8/12/30 90.73 9/10/30 102.05 11/10/30 96. 30 11/21/30 103.43 12/16/30 92.03 12/20/30 105.38 bl 12/29/30 92.77 1/8/31 ... 1/19/31 97.66 86.91 2/24/31 93.70 4/29/31 85.76 5/8/31 101.31 6/2/31 88.33 6/27/31 105.57 8/6/77 99. 18 8/15/31 125.68 110/5/31 115.00 10/9/31 159.39 1/5/32 148.18 11/15/32

Z

'''.08 144.44 153. B 135.20 144.83 166.64 137.16 145.66 161.86 152.73 199.78 179.78 203.35 191. 33 220.96 201.96 295.62 257.33 322.06 295.85 321. 18

1'/10/32 3/8/32 6/2/32 6/16/32 7/8/32

"1"0'" ｾ

ｾ

9/15/32 9/22/32 10/10/32 10/20/32 11/3/32 11/12/32 12/3/32 12/15/32 12/23/32 1/11/33 2/27/33 3/16/33 4/4/33 7/18/33 7/22/33

297.50 327.08 293.42 355.62 337.99 381. 17 198.69 263.46 230.89 294.07 258.31 275.07 211. 84 240.81 217.24 245. 09 171. 60 190.30 157.51 169.42 160. 16 173.04 161. 45 194.36 143.61 154.41 121. 70 156.93 133.77 145.80 86.48 116.79 71.24 85.88 71.48 89.31 44.09 51. 04 41. 03 80.68 65.82 75.64 58.47 65.92 57.56 68.12 55.48 62.55 56.40 64.86 50.16 63.48 55.36 109.43 88.42

I

8/25/33 9/6/33 ::: 9/18/33 10/3/33 10/10/33 10/21/33 12/11/33 12/20/33 2/5/34 2/10/34 2/19/34 5/14/34 5/18/34 6/2/34 6/19/34 7/26/34 8/25/34 bl 9/17/34 ｾ 1/7/35 2/7/35 2/18/35 3/18/35 9/18/35 10/3/35 11/20/35 12/19/35 3/6/36 3/13/36 4/6/36 4/30/36 8/10/36 8/21/36 3/6/37 6/17/37 8/14/37 10/19/37 10/29/37 11/23/37 tiltil 12/8/37 IlJ 12/14/37 ... 12/21/37

105.07 98.24 106.66 92.47 99.88 83.64 103.36 94.56 111. 16 103.61 109.21 90.02 96.15 91. 09 100. 79 85.51 95.71 86. 10 106.17 100. 11 107. 17 96.44 134. 59 127.38 149.05 138.94 159.13 150.42 162.45 142.03 169. 50 160.80 194.47 164.07 190.02 118.37 140.47 113. 52 130.66 122.46 129.98 118.23 1/12/38 ""'/37 134.76 2/4/38 117. 50 2/23/38 132.41 3/31/38 98.75 4/18/38 121. 27 5/2/38 109.85 ｾ 5/10/38 119.64 ..... 5/31/38 107. 16 145.70 9/14/38 131.17 9/21/38 139.47 9/28/38 128.07 11/10/38 158.41

ｾ

g'

1""38

Fig. A10M

(App. AID-p. 16)

DATA - Bull and Bear Markets. Primary Swings, Secondary Reactions.

I""""

1/5/39 1/26/39 3/10/39 4/11/39 6/10/39 6/30/39 7/25/39 9/1/39 9/13/39 ｾ 9/18/39 ｾ 10/26/39 11/30/39 1/4/40 1/15/40 4/9/40 6/10/40 9/5/40 9/13/40 11/8/40 2/19/41 4/4/41 5/1/41 7/22/41 12/23/41 1/6/42 4/28/42 4/6/43 4/13/43 7/14/43 8/2/43 tll 9/20/43 § 12/1/43 7/10/44 9/7/44 3/6/45 3/27/45 6/26/45 7/27/45 2/4/46 2/26/46 5/29/46 7/24/46 8/14/46 9/19/46 9/26/46 10/30/46 11/4/46 t:l:I 11/22/46 CD ...P> 2/10/47 4/15/47 5/15/47 5/19/47 7/25/47 9/9/47

145.67 154.94 136.42 152.40 120.82 140.33 129. 36 145.43 129.20 156.00 147.78 155.60 145.33 153.02 143.41 151. 60 Ill. 29 134.11 127.54 138.47 117.71 124.80 115.02 130.71 106.22 114.48 92.92 136.97 130.23 145.59 134.00 142. 18 128.89 150.57 142.93 161. 82 152. 13 169. 15 160.32 207.24 184.80 212.50 194.90 204.84 165.17 174.96 161. 10 175.34 162.96 184.54 166.16 174.58 161. 84 187.05 174.62

I

10/20/47 185.66 3/9/60 597.60 164.77 Zlll/48 4/18/60 632.68 ｾ 6/14/48 193.81 5/2/60 599.61 175.98 ｾ 9/28/48 6/9/60 659.69 10/23/48 190.30 600.61 til 7/25/60 11/30/48 171. 20 § 8/24/60 641. 56 182.00 1/7/49 9/29/60 568.12 6/14/49 161. 10 10/17/60 597.52 6/12/50 228.44 10/25/60 566.05 7/13/50 197.11 5/22/61 710.93 11 /25/50 235.62 6/19/61 676.46 12/4/50 222.33 730.62 9/7/61 2/13/51 255.96 9/25/61 691. 86 3/15/51 243.39 11/15/61 737.50 5/4/51 263.64 Bear 6/25/62 526.69 241.70 7/2/51 8/23/62 619.97 9/17/51 276.39 tll 10/24/62 552.92 g, 11/26/51 255.82 730.73 ...... 6/5/63 1/23/52 275.45 7/22/63 686.55 255.78 5/1/52 10/29/63 762.09 tll 280.62 11/22/63 711. 49 § 8/11/52 10/23/52 262.62 1/5/53 293.79 6/10/53 261. 36 8/13/53 277.57 9/15/53 255.11 1/3/55 409.52 1/18/55 386.41 ( Footnote: 420.07 3/4/55 (a) This is a new 3/14/55 391. 36 series; to be com7/27/55 469.74 parable, multiply 447.25 8/9/55 preceding figures 9/23/55 487.45 by 0.7339 ) 10/11/55 435.87 1/3/56 489.45 1/23/56 460.34 522. 18 4/9/56 5/28/56 467.58 521. 39 8/9/56 10/1/56 468.38 t:l:I CD 11/7/56 499.72 P> ... 11/29/56 463.06 500.65 1/4/57 2/12/57 454.82 7/15/57 521. 27 10/22/57 419.79 12/4/57 449.93 12/17/57 425.65 458.65 2/4/58 435.07 tll 2/25/58 § 11/17/58 568.35 11/25/58 540.52 8/3/59 679.52 9/22/59 615.76 1/4/60 685.83

(App. All-p. 1)

Appendix All: BIBLIOGRAPHY : Alexander, S. S. Price Movements in Speculative MarketsTrends or Random Walks; Industrial Mgt. Review, May 1961. Ayres, L. P. Turning Points in Business Cycles, Macmillan 1940 Allen, L. B.: Method for Stock Profits Without Forecasting. Doubleday 1962 Barnes, L.: Your Investments, Am Research 1964 Barron's - National Business and Financial Weekly Baruch, B.: My Own Story, Holt 1957 Bean, L. H. : How to Predict the Stock Market, Luce 1962. Bernhard, A.: Evaluation of Common Stocks, Simon and Schuster, 1959 Black, H.: Watchdogs of Wall Street, Morrow 1962 Bolton, A. H.: Elliott Wave Principle, Bolton Tremblay 1960 Bolton, A. H.: Introduction to Bank Credit Analysis, Bolton Tremblay 1958 Bratt, E. C.: Business Cycles and Forecasting, Irwin, 1948 Brooks, J.: Seven Fat Years, Harper, 1954 Burns and Mitchell: Measuring Business Cycles, NBER 1946 Campbell, D.G.: Let's Take Stock, Bobbs Merrill 1959 Carpenter, H. G. A Successful Investor's Letters to His Son, Simon and Schuster, 1934. Carpenter, H. G.: This is Investment Management, Scarborough Press 1946 Cobleigh, 1. U.: How to Get Rich Buying Stocks McKay 1959 Cootner, P. H.: Random Character of Stock Market Prices, MIT Press 1964 Cragg, A.: Understanding the Stock Market, Garden City 1929 Crane, B.: Sophisticated Investor, Simon and Schuster, 1959 Croxton and Cowden: Applied General Statistics, Prentice Hall, 1939. Dahl, C.: Consistent Profits in the Stock Market, Tri State Offset, 1951 Darvas, N.: How I made $2,000,000 - Am Research 1960 Dewey, E.R. and Dakin, E.F.: The Science of Prediction, Henry Holt 1947. Drew, G.: New Methods for Profit in the Stock Market, Metcalf Press 1941 Edwards and Magee, Technical Analysis of Stock Trends, Magee 1948 Elliott, R. N.: Nature's Law - 1946 Elliott, R.N.: Articles in Financial World, March-August 1939

6-13

(App. All-p. 2)

Elliott, R. N.: The Wave Principle. 1938 Engel, L.: How to Buy Stocks. Bantam. 1953 Epstein, R. C.: Making Money in Today's Market, Economica 1959 Fisher, P. A.: Paths to Wealth Through Common Stocks. Prentice Hall 1960 Fisher, P. A.: Common Stocks and Uncommon Profits. Harper, 1958 Fritz, S. and Shumate, A. M. : Making the Dow Theory Work, Russell 1960 Granville, J. E. : Strategy of Daily Stock Market Timing for Maximum Profit, Prentice Hall 1960 Gutman, W. K.: You Only Have to Get Rich Once, Dutton, 1961 Hamilton, W. P. : Stock Market Barometer. Russell, 1922/60 Hardy, C. O. : Odd Lot Trading, Brookings Institution. Investors Intelligence: Encyclopedia of Stock Market Techniques, Inv, Intelligence 1963 Jacwin and Costa, How to Accumulate Wealth Through Stock Speculation, Kent 1958 Jiler, W. L.: How Charts Can Help You in the Stock Market, Commodity Research, 1962 Kelly, F. C.: Why You Win or Lose, Kelly, 1930 Krach, E. T.: Bond Values and Yields, Cosmopolitan 1945 Leffler, G. L.: The Stock Market, Ronald, 1957 Loeb, G. M.: Battle for Investment Survi val, Simon and Schuster 1957 Magee, John:General Semantics of Wall Street, Magee 1958 Mayer, M.: Wall Street Men and Money, Harper 1961 Merrill, Arthur C.: Investing in the Scientific Revolution, Doubleday 1962 Mills F. C.: Price Quantity Interactions in Business Cycles, NBER 1946 Moroney, M. J. :Facts from Figures, Penguin 1951 Neill, H.: Tape Reading and Market Tactics, Forbes 1931 Nelson, S. A.: ABC of Stock Speculation, Nelson 1900 Nelson, S. A.: ABC of Wall Street, Nelson 1900. O'Connor, Wm: Stocks. Wheat and Pharaohs, Wener, 1961 Preston, C.: World of Wall S1. Journal, Simon and Schuster 1959. Rhea. R.: Dow Theory, Rhea 1932

(App. All-p. 3)

Rhea, R :Dow' s Theory Applied to Business and Banking, Simon and Schuster 1938 Rhea, R.: Story of the Averages, Rhea Russell, R.: Dow Theory Today, Russell 1958 Sergeant, W. P.: Stock Market Behavior, Exposition 1957 Schabacker, R. W.: Stock Market Theory and Practice, Forbes 1930 Schaefer, E. G.: How I Helped More than 10000 Investors to Profit in Stocks, Prentice Hall 1960 Schwed, F.: Where are the Customers I Yachts? Simon and Schuster 1940 Shulsky, S. :Stock Buying Guide, Arco 1959 Schultz, H. D.: Bear Markets, Prentice Hall 1964 Stabler, C.N.: How to Read the Financial News, Harper 1932 Stansbury, C. B.: Dow Theory Explained, Russell, 1938 Stearns, L: How to Live With Your Investments, Simon and Schuster 1955 Sterling, D.: Wall Street, Doubleday 1955 Wise, T. A.: The Insiders. Doubleday 1962 Wright. W.: Forecasting for Profit, Wiley 1947 Wyckoff, R. D.: Method of Trading and Investing, Wyckoff 1931 Wyckoff, R. D.: Wall Street Ventures and Adventures. Harper 1930

6-14

(App. A12-p. 1)

Appendix A12= HOW TO MAKE THE CHI SQUARED TEST: How significant are the findings in this book? One of the simplest checks of significance is the "Chi Squared Test". You will find a discussion of this test in all standard statistical text books. We are including below an example of this test which can be applied to many of the findings in this book. The formula is:

Where:

-c': Chi Squared ! = "Total of"

o/' -

0= -Ob s e r ve d Result

E= Expected Result For exarnpl er on the day before Christmas, In the last 67 years, the market rose 49 times and declined 18 times. Is this significant?

In the 67 years, the market rose on 53.16% of all the days in the period, and declined on 46.84% of the days. If we multiply these percentages by 67, the expectation for the day before: Christmas is UP: 35.6 DOWN: 31. 4 Substituting these values in the formula: (49-35.6)2 35.6

+ (18-31. 4)2 31.4

=

10.7

(App A12-p. 2)

Evaluation: the type stated centage up plus For this simple "one degree of as follows:

Many of the findings in this book are of in the example. The answer is a pera percentage down, with a total of ｬ ｾ type of problem (the statisticians call it freedom"), the results can be evaluated

If Chi Squared is 3.84, the probability of getting this Chi Squared or higher is 50/0 or one in twenty. This is rated "Probably Significant" by some statisticians. If Chi Squared is 6.64. the probability of getting this value or higher is 1. 00/0 This is rated "Significant". If Chi Squared is 10.83, the probability of getting this value or higher is 0.10/0 or one in a thousand. This is considered "Highly Significant". In the example above, the Chi Squared is 10.7 • This difference from expectation is close to the 0.10/0 level, and the result could be rated "Highly Significant".

6-12

(App. A13-p. 1)

Appendix A13: THE ELAPSED TIME CALCULATOR: - - A tool for students --

ELAPSED

-DAY

DAY

OF MONTH

I

i

I I

TIIiI

MAR.

OF

CA LCULATOIl

THE

YEAR

APR.

MAY

JUNE

JULY

AUG.

SEP.

OCT.

NOV.

DEC.

JAN.

FEB.

276 277 27B

307 306 309

33B 339 340

I 2 3

1 2 3

32 33 34

62 63 64

S3 94 95

123 124 125

154 155 156

IB5 IB6 IB7

215 216 217

246 247 248

4

4 5 6

35 36 37

65 66 67

96 97 98

126 127 128

!!I7 158 159

18B IB9 190

218 219 220

249 250 251

279 280 2BI

310 311 312

ｾｉ

7

38 39 40

68 69 70

99 100 101

129 130 131

160 161 162

191 192 193

221 222 223

2&2 253 254

2B2 283 2B4

313 314 315

344 345 346

41 42 43

71 72 73

102 103 104

132 133 134

163 164 165

194 195 196

224 225 226

255 256 257

265 286 287

316 317 318

347 348 349

44 45 46

74 75

105 106

135 136

166 167 168

197 19B 199

227 226 229

25B 259 260

28B 289 290

319 320 321

350 351 352

261 262 263

291 29l: 293

322 323 324

353 354 356

264 265 266

294 295 296

325 326 327

356 357 35B

5 6 7 8 9

9

10

10

II

II

12

12

13 14 15

13 14

8

I!I

I ｾ

-+ . 76

16 17 16

16 17 18

48

47

19 20 21

19 20 21

50 51 52

I

49

77 78 79

I

1----

108 1'38 109 139 110 140

I

I

169 170 17\

---r'--j-- r---;l 80 B I

I

B2

II I

\41

112

142

II 3

I

172 173 174

143

I

230 200 231 201 232 202 ---- f - - - 233 203 204 234 205 235

__•.

...

342 343

--_.

f----- --l---- . .._----

. - f------22 23 24

22 23 24

53 54 55

B3 84 85

114 115 116

144 145 146

175 176 177

25 26 27

25 26 27

56 57 58

86 B7 B6

117 liB 119

147 148 149

28 29 30

28 29 30

59 60 61

89 90 91

120 121 122

31

31

I

206 207 208

236 237 238

267 26 B 269

297 29B 299

328 329 330

359 360 361

178 179 IBO

209 210 21 I

239 240 241

270 271 272

300 301 302

331 332 333

362 363 364

150 15 I !!I 2

IB 1 182 IB3

212 213 214

242 243 244

273 274 275

303 304 305

334 335 336

365 366

153

184

-- f------

To

find

(I) Put (For (2) Add

92

numb"

of

down 365. Q

leap "Ooy

(3) Sub'roci (4) Remainder

days

bel..,een

yeor

Feb. 29

of the

year"

"Day 1'1

of Ihe

Ihe

two

ree.ae

for each

II)

366.) the

yeo," for

number of

[Komple: April 24.1962

do tes:

passed over.

use for

days

the

dotes.

(3) (4)

COPYRIGHT

1962

Arthur

A

Merrill

12,

+ 366

(For

Feb 29, 1964)

12

( For

355

743 two

March

feb. 28, 19631

first dOle.

between

10

337

(For

t-

121 +

second date.

the

306

245

-

55 588

Mareh

1964

12,1964)

(Totol)

( For

April

« Elapsed

24

time

1

(962)

In days)

(App. A14-p. 1)

Appendix A14: PRICE EARNINGS CALC ULATOR: -- A tool for students --

EARNINGS 0.12

100

PRICE/EARNINGS

90

0.15

CALCULATOR

80

0.20

70 0.30 60

,,

PRICE/EARNI NGS

,

0.50

100 90 80

50

0.40

0.60

70 60

0.70

50

0.80

EXAMPLE: 40

PRICE'

$ GO.

'

EARNINGS· $4.00 "

...

0.90

40

ANSWER. ON MI DOLE

,,

SCALE:

1.00

...

30

PRICE/ EARNI NGS • 15.

...

-, -... ... ...

30

20

ＧＵｾ

1.50

., ,

,,

25

2.

... ,

10 9 8 7

3.

6

20

5

' ... 4.

4 FOR

PRICE

SCALE

AND

SCALE

OF

EARNINGS

100-1000, SCALE

8Y

MULTIPLY

80TH

TEN.

PRICE

5. 6.

15 FOR SCALE

PRICE AND

SCALE

OF

EAAI'tINGS

1-10, DIVIDE SCALE

BY

BOTH

TEN.

PRICE

7.

a 9. 10.

10

10

COPYRIGHT

1959

ARTHUR

A. MERRILL 15.

(App. AI5-p. 1) Appendix A15: 300 YEAR CALENDAR: - - a tool for students --

- YEAR

--

TYPE

LETTER-

Go down column to first three digits of year f ourth

...--then across to column of

digit

and obta i n Year Type Lett e r. ｾｏ

I 175 A B 176 I 0 177 A B '78 M A 179 E F 180 C 0 18 I A B 182 M A 183 E,F 184 J E L85 B C 186 N B 187 F G 188 K F .189 C 0 190 A B ,191 F G 192 K F 193 C 0 194 H C 195 G A 196 197 198 199 200 201 202 203 204 205

L 0

,

G E 0

A B M A E F J E B C N B F G

2

3 A

4 5 6 7 B C K F

8

9

G A

E F N B C 0 L G J E F G H C o E B C K F G A 0 N 8 C D L G A 8 E F N B C 0 L G J E F G H C 0 E B C K F G A I 0 N B C 0 L G A B F G H C 0 E M A K F G A I 0 E F C 0 L G A B J E H C 0 E M A B C G A I 0 E F N B A B J E F G Ｍｾ C 0 L G A 8 J E H C 0 E M A B c G A 1 0 E F N B L G A B J E F G o E M A B C K F I 0 E F N B C 0 A e J E F G H C M A B C K F G A E F N B C 0 L G J E F G H C 0 E B C K F G A I 0 N B C 0 L G A B F G H C 0 E M A K F G A I 0 E F C 0 L G A B J E H C 0 E M A B C

,

FIG.AI5A

I

(App. AlS-p. 2)

CALEN DAR .... 1753 - 2059 TO USE:

FIRST: OBTAIN YEAR TYPE LETTER FROM OPPOSITE PAGE, '--THEN FIND MONTH, / GO STRAIGHT ACROSS TO YEAR TYPE LETTER. THEN DOWN TO CALEN DAR. JAN. 31d. FE 8.28-29 MAR.31.d APR. 30.d MAY 31.d JUNE 30d. JULY 31.d. AUG. 31.d. SEP. 3O.d OCT. 31.d NOV. 3011 DEC. 31.d.

E B 8 F

G

L I

0 0

H

0 A F C G E B G

A F

L J N L I M K

C A E B G

H

0

M

B

r

/

N K J N L I N K H M J H

A H E L E K 8 H G M 0 J B H F L C I A N E K C I

K H N

D A A E C G E B

F

K I M K H L J N L

D A

F

Ｎｾ

C J G N G M 0 J B H F L 0 J A N E K C I G M E K

B I F M F L C I A N E K C I G M 0 J 8 H F L 0 J

M J I M K H

F C C G E B G

M J N L I N

0 A

F C A

/

31.d. JAN.' 28·29FEB. 31.d. MAR. 30d. APR. 31.d. MAY 30.d. JUNE 31.d. JULY 31.d. AUG.. 30.d SE P. 31.d. OCT. 30.d. NOV. 31.d. DEC.

Ｈｾ

ｾ

5

M Tu W Th F

I

ＲＳＴｾＶＷ

5

5

II Tu III Th F

5

1 2 3 4 !i 6 7 8 9 10 II 12 13 14 ｾｉ 16 17 18 19 20 21 22 23 24 as 21 27 28293031

M Tu \1/ Th F S

5 M Tu \1/ Th F 5

5

2 4 !i 6 7 8 9 II 12 13 14 15 18 18 19 2021 22 Ｒｾ 25 2627 2829 3CI

2 3 4 !i 6 7 8 9 10 II 12 13 14 15 16 17 18 19 202122 23 242!i 26 27 28 29 30 31

1 234 5 678 9 10 II 12 13 14 15 16 17 18 19202122 23 24 25 26 2728 29 3031

8 9 10 II 12 13 14 16 17 18 19 2021 22 23 24 es 2627 28 129 3031

I

3 10 17 24 31

5

2 3 4 ｾ 6 7 8 9 10 II 1213 14 ｉｾ 16 17 18 19 2C 2.1 22 23 24 25 26 27 28:n 3031 I

ｾｉ

5

II Tu W Th F 5

I

M Tu III Th F 5

-,

EXAMPLE: JULY YEAR

4, 1776 TYPE; H

DAY OF WEEK: THURSDAY

6-8

II Tu \II Th F 5 I

2

3

45678910 II 12 13 14 15 16 17 18 192021 222324 Ｒｾ 2627 28 29 3031

COPYRIGHT ARTHUR

ＱＹｾＲ

A. MERRILL

FIG. AI5B

About the author: Arthur A. Merrill, BS, MBA, devoted 33 years to the General Electric Company, in engineering. statistics, planning, forecasting, and management. Since 1962 he has been President of Merrill Analysis, Inc , , and has edited a statistical letter "Technical Trends", to help investors in their decisions. He is the author of many articles and books. He is a Past International President of SPEBSQSA, a member of the American Statistical Association, the Society for the Investigation of Recurring Events and the Foundation for the Study of Cycles. His home is in Chappaqua, New York.

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