NEWSTOCKTRENDDETECTOR

AREVIEWOFTHE19291932PANIC
ANDTHE19321935BULLMARKET

WithNewRulesandChartforDetectingTrend
ofStocks

by
WILLIAMD.GANN

W.D.GANN,Publisher
820S.W.26thRoad
MIAMI,FLORIDA

FOREWORD
Amanwritesthebestanddoesthemustgoodforotherswhenhisobjectinwritingisnotto
makemoneyorgratifyambitionorgainpublicity,buttohelpotherswhoneedhelpandappreciate
hisefforts.
WhenIwroteTRUTHOFTHESTOCKTAPEin1923,Itwasbecausetherewasademand
for a book of then kind. People need the help and I could give them and the benefit of my
experienceandknowledge.InthatbookIgavethebestIhandandreceivingmyrewards.People
appreciatedmyefforts.Theyboughtthebookthenandtheyarestillbuyingit.Theysayitisagood
bookandmorethenworththemoney.Thatisverygratifyingtome.
Afterthe1929bullmarketculminatedtherewasademandforanewbooktomeetchanged
conditionsunderthesocalledNewEra,soIwroteWALLSTREENSTOCKSELECTORinthe
Springof1930.Igavefreelyofmyknowledgeandthebenefitofyearsofexperience.Thisbook
helpedotherstoprotecttheirprincipalandmakeprofits.Peoplewhoreadthebookpronouncedit
oneofthebest.Itisstillselling,andagainIhavebeenrewards.
Nomancanlearnallthereistoknowaboutforecastingthetrendofstocksin3,5,10or20
years,butifheisadeepstudentandhardworker,helearnsmoreandknowledgecomeseasierafter
yearsofexperience.Iknewmoreaboutdeterminingthetrendofstocksin1923thenIdidin1911.
Sevenmoreyearsofexperience gavememoreknowledgeandenablemetowritetheWALL
STREETSTOCKSELECTORin1930andgivemyreadersthebenefitofmyincreasedknowledge.
Now, after five more years have elapsed, my experience and practical test of new rules have
enabledmetolearnmoreofvaluesince1930.
The19291932panicandwhathasfollowedsince,gavemevaluableexperienceandIhavegained
more knowledge about detecting the right stocks to buy and sell. I cannot lose if I pass this
knowledgeontothosewhowillappreciateit.
Hundredsofpeoplewhohavereadmybookshaveaskedmetowriteanewbook.Again,I
answerthecallandmeetthepopulardemandwithNEWSTOCKTRENDDETECTOR.Ibelieve
thebookwillhelpotherstoavoidsomeofthepitfallsofrecklessspeculation.IfIcanleadafew
moretothefieldofknowledge,Ishellagainbeamplyrepaidformyefforts.
W.D.Gann
January3,1936,
88WallStreet,NewYork.

NEWSTOCKTRENDDETECTOR
CONTENTS
Chapter

Page

I. ANewDealinWallStreet

II. FoundationforSuccessfulTrading

III. HistoryRepeats

12

VI. IndividualStocksvs.Averages

27

V. NewRulestoDetectTrendofStocks
VI. VolumeofSales

33
69

VII. APracticalTradingMethod

82

VIII. FutureTrendofStocks

88

CHARTS
No

Page

DouglasAircraftMonthlyHighandLow19281935

36

UnitedFruitWeeklyHighandLow:1935

37

3a

CornProductsWeeklyHighandLow:19331934

44

3b

CornProductsWeeklyHighandLow:19341935

45

U.S.SaneltingMonthlyHighandLow:19241935

48

NationalDistillersMonthlyHighandLow:19251935

57

UnitedFruitandChryslerMotorsComparison:1935

62

CHAPTERI
ANEWDEALINWALLSTREET
SincewritingTRUTHOFTHESTOCKTAPEin1923andWALLSTREETSELECTOR
in1930thegreatestpanicthattheworldhaseverseenhastakenplace,culminatingwiththegreatest
stockdeclineinhistory,reachingextremelowlevelsonJuly8,1923.Conditionshavechanged
since1929andnewlawshavebeenpassedaffectingstockmarketmovements.Thepassingofthe
lawsupervisingstockexchangeshasmadeagreatchangeintheactionofthestockmarketand
madeitnecessarytoformulatenewrulestomeetthechangedconditions.TheBiblesaysOld
thingspassawayandnewonescometotaketheirplaces.Awisemanchangeshismind,afool
never.Themanwhorefusestochangewhenconditionschange,ortoseethenewwayofdoing
thingsisdoomedinfailure.
Thisisanageofprogress.Wemoveforward,notbackward.Wecannotstandstill.Wemust
goaheadwithprogressorretrogradeintothelistofthehasbeens.HenryFordmakehundredsof
millionsofdollarswiththeoldModelTcar.ItwasagoodcarinitsdayandFordwassatisfied
withit,buttimeandconditionschanged.Thepublicchangedanddemandedanuptodate,better
car.HenryFordbeingawiseman,sawthehandwritingonthewallandchangedhismind.Inthe
midstoftheworld'sgreatestdepression,Fordclosedhisfactoryandspentover$100,000,000to
developanewandbettercar,orastheboyssay,Hemadealadyoutof'Lizzie'.Hewasnot
actuatedbythedesireformoremoneywhenhedevelopedthisnewcar.Itwasprideandambition
andnotgreedthaturgedhimtokeepthepublicsgoodwillbygivingthemabettercaratalower
price. The public responded quickly and the new Ford became a leader. Each year Ford has
improvedhiscaruntilthe1936Modelisthebestcaryetproduced.
PoliticianswithselfishmotiveshavealwayspreachedagainstWallStreetandmisledthe
publicintheNewYorkStockExchangeandthetypeofmanwhohandleit.Thereisnobusinessin
theworldahighertypeofhonorexiststhanamongthemanwhoaremembersoftheNewYork
StockExchange.Inotherlinesofbusinesscontractsaremadeforfuturedeliveryofdifferentclasses
ofgoods,lumber,textilesandmercantileproductsofvariouskinds.Incasesofthiskind,when
pricesadvance,thebuyercallsonthesellertomakedeliveryoftheproducts,butwhenprices
declinehecancelshiscontractsandleavesthesellertogetoutthebestwayhecan.Iquotefroma
letterreceivedfromprominentlumberman;
Inmakinglumberitisimpossibletoprofitonfuturepriceschangesevenshouldonebefortunateenough
toanticipatethem,forthereasonthepurchasermaycancelthecontractifpricesdecline,butthesawmillis
expectedtofillthecontractatthesalepriceevenifpricesadvanceaboveit.Withfewexceptions,thisisthe
generalrulegoverningsalesbysawmillstofactoriesthatconsumethemajorpartofhardwoodlumberinthe
UnitedStates.Inthedeclineofthelumbermarketthefirstpartof1934,mycompanyhadlumberorderscanceled
amountingto1,400,000feet.Iknowthismustseemstrangetoyou,havingoperatedsolongwhereallcontracts
aremadebindingonbothbuyersandseller.
IhaveahighregardforthebusinessmethodusedinWallStreet.Aftertradingtheretenyearsitismy
opinionthereisprobablynoplaceorbusinesssofreeofrepudiationsoractsofdishonesty.

SuchathingasamemberoftheNewYorkStockExchangeeverattemptingtocancelhis
contractforastockhebuysofsellisunheardof.WhenabrokerbuysorsellstocksontheNew
YorkStockExchangebyraisinghishandornoddinghishead,heisboundbyhishonortoliveup
tothecontractandhedocs.Nomatterhowmuchthestockgoesnotattempttocancelhiscontract.
Himakeshisdelivery.ThebrokersandthemanagersoftheNewYorkStockExchangearehonest
andreliablemen.ThepublichasbeenconfusedastothepositionoftheNewYorkStockExchange,
whichisbutthemeansandthemachineryforcarryingontransactionsbetweenbuyerandseller.
ThebrokerontheFlooroftheNewYorkStockExchangeareinnowayresponsiblefortheactions

ofpoolsofoutsidedealswhichattimeshavebeenhandledbyunscrupulousmanipulationinthe
past,butthepublichasbeenledtobelievethattheStockExchangeanditsmemberswereworking
againstthem.Thebrokerssimplybuyandsellforacommissionandgivehebestservicepossibleto
their customers. The York Stock Exchange serves a useful purpose. The greater part of the
manufacturersofthiscountryhavetheirstockslistedontheYorkStockExchangeandeverybuyers
andsellercanknoweverydaywhatthepricesare.WithouttheNewYorkStockExchangethere
wouldbenoClearingHouse,noplacewherepeoplewhoneedmoneycouldinstantlyturntheir
securitiesintocash.ThefactthattheNewYorkStockExchangehasbeeninexistencesince1792
provesthatitfillsaneconomicneed,oritwouldhavelongsincebeenoutofbusiness.
ForyearsWallStreetandtheNewYorkStockExchangeanditsrulesandwayofdoing
businesswereconsideredthebestandneedednochanges.ThencametheNewDealandthe
SecuritiesExchangeLawwithcompelledchangeinrules.Beforetheserawswereputintoeffect,
theNewYorkStockExchangesawtheneedofanewwayofdoingbusinessandkeepingthepublic
thoroughlyinformedofthewaybusinesswascarriedon.
WHYBLAMEWALLSTREETANDTHENEWYORKSTOCKEXCHANGE?
ThemanwhomakesprofitsnevergivescredittoWallStreetbrokersoranyoneelseforhis
profits.Hetakescreditformakingthemhimself.Then,whyshouldbeblamehislosesonsomeone
else?
Ifyoumakeatradeinstocksandlosemoney,donotletpoliticiansleadyoutobelievethat
poolmanagers,manipulators,WallStreet,ortheNewYorkStockExchangearethecauseofyour
losingmoney,becausetheyarenot.Nooneforcesyoutomakeatrade.Youbuyorsellbecauseyou
hopetomakeprofits,andyouwouldnotkickifyoumadethem;thereforedon'tplaythebabyact
andblamesomeoneifyoulose.Ifyouhadcarelesslyruninfrontofanautomobileandwere
injured,wouldyoublametheautomobileorthedriverforyourcarelessness?Justbecausepeople
havebeenkilledbycarsisnoreasonwhylawsshouldbepassedtokeepautomobilesofftheroads
andstreet.PoliticianshavetriedtopasslawsforyearstorestricttheusefuloperationsoftheStock
ExchangeandCommodityExchanges justbecausepeoplewholostmoneyhavecomplainedto
CongressagainsttheExchangeswhichserveausefulpurpose.
THELAWOFSUPPLYANDDEMAND
ThepricesontheNewYorkStockExchangeandtheChicagoBoardofTradearegoverned
bySupplyandDemand.Nomatterwhetherthebuyingorsellingisbythepublic,bypools,orby
manipulators,pricedeclinewhentherearemoresellersthanbuyerandpriceadvancewhenstocks
arescarceandwhentherearemorebuyersthansellers.ThemembersoftheseExchangesdonot
makethemarkets;theyonlydothebuyingandsellingforthepublicandlargeoperators.Thepools
andlargeoperatorsinthepasthavemanipulatedprices,butnoblameshouldbeplacedonthe
Exchangeswhichmerelyactasaclearinghouseforthetransactions.
Ifyoucouldfindouttherulesthemastermarketmakersusetomakemoney,youwouldbuy
andsellwhentheydoandmakeprofits,wouldn'tyou?Ifyouknewwhatthebigoperatorswere
doing, you certainly would follow them. People often ask me: How can I make some easy
money?orIlowcanImakesomemoneyquick?.Thereisnowaytomakeeasymoneyandthere
isnowaytomakemoneyquicklyuntilyouhaveacquiredknowledgeyourself.Youmustpayfor
whateveryouget.Whatisworthhavingisworthpayingfor.Gettingmoneyquickandeasydoes
moreharmthatgood.
YoucanlearnwhatthebigoperatorsaredoingbybeingagoodWallStreetdetective.You
candetectwhatthepowersthathearedoingbyastudyofSupplyandDemand.Therecordsof
thetotalsalesandthehighandlowpricesofeverystockarepublisheddailyinthenewspapers

throughoutthecountry.Thereisnosecretaboutit.Itisjustuptoyoutofollowrules.Ifyoustudy
SupplyandDemandandapplymyrules,youcandetectthetrendandmakemoney.
HOWNEWDEALHASCHANGEDCONDITIONE
TheNewDealinWashingtonandthelawspassedhavechangedstocktradingsofarasthe
publicisconcernedWashedsalesundertheSecuritiesExchangeLawarenolungerpermitted.The
specialistisrestrictedontradesthathecanmakeforhimself.Shortsellinghasbeencurtailed.A
heavyincreaseintheamountofmarginrequiredtocarrystockshasreducedthevolumeoftrading.
Taxeshavebeenincreased,bothincometaxesandothertaxes,whichcausestradersandinvestorsto
holdonlongerandnotsellouttheirstocksbecausetheywouldhavetopaysuchalargeamountof
theirprofitstotheGovernment.Thischangesthetechnicalpositionofthemarket;makesisstronger
attimesbuteventuallywillmakeitmuchweakerandstockswilldeclinemuchfasterbecausethe
shortinterestinthefuturewillbelimited,pooloperationswillbesmaller,andthesupportinthe
marketbythespecialistwillbemuchsmallerthanithasbeeninthepast.
Therewillcomeatimewhenthemarketwillrunintorealheavyselling:bidsandofferswill
befarapart.Itwillbehardtosellstockswheneverybodywantstosellandnobodywantstobuy.
Anotherthing,heavymarginswillworkagainstthemarketandcauseagreaterdecline,because
whenpeopleputup40to60%margin,theywillholdonlonger,oruntilthemarginisnearly
exhausted,theneverybodywillwanttosellingthesametimeandtherewillhefewbuyers.Itismy
opinionthatthelawspassedtoregulatetheStockExchangewillnotprovebeneficialtothepublic
inthefuture,justasmanylawsalreadypassedbytheAdministrationunderPresidentRousevelt
havealreadyprovedtobedetrimentalandtheSupremeCourthasfounditnecessarytodeclarethem
unconstitutional.
CHAPTERII
FOUNDATIONFORSUCCESSFULTRADING
Wisdomistheprincipalthing:
thereforegetwisdom:andwith
allthygettinggetunderstanding.Proverbs4:7

Haveyoueverstoppedtothinkandmakeacarefulanalysiswhyyouhavelostmoneyin
stocksorwhyyouhavebeenwrongwhenyoumadeatrade?Ifyouhave,youhaveprobablyfound
that youtraded onhope,bankers opinions,brokersopinions,orrelied ontips,oryouguessed
yourself.Anotherreason,becauseyoudidnotadmittoyourselfthatyoucouldhewronganddid
notprotectyourselfwhenyoumadethetrade.Butregardlessofhowyoumadethemistakeandhad
theloss,thefaultwasyourown,becauseyouhadnodefiniteruleorplanorwaytoknowjustwhen
tobuyorsell.
Youshouldlearntotradeonknowledge,whichwilleliminatefearandhope.Then,when
hopeorfearnolongerinfluenceyou,knowledgewillgiveyounervetotradeandmakeprofits.You
shouldlearnthetruthaboutastock,thenlearnhowtoapplyalltherulesthatIhavegiveninmy
booksTRUTHOFTHESTOCKTAPE,WALLSTREETSTOCKSELECTORandinthisbook,
NEWSTOCKTRENDDETECTOR.Thenyouwillhaveaknowledgeoftradingandaneducation
thatyouneverhadbefore,andwhenyoumakeatrade,itwillheforagoodandsufficientreason
andondefiniterules.Youwillneitherhopenorfearthen.Youwilltradeonfacts.Youwillprotect
youcapitalandprofitsbytheuseofstoplossordersandwillmakeprofits.
Thereisonewaytoalwayscorrectamistakeifyoubuyorsellastockagainstthetrend,and
thatistoplaceastoplossorder.Astoplossorderprotectyouinmanyways.Whenyoubuyastock,

placeastoplossorder1,2or3pointsaway.Thenifyouareoutoftownoroutofreachofyour
brokerandsomesudden,unexpectedeventhappenstocauseasharpdeclineandthestockreaches
yourstoplossorder,youareautomaticallysoldout.Thestockmightgotopointslowerthesame
daybeforetheycouldreachyou.Yet,youareprotectedbecauseyouhadyourorderwiththebroker
tosell.Youdidnothavetohetheretowatchitanddidnothavetobewherethebrokercouldreach
you.
Thereisnothingthatwillgiveyoumorevaluableinformationorenableyoutotellmore
whatastockisgoingtodothantostudyitspastactionsandapplytherulesthatIgiveinmybooks.
Ifyouknowastockhasdoneinthepast,itwillhelpyoutodeterminewhatitwilldointhefuture.
Allofthebuyingandsellingisrecordedandregisteredinthepriceofthestock,whichisinfluenced
bySupplyandDemand.Pricemovements,itstudiedcorrectly,willtellyoumoreaboutthestock
thanbrokerscantellyou,ornewspapersoranyotherkindofsocalledinsideinformation.
LEARNTOBEINDEPENDENT
Thegreatesthelpthatonemancangiveanotheristoshowhimhowtohelphimself.The
manorwomanwhodependonothersforadvice,forinsideinformationorwhatothersthinkabout
thestockmarket,willnevermakeasuccessofspeculationoranythingelse.Youmustlearntobe
independent.Learntodobydoingandtoknowbystudyandapplication.Thenyouwillhave
confidenceandcouragethatnooneelsecangiveyou.
Anintelligentmanwillnotfollowblindlytheopinionofotherswithoutknowingwhattheir
opinionisbasedon,butwhenhehimselfsees,understandandknowstherulesthatforecaststock
markettrends,thenhebecomesagoodWallStreetdetective.Hedetectthefuturetrendsandfollow
themwithconfidence.Henolongersays,IfknewtheinformationIgetonChryslerwasright,I
wouldbuy500sharesinstead100.WhenheseesandunderstandswhyChryslergivesadefinite
indicationofanadvance,hethenhasnofearandnohope,buthasconfidenceandcouragetobuy
500shares.
Nomatterwhatbusinessyouareinterestedin,learnallyoucanaboutit.Themustimportant
thing,outsideofyouhealth,foryoutoprotectisyourmoney.Thereforetaketimetostudyand
prepareyourselftohandleyourmoneyyourselfanddonotdependforeverandentirelyuponothers.
ADEPUNITEPLAN
Makeupyourmindnowtohaveadefiniteplanoraiminthefuture.Decidetofollowrules
whenyoubuyofsellstocks,butfirstprovetoyourselfthattherulesaregoodandthattheywill
work.
Therulesgiveninmybooksaregoodpracticalrules.Youranprovethemtoyourown
satisfactioninashortperiodoftime.Manymanandwomenwhohaveboughtmybooks,TRUTH
OF THE STOCK TAPE and WALL STREET STOCK SELECTOR, have learned the rules,
followedthemandmadeasuccess,andyoucandothesameifyouwillworkandstudyhard.
IhavestudiedandimprovedmyMethodseveryyearforthepastthirtyfiveyears.Iamstill
learning.Someofmygreatestdiscoveriesweremadebetween1932and1935.Afterlongyearsof
studyandresearch,Ihavesimplifiedandmademyrulespracticalsothatotherscanapplythemas
easilyasIcan.Ihaveeliminatedunnecessary;havecutdowntheworksoyoucangetresults
quicker;andhavemadeprofitsbyfollowingstrictlythesamerules.
KNOWLEDGEBRINGSUCCESS
ThedoorthatopenstobigprofitshasbutonekeytounlockitandthatkeyisKnowledge.
Youcannotgetthatknowledgewithoutwork.Ihavemadeasuccessbyhardworkandyou,too,can

makeplentyofmoneyoutofthestockmarketifyoustudyandworkhardenough.Workistheway
infindtheRoyalRoadtorichesinWallStreet.
WhentheQueenofShebavisitedKingSolomon,shedidnotgoforhisbankrollorjewelry.
Itwashiswisdomthatshesought,andhisgreatwisdomwonherlove,soArthurBrisbanesays,and
IhaveagreatrespectforMr.Brisbane'sopinion.Ifyougetpracticalknowledgeonstocksand
commoditiesyouwillhavenotroublesingettingcapitaltomakemoremoneywith.Moneyalways
comestoknowledge;withoutknowledgemoneyisworthless.Youcanincreaseyourmoneyand
makewiseinvestmentwhenyouhaveacquiredknowledge.
QUALIFICATIONSFORSUCCESS
1ST:KNOWLEDGE
FirstandmostimportantYoumustgetKnowledge.
Makeupyourmindtospendthirtyminutes toonehourperdaystudyingstockmarket
movementsforthenextfiveyears.Thenyouwillgetknowledgeofhowtodetectstockmarket
trendsandwillmakemoney.Youwillnotbelookingforaquickandeasywayinmakemoney.
Youwillhavepaidinadvancewithtimeandstudy.Themoretimeyouputiningettingknowledge,
themoremoneyyouwillmakelater.
2ND:PATIENCE
Thisisoneoftheveryimportantqualificationsforsuccess.Whenyoubuyorsellyoumust
havethepatiencetowaitforopportunitiestogetinright.Then,youmusthavethepatiencetowait
untilthereisachangeintrendbeforeyoucloseatradeoftakeprofits.
3RD:NERVE
Icangiveamanthebestgunintheworldandifhehasn'tthenervetopullthetrigger,he
willneverkillanygame.Youcanhavealltheknowledgeintheworldandifyouhaven'tthenerve
tobuyandsell,youcannotmakeanymoney,butKnowledgedoesgiveamannerve:makeshim
boldandenableshimtoactattherighttime.
4TH:GOODHEALTH
After you have gained knowledge, acquired patience and developed nerve, the next
importantqualityisgoodhealth.Nomancanhavepatienceandnerveanddohisbestunlesshis
healthisgood.Ifyouareinbadhealth,youbecomedespondent,youlosehope,youhavetoomuch
fear,andyouwillbeunabletoact.Ihavebeenthoughtthegameforalltheseyears:havetriedto
tradewhenIhavebeeninbadhealthandhaveseenotherstrytotrade,butIneversawamanyet
makeasuccessspeculatingwhenhishealthwasbad.Thethingtodoifyourhealthgetsbadisto
quitbusiness,quitspeculationandgetyouhealthback,forhealthiswealth.
5TH:CAPITAL
Withallofthesequalificationsformakingasuccess,youmusthavecapital,butifyouhave
knowledgeandpatience,youcanstartwithasmallcapitalandmakealotofmoney,providedyou
usestoplossorders,takesmalllosses,anddonotovertrade.
Remember,neverbackthetrend:afteryoudetectthetrend,gowithisregardlessofwhat
youthink,hopeorfearandyoufillmakeasuccess.ReadandfollowtheTwentyfourNever

failingRulesonpages1819ofWALLSTREETSTOCKSELECTOR.
CHAPTERIII
HISTORYREPEATS
Future stock market movements can be forecast by a study of past history and past
movements.Byknowingthetimewhenthegreatestadvanceshavetakenplaceandthetimeswhen
thegreatestpanicanddeclineshaveoccurredandthetimeperiodstowatchformajorandminor
changesintrend,youcandetectwhattoexpectinthefuture.Justrememberonething,whateverhas
happenedinthepastinthestockmarketandWallStreetwillhappenagain.Advancesandbull
marketswillcomeinthefutureandpanicswillcomeinthefuture,justastheyhaveinthepast.This
istheworkingoutofanaturallawandthebalancingoftimeandprice.Itisactioninonedirection
andreactionintheoppositedirection.Inordertomakeprofits,youmustlearntofollowthetrend
andchangewhenthetrendchanges.
War in the past has always had a great effect upon stocks and commodity prices. The
startingofwarsoftenhasproducedpanicsorsharpdeclinesfollowedbyboom,andafterthewar
wasover,therewasanothersharpdeclinesorapanic,followedbyanotherboomwithprobably
higherlevelsthanoccurredduringthewardays.Itisimportant,therefore,tostudytheactionof
stocksandcommoditiesaroundthebeginningofwarperiodsandaftertheendingofwarsinorder
todetectwhatmayhappeninthefuturethenthesesameconditionsrepeats.
Itisimportanttostudythetimethathaselapsedbetweenbottomsandtopsandthegreatest
durationofanybullcampaignaswellasthegreatestdurationofanypanicordecline.
W.D.GANNAVERAGES
18561874
1856
1857

IfyouwillrefertomyaveragesinWALLSTREETSTOCKSELECTOR,youwillsee
thaninFebruary,1856,stocksreachedahighof95.Thenfollowedaperiodaperiod
ofdistribution.
InJanuary,thelasthighwasreachedat92,fromwhichapanickydeclinestarted.This
wasthe1857panic,whichculminatinginOctober,1857,withtheAveragesdown58
pointsinaperiodofsixmonths.

1858

Arallyfollowedtomarch,1858,lastingfivemonths

1859

ThemarketdeclinedandmadelowinJune,down15months

1860

InSeptember,thehighwasmadeagain,15monthsup.

1861

LastlowontheAveragesat48inMarch.Timeofdecline,7months,thelastlowbefore
theCivilWarboom.Atthispointwatchthelengthoftimeperiodtocomparewithother
warbooms.

1864

InApriltheAveragesreachedahighof155.Time36monthsfromthelastbottomand
atnotimedidtheydeclinemorethantwoconsecutivemonths.

1865

March,low88,down67pointsin11months;October,high121;time7months

1866

February,lowtoo;time,4months;October,high125,8monthsfromthelowand19
monthsfrom1965low.

1867

April, low of reaction 104; time, 6 months. From this low the big afterwar boom

followed.
1969

July,high181;time17monthsfromApril1867;50monthsfromMarch,1866low;and
99 months from March, 1863 low, which was the most important time period to
increasefrom,being8yearsand3months.Thelaststageoftheboomlasted29months.
Thisendedthegreatafterwarboom,andapanicfollowed.

1873

November, low 84, a decline of 96 points from the high of 1869. Time of bear
campaign, 52months,butfromAugust,1870toMay,1873therewas arally of9
monthsandfromJanuarytoJune,1872,arallyof6months;andfromNovember,1872
low,arallytoJanuary,1873,atwomonthsrally,whichimplicatedaweakmarket,just
aswehadin1931and1932.

1874

February, high 107. Time of the rally, 3 months. In June and October, lows were
reached:timeperiod,4monthsand8months.ThentherailsralliedtoMay,1875.
12INDUSTRIALSTOCKAVERAGES
18751896

Here we begin with 12 Industrial Stock which were about the same as the DowJones
Averages,whichstartedin1897.
1875

March,high53:October,low48

1876

February,high52.

1877

October,low36,adeclineof16monthswithoutmuchrally.

1879

ArealbullmarketbeganinAugust,1879andlasteduntilJune1881aperiodof22
months.

1881

June,high72,andadvanceof47monthswitha6monthsreactionin1878and1879,
and2to3monthsreactionseveraltimes.

18811885 FromJune,1881toJune1884,therewasanextremebearcampaignwiththeAverages
downfrom72to42.TheBearCampaignlasted36monthswithonlya2monthsrally,
liketherallyfromJulytoSeptember,1932.Then,fromthetopofarallyinAugust,
1884therewasadeclinetoJanuary,1885,makingadoublebottomat42againstthe
lowofJune,1884.
1885

November,high57,uptomonths.

1886

May,lowofreactionat53.

1887

EndofbullmarketinMay;time34monthsfrom1884lowand27monthsfromthe
secondarybottomofJanuary,1885.

1888

April,lowofhearmarketat53.Time11to12months.

1889

Athirdtopat63wasreachedinJanuary,1890,makingthisalmostatripletopand
sellinglevel.

18881890 ThetimefromApril,1888toJanuary,1890was21months.
1890

December,lowofdeclineat49.Time,11monthsfromlasthighofJanuary,1890.

1893

January,highofbullmarketat72.Time25monthsfrom1890,bottomofhearmarket

at40down32pointsin7months.
1895

HighofthebullcampaigninJuneat58:time,22months.Thiswasreallyarallyina
bearmarket,forthemaintrendwasstilldown.

1896

BryanSliverPanic:
August,1896,lowoftheDowJonesAveragesat29.Time,14monthsfromthetopof
1895,and43monthsfromJanuary,1893top.Afterthispanickydeclinewasover,the
McKinleyboomstarted,whichlastedforseveralyears.

DOWJONESINDUSTRIALAVERAGES
18971935
1897

September,high55.Time,12months

1898

March,low42.Time,6monthsfromtheprevioustop.

1899

April, high 78. Time, 13 months. A sharp decline followed in May; then a slow
advance.Septemberhigh78,sameastheAprilhigh.Timefrom1896,37monthsand
fromMarch,1898,18months.

1900

September,low53.Time,12months.Endofbearmarket.

1901

June, high 78, same as tom in 1890, a third top and the end of the bull market.
December,low62.Time,6months.

1902

April,high69.Time,4months.

1903

OctoberandNovember,low42.Time,28to29monthfrom1901top:8monthsfrom
topoflastrallyinFebruary,1903.After1903,theIndustrialAveragesbecausemore
activeandwereleaders,whereasprevioustothistimetherailroadswerethemostactive
andloadingstocks.Theraildidleadfrom1896to1906,whichwasthelasthighuntil
192429boom,whentherailsreachedthehighestinhistory.Wewillnowcontinuewith
theindustrials.

1906

January,high103.Time,27monthsfrom1903lowandneverreactedmorethan2
months,anindicationofastrongbullmarket.Lowofreactionat86inAugust.Time,6
month.October,high97.

1907

January,high97,fromwhichabigdeclinestarted.March14,1907apanickydecline
knownasthesilentpanic.Stocksdeclined20pointsthatday.LowoftheAverages
was76.Ralliedto85inMay,thendeclinedto53inNovember.Time,22monthsfrom
January,1906high.AccumulativetookplaceandbullmarketstartedfromNovember.

1909

October,high101,topofbullcampaign.Time,23months.Neverreactedmorethan3
months.

1910

July,low73,bottomofdecline.Time,9months.

1911

June,high87.Time,11months.Asharpdeclinefollowed.September,low73,same
lowasJuly1910.

1912

October,high94,topofbullwave.Time,13month.

1913

June,bottom at53.Time, 8months,thethird timeatthe same level.This is very

importantandalwaysindicatesthatanadvanceshouldfollowaslongasthirdbottomis

notbroken.September,high83.Time,3months.December,low76.
1914

March,high83,sameasSeptember,1913.WarwasdeclaredinEuropeintheearlypart
ofJulyandtheStockExchangeclosedattheendofJulyandremainedcloseduntil
December,1914,theIndustrialAveragesdeclinedto53,thesamelowlevelreached
in1907.TimefromOctober,1912,26months.

1915

December,high99,justunderthetopof1909.Time,12monthsfrom1914low.

1916

April,low85.Timeofreaction,4months.November,high110,topofbullcampaign.
ThiswasanewhighlevelfortheDowJonesIndustrialAverages.Time,23months
fromDecember,1914.

1917

February,low87.June,high99.Time,4months.Thenabigpanickydeclinefollowed.
December,low66,bottomofbearcampaign.Time,13months.

1919

November,high119,topofbullcampaign.Time,23monthsfromDecember,1917
low.Noreactionlastedmorethat3months

1920

December,low66,samelowas1917.Timefromtop,13months.

1921

May,high79.August,low64,not3pointsunderthe19117and1920lows,whichwas
asignofgoodsupportandindicatedthatabullmarketwouldfollow.Timefrom1919
top,21months.

19211929BULLCAMPAIGN
FromthelowinAugust,1921,followedthegreatestbullmarketinthehistoryoftheUnited
States,culminatinginSeptember,1929.
1823

TopoffirstsectionofthisgreatbullmarketwasreachedinMarch,1923,withthe
Averagesat105.Time,19months.Lowofreactionat86inOctober.Time,7months.

1924

February,highofrally,105,fromwhicha3monthsreactionfollowed.May,low89.
May1924wastherealbeginningoftheGoolidgeBullMarket.

1925

InJanuarytheDowJonesAveragescrossed120,thehighof1919,whichindicated
muchhigherpricesbecausethevolumeoftradingwasheavyandstockswerevery
active.

1926

February,high162.Timefromlastlow21months.Marchbottomofasharpdecline,the
Averagesdecliningto136andsomestocksdeclining100pointsinthisshortperiod.
TheAveragesheldforafewmonthsinanarrowtradingrangeandthenstartedupagain.
Afterthatnoreactionlastedmorethan2monthsuntil1929.

1929

OnSeptember3,1929,whenfinaltopwasreachedtheIndustrialAveragesmade386,
up322pointsfromthe1921lowand300pointsfromthe1923low.Timefrom1921
lowto1929high,97months.(Referto18611869andyouwillseehowthiscompares.
TheBullCampaignatthattimelasted99months,whichwasoneofthegreatestin
historyuntil1929.)Thetimefromthe1923lowto1929highwas71months,andfrom
the1924low,64months;fromMarch1926low,42months;andfromthelastlowof
October,1926,35months.

Itisbeforeandafterwarsthatyoucandeterminethegreatestlengthoftimeabullmarket
mayrunandthegreatestoftimeapanickydeclinemayrun.Theculminationofthebullmarketin
September,1929wasreallytheresultofalongtrendbusinesscyclewhichbeganinAugust,1896

andcontinuedfor33years,witheachcampaigninthemarketmakinghigherprices,whichshowed
thatthelongtrendwasup.Itwasonlynaturalthatafterthegreatestbullmarketinhistory,the
greatestbearmarketinhistorymustfollow,andtodeterminehowlongthebearcampaignmight
run,youwouldlookbacktoseewhathadhappenedafterpreviouswasbooms.
18691873 From1969to1873wefindthatthetimeperiodwas53monthsandthatthemarkethad
a9monthsrally,a6monthsrallyanda2monthsrallyduringthatperiod.
18711873 May,1871topNovember,1873low.Time,30months.
18811884 Thenwereferto1881to1884andfindthatthebearmarketlasted36months.
18931896 Thenwereferto1893toAugust,1890andfindthatthebearmarketlasted43months.
Goingbackoveralltherecords,wefindthatthegreatestbearmarkethadlastednotmore
that43monthsandthesmallesthadbeenasshortas12months.Someofthemhadculminated
around27months,30months,34monthsandinextremedeclines,anywherefrom36to43months.
Therefore,from1929,basedonpastrecords,wewouldbegintowatchforbottomaround
the30thtothe36thmonthandthenagainaroundthe40thto43rdmonth.
19291932BEARMARKET
FirstsectionofTheGreatestBearMarketSeptember3,1929toNovember13,1929.
TheDowJones30IndustrialAveragesdeclinedfromahighof386onSeptember3,1929to
alowof198onNovember13,1929,adeclineof188pointsin71daysthegreatestdeclineinthe
historyoftheNewYorkStockExchangeintheshortestperiodoftime.
AsecondaryrallyculminatedonApril17,1930withtheaveragesat297,up99pointsin
155days.ThevolumeofsalesdecreasedinApril.Thetopofsecondaryrallyisalwaysanimportant
pointtowatch.
SecondSectionofTheGreatBearMarketApril17,1930toDecember17,1930:
FromthetoponApril17,1930therewasadeclinetoDecember17,1930.Theaverages
declinedfrom297to155,adeclineof142points.Time,244daysof8months.
ThesecondrallycarriedpricestotoponFebruary24,1931,withtheaveragesat196,up41
pointsin69days.Thisshortertimeperiodandsmallernumberofpointsindicatedweaknessand
showedmaintrenddown.
ThirdSectionofTheBearMarketFebruary24,1931toJanuary5,1932:
AftertopinFebruary,1931adeclinestartedandinApril,1931theAveragebrokethelows
ofDecember,1930.OnJune2,1931declinedto120,thetopofNovember,1919.Myruleisthat
oldtopsbecomebottomsandoldbottomslaterbecometops;therefore,fromtheoldtoplevelarally
couldbeexpected.FromJune2ndtoJune27ththeAveragesadvancedto157up37pointsin25
days.Thiswasaquicklyrallyinabearmarketandshowedweaknesssincestockscouldnotrally
onefullmonth.AfterthisrallytherewasadeclinetoOctober5,1931,withtheAveragesat85,
down72pointsin100days.AquickrallyfollowedtoNovember9,1931,withthepriceat119,up
tothebottomofJune2,1931.Herewewouldexpectsellingundertheoldbottom,accordingtomy
ruleofoldbottomsbecomingtops.Thiswasarallyof35pointsin35days.Themaintrenddown
was resumedand onDecember 17,1931,justoneyear fromthe low ofDecember, 1930,the
Averagesreached72;hadaquickrallyto83onDecember19 thanddeclinedto70onJanuary5,
1932,down40fromthelasthighofNovember9,1931.Thisdeclinelasted57days,butwas192
daysfromJune27,1931andwasreallytheendoftheThirdSectionoftheGreatBearMarket
because after thelow ofJanuary 5,1932,themarket rallied toMarch9,1932.The Averages
reached89,up19pointsin64days,averyfeeblerallyforthetimerequired,whichshowed
thatliquidationhadnotrunitscourse.

FourthSectionofTheGreatBearMarketMarch9toJuly8,1932:
ThefourthandlastsectionofthegreatBearMarketlastedfourmonths,fromMarch9,1932
toJuly8,1932,or121days,ashortertimeperiodwithapricedeclineof49points.Notethatthis
wasaboutthesamenumberofpointsasthedeclinefromNovember9,1931toJanuary5,1932.
FromMarch9toJuly8,1932whenthefinalwaveofliquidationwastakingplace,thegreatestrally
onAverageswas7points,andeachdeclinefromthesmallralliesgotshorterandthevolumeof
salesless,whichshowedthatliquidationwasaboutover.ThelastdeclinefromJune16 thtoJuly8th
was11points.ThentheGreatBearMarketendedandthetrendturnedup.
OnJuly8,1932,theDowJonesAveragemadelowat40,down34monthsfromthe1929
topand27monthsfromApril,1930top,whichweretimeperiodswhenwewouldexpectasharp,
panickydeclinetoend,especiallyadeclinewhichhadcarriedtheAveragesdown345pointsin34
monthsandwipedoutthegainof33yearsinmanystocks.
NotethatinApril,1897,thelastlowwas40,fromwhichtherealbullmarketstarted,and
inJuly,1932theAveragesreachedthissamelevel40,althoughtherewasadifferentnumberof
stocks.
PrevioustothebottominJuly,1932,thevolumeofsalesandtimeperiodsallindicatedthat
themarketwasneartheendofthebearcampaign.
19321935BULLMARKET
FirstSectionofBullMarketJuly8toSeptember8,1932:
Fromthelowof40onJuly8,1932theDowJones30IndustrialAveragesralliedto81on
September8,1932,anadvanceof40pointsin62days.Thiswasafastadvanceonshortcovering
andsomegoodbuying,butwhenstockscouldnotholdandgohigherinthethirdmonth,itwasan
indicationoflowerprices.Thelargevolumealsomadeitplainthatthiswasonlythefirstrallyin
thebullcampaign,fromwhichasecondarydeclinemustfollow.
SecondarydeclineJustastheBearMarkethadasecondaryrallyfromNovember,1929to
April,1930,soafterthemarkethadgivenasignalthattheBearMarketwasover,therewasa
secondarydecline,whichlasteduntilFebruary27,1933,withtheAveragesat49,down31points
fromthetopofSeptember8,1932in172days,but9pointsabovethe1932lows.AtthisPresident
Rooseveltwasinauguratedandbanksclosed.TheNewYorkStockExchangeclosedforoneweek.
Thevolumeofsaleswasverysmall,whichindicatedliquidationwasover.Whennewsistheworst,
itistimetobuystocks,asaBullMarketbeginingloomandendsinglorywithnothingbutgood
news.
SecondSectionofBullMarketFebruary27,1933toJuly17,1933:
Theaveragesadvancedfromthelowat49inFebruary,1933toahighof110onJuly
17,1933up61pointsin141days.Time,12monthsfromJuly,1932lowand5monthsfrom
February,1933low.Myruletellsyoutoalwayswatchforachangeintrendoneyear,twoyears,
etc.,fromanyimportanttopandbottom.ThesalesduringMay,June,andJulywerelargerthanat
theendofheBullMarketin1929.Thisenormousvolumewasanindicationthatthemarketwas
reachingaculminationandasignoftop.
Areactionfollowed.TheAveragesreachedbottomat82onOctober21st,1933,down28
pointsin96days.Thevolumeofsaleswassmall.InviewofthefactthattheAveragesdeclined
only2pointsunderthelowpointofJuly21,1933anddidnotdeclinetothetopof81madeon
September8,1932,indicatedthatthemaintrendwasstillup.
ThirdSectionofBullMarketOctober21,1933toFebruary5,1934:
Fromthelowat82onOctober21,1933,theAveragesworkedupto111onFebruary

5,1934,justonepointabovethetopofJuly17,1933,adoubletoponlargevolumeof5million
sharesperday.Thiswasanadvanceof20pointsin107days.Time,19monthsfromJuly,1932low
and4monthsfromOctober,1933low.SincetheAveragesfailedtogothrough112,themarket
indicatedtop.
ThentherewasareactiontoJuly26,1934,withtheAveragesdecliningto84,adeclineof
27pointsin171days,thesamelengthoftimeasthereactionfromSeptember8,1932toFebruary
27,1933.Time,fromFebruary,1934top,5months.ThevolumeofsalesonJuly26was3million
sharesandtheAverageswere2pointsabovethelowofOctober21,1933.Thislargevolumeand
highersupportlevelwasanindicationofbottom.
FourthSectionofBullMarketJuly26,1934toNovember20,1935:
The30IndustrialAveragesadvancedfrom84onJuly26,1934to149onNovember
20,1935,anadvanceof65pointsinnearly16months.Time,40monthsfromJuly,1932low;33
monthsfromFebruary,1933low;25monthsfromOctober,1933low.
ThegreatestreactionwerefromAugust25,1934toSeptember17,1934,adeclineof12
points,andfromFebruary18,1935toMarch18,1935,adeclineof12pointsontheaverages,and
asthisreactionlastedonlyonemonths,itshowedmaintrendwasstillup.AfterMarch18,1935
lows,therewasnoreactionofover8pointsandnonelastedmorethan2weeksuntiltopwas
reachedonNovember20,1935.ThenareactionfollowedtoDecember19,lastingonemonth,a
declineof11points.ThevolumeofsalesinOctoberandNovemberwere104,000,000shares,
whichindicatedatleasttemporarytop,withtheAveragesup109pointsfrom1932low,adup53
pointsfromMarch18,1935lowinaperiodof247days.
Atthiswriting,December31,1935,itismyopinionthattheAverageswillnotcross150
andwhentheydeclineto138,willindicate120,possibly112,theoldtopof19331934,butasI
havesaidbefore,followthetrendofindividualstockswhenyoutradeasmanyofthemwillgo
oppositetothetrendwhenyoutradeasmanyofthemwillgooppositetothetrendofthe30
IndustrialAverages.
TIMEPERIODSTOWATCHFORFUTURECHANGEINTREND
January,1936 will be 42month from1932 low; March,1936 will be 37months from
February,1933low;July,1936willbe36monthsfromthe1933topand48monthsfromthe1932
low.Therefore,thesemonthswillbeveryimportantin1936towatchforchangesintrend.
CAUSEOFTHE19291932PANIC
Thepricedeclinefrom1929to1932wassodrasticbecausepeoplewhoboughtathigh
levelsheldonandhopedandboughtmoretoaverageonthewaydown.Theywerewrongatthe
timetheyboughtthefirststockandcontinuedtobewrongbybuckingthetrendandbuyingmoreto
average,theworstthingthatanytradercando.Remember,averageyourprofits,butneveraverage
aloss.
Afterstockshaddeclined100pointsormore,otherpeoplebegantobuystock,becausethey
thoughttheywerecheapandtheonlyreasontheythoughtheywerecheapwasbecausetheywere
down100pointscomparedwithhighlevels.Thiswastheworstreasonofallforbuyingstocks.
Later,whenstocksweredownaround150,250and300pointsfrom1929toplevels,otherpeople
boughtforthesamereason,thattheywerealongdistancedownfromthetopandlookedcheap.
Theywerewrongbecausetherehadbeennochangeintrend.Thetimeperiodhadnotrunoutand
themarkethadgivenbuyingsignals.
Ifthesebuyershadonlywaited,andhadknowhowtofollowtheruleslaiddowninmy
books,WALLSTREETSTOCKSELECTORandTRUTHOFTHESTOCKTAPE,theycould
havedeterminedwhenthetrendchangedandcouldhaveboughtstockatlowlevelsandmadehigh

profits,butmostofthemwerebuyingonguessworkandhopingthatthestockwouldgoup.Many
ofthesepeople,nodoubt,madeuptheirmindsstocksneverralliedto.Theyhopedforarally,but
thehopewasnotbasedonanysoundreasonsandtherewasnosoundreasonforexpectingarallyor
anadvancethatwouldletthemout.
HopeGivesWaytoDespair:
Finally,intheSpringandSummerof1932,whenstockshaddeclinedtowhatlookedlike
ridiculouslylowlevels,theycontinuedtodeclinefrom25to50pointsmore.Thiscausedallkinds
ofbuyersandinvestorstolosehope.Theirheartsgrewsick.Fearsupplantedhope.Theysawthings
intheveryworstwayandallsoldout.Somesoldbecausetheywereforcedtosell,becausethey
couldnotputupmarginstocarrytheirstocks;othersoldbecausetheyfearedstockswouldgo
lower,whichwasnoreasonforselling,nomorethanwhentheyboughtbecausetheyhopedthey
wouldgoup,whichwasnoreasonforbuying.
WHOBOUGHTSTOCKSINTHEPANIC?
Manypeopleaskthisquestion.Thepeoplewhoboughtstocksatlowlevelswerethosewise
oneswhosoldoutin1928orearly1929,orsoldafterthefirstbreakinSeptember,1929,whenthe
signswereplainthatthetrendhadturneddown.Thesepeoplekepttheirmoneyandwaiteduntil
conditionslookedtheworks;thenboughtstockswhentheywerefarbelowtheiractualvalue.They
receivedarichrewardsfortheirpatience,knowledgeandnerve,forittooknervetobuywhen
everythinglookedworse,justasittooknervetosellin1929wheneverythinglookedthebrightest
andonecouldhearnothingbutoptimistictalk.
WILLSTOCKSGOHACKTO1929HIGHTS?
ThisisanotherquestionthatIhavebeenaskedfromtimetotime.Whydopeopleaskthis
question?Becausemanyotthemholdstocksboughtateveryhighlevelsandhopethattheywillgo
upsotheycangetoutwithoutaloss.IamconfidentthattheDowJones30IndustrialAverageswill
neversellat386again.IamalsoconfidentthattheRailroadAverageswillneversellat189,the
highof1929,andthatmanyofthepublicutilitystockswillneverreachthe1929levelsagain.
Why?becauseatthetimetheysoldattheseabnormallyhighlevels,theirsellingpricewasnot
basedonvalueorearningpower.Priceswereforcedtothesehighlevelsforthesimplereasonthat
everybodywasgamblingmadandbuyingregardlessofpriceorvalue.Theywillnotbuystocks
againlikethatforalongtimetocomebecausehighmarginrequirementswillrestrictlargerbuying
operations.
WhileIdonotexpecttheAveragesandoldtimeleaderstoreachthe1929highsagain,yet
manyindividualstockswilladvanceabovetheir1929highs.Duringthe19321935BullMarket
new leaders developed that went for above the 1929 highs. In another chapter we give you
examples of stocks that crossed 1929 high and show you their position and how plain the
indicationswerethattheyweregoinghigherandtheonestobuy.Otherstocks,lateron,willgo
abovetheir1929highs,aswillheexplainedinthefollowingchapters.
CHAPTERIV
INDIVIDUALSTOCKSvs.AVERAGES
For years the DowJones Industrials Averages, Railroad Averages, and Public Utility
Averageshavebeenareliableguidetothetrendofthemarket.Yearsagowhentherewereaguide
to thetrend ofindustrial stocks.WhenRailroads werethe leaders andactive, the 20Railroad

Averageswereagoodtrendindicator.But,now,sincemorethat1200stocksarelistedontheNew
York Exchange, the 20 Railroad Averages and the 30 Industrial Averages are no longer
representativeoraguidetotheaveragetrendoftheentiremarket.
Variousindustrialthroughoutthecountryareaffectedbychangingandarealsoaffectedby
varyingconditionsinforeigncountries.Onemotorcompanymaybeprosperingandmakingmoney
whileanotheroneisgoingintobankruptcyandoutofbusiness.Crosscurrentsinthestockmarket,
due to various influences, cause some stocks to decline while others advance. There changed
conditionsbeganin1928and1929,buthavebeenmorepronouncedsincestocksmadelowinJuly,
1932.Thereforeinordertomakemoneytradinginthestockmarket,youmuststudyandapply
rulestoindividualstocksandnotdependonAverages.
Wedonothaveauniversalbullmarketanymore,whenallstocksadvanceatthesametime.
Wehaveamixedtrend,themaintrendbeinguponsomestocksanddistinctlydownwardonothers.
ThemajorityofstocksreachedlowlevelsinJuly,1932,andstartedworkinghigher.TheDow
Jones30IndustrialmadelowinJuly,1932.The20RailroadAveragesmadelowsinJuneandJuly,
1932.In1935,atthetimetheDowJones30IndustrialAverageswereup80points,thePublic
UtilityAveragesreachedanewlowlevel.Thiswasbroughtaboutbyadverselegislation.
Bystudyingandapplyingtherulestotheindividualstocks,youwouldhavefoundedthatthe
Public Utility stocks showed downtrend while other stocks advanced. A study of the chart of
AmericanTelephone&Telegraph,whichheldupbetterthantheotherPublicUtilitiesin1935,
revealed that is was in a stronger position. One reason was that during the entire depression
AmericanTelephoneandTelegraphneverpasseditsdividendsandcontinuedtopay$9ashareper
year,whileotherPublicUtilitystockspassedtheirdividends.Duringtheboom,whichculminated
in1929,thePublicUtilitystockshadbeenwatered;stockdividendshadbeendeclared;therehad
beennumeroussplitups.Theresultwasthatnootherstockshadbeenmoreoverboughtthanthe
PublicUtilities.
Youcannotdetectthebeststocktobuybyfollowingtheaveragesofanygroupofstocks.
Someofthestocksinagroupwillmakenewhighseveryyearinbullmarketwhileotherswillmake
newlowsinbullmarketsorgointoreceivershiporbetakenofftheExchange.Forexample:In
1932whentheaverageofallairplanestocksshoweduptrend,ifyouhadselectedCurtissWright
Aasthebestairplanestockinthisgrouptobuyjustbecauseithadbeenaleatherinaprevious
campaign,youwouldhavemadeamistake.InAugust,1932,CurtissWrightAsoldaslowas1
1/24inApril,1934,madeahighof12.NowcompareDouglasAircraftandmakeastudyofits
position. In 1932 Douglas made a low of 51 in February, 1934 reached a high of 28 ; in
September,1934declinedto14,adeclineofabout50%fromthetop.InJuly,1935whenCurtiss
WrightAwasstillselling4pointsunderthe1934high.Douglascrossedits1934top,which
showedthatitwasinastrongpositionandmuchbettertobuy,evenat28,thanCurtissWright
A.InDecember,1935,Douglascrossed45,the1929high,andadvancedto58whileCurtiss
WrightAonlyadvancedto12.CurtissWrightAnevershowedtheactivityofpowerto
advanceasDouglasandsomeotherairplanestocks.Douglaswasmakinghigherbottomandhigher
topsrightalongwhileCurtissWrightAwasmovinginanarrowtradingrange,soDouglaswas
thestockinthisgrouptobuy.Thisisproofthatyoumuststudyeachindividualstockinagroupin
ordertodetectitstrend.
THEDOWTHEORYORSOLETE
Tomakeasuccess,youmustbeupdodate;mustdiscardoldtheoriesandoldideaswhen
theybecomeobsoleteandfollownewrulesandnewstocksinordertomakeasuccesstradinginthe
stockmarket.
DuringrecentyearstheDowTheoryhasspreadalloverthecountry.Peoplehavebegunto
regarditasveryvaluableandinfallible,butinfact,itisnowpracticallyofnovaluetoatrader.

WithsomanystockslistedontheNewYorkStockExchange,30stocksor20stockarenolongera
representativeofthetrend.Besides,youcannottradeinaverages.Youmustfollowthetrendof
individualstockinordertomakemoney.
TheDowTheoryworkedquotewellupto1916,whentheWorldWarchangedeverything.
Thenthiscountrychangedfromanagriculturalcountrytoamanufacturingcountry.In1916,when
theDowJones30IndustrialAveragesadvancedtonewhighlevels,whichwas7pointsabovethe
highsof1906,theRailroadAveragesatthantimewere24pointsunderthe1906recordhigh.The
manwhowaitedfortheRailstoconfirmtheupwardtrendinIndustrialscertainlygotleftand
missedopportunitiesandprobablylostmoney.
In1917theGovernmenttookovertheRailroads,andinDecember,1917,theDowJones20
RailroadAveragesdeclinedto69.TheIndustrialatthesametimemadealowof66.Thiswasthe
firsttimethattheRailwareaslowastheywerein1897,whiletheIndustrialwere13pointsabove
the1907paniclows.
In1918and1919theRailsfailedtofollowtheIndustrialsandwerenogoodasaguideor
confirmationaccordingtotheDowTheory.InJuly,1919,theIndustrialsmadeanewhighrecord
whiletheRailsweremakingnewlowlevels.InNovember,1919theIndustrialsreachedanewhigh
at1191/2.InthesamemonththeRailroadAveragesreachedlowoftheyear,only3pointsabove
the1907lows.TheRails weregoingexactly oppositetothetrendofIndustrials andtheDow
Theorywasnotworking.
InJune,1921,theRailroadAveragesreachedalowof64.InAugust,1921,theIndustrial
Averageswereonly2pointsunderthe1907lows.ThenfollowedabigbullmarketinIndustrial
stockandtheRailswerelaggards.
InJanuary,1925,theIndustrialAveragescrossed120,therecordhighof1919andtheRails
werestill38pointsbelowthe1906highsand12pointsbelowthe1919highs.Ifyouhadwaitedfor
theRailstoconfirmtheIndustrialsbymakingnewhighsbeforebuyingindustrialstocks,youwould
havemissedbigopportunitiesandwouldhavehadtowaituntilJuly,1927whentheRailscrossed
thehighsmadein1906highsforIndustrialStocks.
OnSeptember3,1929the30IndustrialAveragesreachedthehighestpriceinhistoryat386
andtheRailsreachedahighof189.AfterthepanickydeclinetoNovember,1929,theIndustrial
Averagesralliednearly100points.TheRailsralliedonly29points.AfterApril,1930,theRails
wereweakerthanIndustrialandhadsmallerrallies.
InNovember,1931theRailsbroke42,thelowmadeinAugust,1896.InJune,1932,the
Railsdeclinedto131/8,whilethe30IndustrialAveragesdeclinedto401/2.TheIndustrialswere
12pointsabovethe1896lows,whiletherailswere29pointsunderthe1896lows.
InJuly,1933,theIndustrialsralliedto110andtheRailsralliedto58.
In October, 1933, the Industrial Averages reacted to 82 1/2 and the Rails to 33. The
Industrialsneverbrokethe1933lowsuntiltheyadvancedto1491/2inNovember,1935.
InMarch,1935,theRailssoldat27whiletheIndustrialswereat96.TheIndustrialswere13
pointsabovethelowsofOctober,1933,whiletheRailswere6pointsbelow.Thisagainprovedthat
youcouldnotdependupontheDowTheory.
FromMarch,1935toNovember,1935theIndustrials advanced531/2pointswhilethe
Railsralliedonly12points.Youwouldhavemissedprofitsofanywherefrom50to75pointsifyou
hadwaitedtobuyIndustrialstockuntiltheRailsmadenewhighsandconfirmedtheadvance.
ThisisplentyofproofthattheDowTheoryisnowobsoleteandthatyoucannotdepend
uponittoworkinthefuture.
CHANGEWITHTHETIMES
Inordertomakemoneyunderthechangedconditions,youmuststudyindividualstocksand
followtheirtrend.Don'tlettheAveragesfoolyou.Whenonestockshowsachangeintrend,go

withitregardlessoftheactionofothersinthesamegroupandregardlessoftheactionofthe
Averages.
YearsagoStageCoachStocksadvancedandyoucouldhavemademoneybuyingthem,but
stage coaches went out of business and so did the stocks. Then there were Canal Stocks that
advancedandyoucouldhavemoneybuyingthem,butothermodesoftransportationreducedthe
businessoncanals.Theautomobilescamealongandtookbusinessawayfromtherailroads.Now
theairplaneiscomingalongandtakingbusinessfromtherailroadsandwilllatertakeitfromthe
automobilesandtrucks.Theairplanewillbethefuturemodeoftransportation.Youwillhaveto
watchairplanesinfutureforguide,thesameasyouwatchedautomobilestocksafewyearsago,
becausethemoneywillbemadetradinginairplanestocksratherthanrailsorautomobiles.
Keepuptodate;beprogressive.Donotclingtooldtheoriesorideas.Learntofollowthe
trendofindividualstocksandyouwillmakeprofits.
CHAPTERV
NEWRULESTODETECTTRENDOFSTOCKS
TheruleswhichIgiveinmybooks,TRUTHOFTHESTOCKTAPEandWALLSTREET
STOCKSELECTOR,areallgood.Theywillworkinfuturemarketmovesfor100yearsbutunder
thechangedconditionsstockswillmoveupslowerthegreatestpartofthetimeandonasmaller
volume.(ComparepresentvolumeofU.S.SteelandGeneralMotorswithvolumeofformeryears.)
TherulesinmybookarebaseduponSupplyandDemand;havebeentriedandtested.Whether
stocksadvanceonbuyingbythepublic,poolsorinvestors,itisafteralltheresultofSupplyand
Demand.Whenbuyingpowerisgreaterthansellingpower,ifforcesstockshigherrightalong.Then
whenthereversetakenplaceandthesellingpressureisgreaterthanthebuying,stocksworklower.
ThenewrulesthatIgiveyouinthisbook,ifusedwiththerulesinmyotherbooks,willhelp
youmakeasuccesstradinginindividualstocks.
Justasdetectiveslearnthehabitsofacertaingangofcriminalsfromthecluesthatthey
leavebehindthem,socanaWallStreetdetectivefindacluetowhatthepowersthatbeormaster
marketmanipulatorsintendtodowiththestocks.Themovementsofastock,upordown,ismade
byhumanmindswhobuyofsellitwiththeintentionofclosingthedealslateroraprofit.Whatare
man'smindcandevice,anothermindcanfigureout,forafterall,humannatureneverchanges.By
studyingindividualstocksandfollowingtherulesfordetectinganddeterminingthetrend,youwill
beabletomakelargeamountsofmoney.
BESTWAYTODETECTTREND
Yearsofexperiencehaveconvincedmethatthetrendcanbedetectedbyastudyofcharts.
MonthlyChart:ThebestcharttousefordetectingthemaintrendofastockintheMonthly
highandlowChart.
WeeklyChart:TheWeeklyhighandlowChartisthenextbestguidetotherealtrendofa
stock.
DailyChart:Whenamarketismovingveryfastandisveryactiveonlargevolume,the
DailyhighandlowChartisgoodguideandtrenddetector.
Todetect whenastockisgettingintostrongpositionandreadytoadvice,lookupthe
MonthlyChart.Ithereisgoodsupportandgoodbuying,thenthestockwillgraduallybeabsorbed
andasitgrowsscarcerandthedemandincreases,itwillworkhigherandreceivesupportatahigher
level,makinghigherbottomsandhighertops.
Whenastockisgettingreadytochangetrendtothedownside,itwillstartmakinglower

topsandlowerbottoms:thenwhenitbreaksbelowthepointfromwhichismadethelastrunupto
thetop,iswillbeanindicationthatthemaintrendhasturneddown.
KINDOFSTOCKSTOTRADEIN
Thekindofstockstotradeinarethosethatareactiveandthosethatfollowtherulesanda
definitetrend.Therearealwaysqueeractingstocksandsomestocksthatdon'tfollowtherules.
Thesestocksshouldbeleftalone.Stocksthatholdinanarrowtradingrangeforalongtimeshould
notbetradedinuntiltheybreakoutontheupsideorbreakbottomsonthedownsideandshow
increasedvolumeofsalesandactivity.
WHERETOBUYANDSELL
Youshouldbuyastocknearasinglebottom,adoublebottom,oratriplebottomandplacea
stoplossnotmorethat3pointsaway.Bybuyingnearasinglebottom,Imeanthatafterareaction
youshouldwaitastockholdsaroundalevelfor2to3weeks,thenbuyandprotectwithastoploss
order3pointsunderthelowestweek,orinactivemarketsifastockreactsandthenboldsarounda
levelfor2to3days,buyandprotectwithastoplossordernotmorethan3pointsunderlowestday.
Whenthestocksellsaroundthesamepricelevelseveralweeks,severalmonthsorayearormore
apart,itformsadoublebottomandisabuy.Ifitsellsaroundthesamelevelthethirdtime,itisa
triplebottom.
Whenastockadvancesinanewhighlevelsorcrossesaformeroldtopby3pointsthenifit
isgoinghigher,isshouldnotreactback3pointsbelowtheformeroldhigh.Thenyoushouldbuy
onaslightreactionof1topointsandplaceastoplossorder3pointsundertheoldtop.
Afterabullmarketgetsstarted,buyonareactionandplaceastoplossorder3pointsunder
theprevioussupportlevel.
Afterastockcrossthetopofapreviousyearby3points,itisabuyonanylittlereaction.
Forexample:
DouglasAircraft:1932high185/8.1933high181/4.In1934whenitcrossedthisdouble
top,accordingtotheruleyouwouldbuy.RefertoChartNo.1onpage16.Thestockadvancedto
28in1934.Thenin1935afterDouglasAircraftcrossed281/3,itneverreactedlowerthan26.
Therefore,whenitreactedhackbelow28,itwasabuywithastopat25.Itissignificanttonote
thatafterDouglascrossedtheoldhighof28,itneverreacted3days(thereactionsonlylasting
about2days)beforethestockresumeditsupwardtrend.Wheniscrossedthe1929highat45,
youwouldbuyagainandcontinuetopyramidaslongasitshoweduptrend.Thestockadvancedto
583/8inDecember1935.
Reversetheaboverulesonthesellingside.Youshouldsellagainstsingletops,doubletops,
ortripletops,oratsomepointswhereyoucanplaceastoplossordernotmorethan3pointsaway,
orwaituntilastockshowsdistributions

CHARTNo.1DOUGLASAIRCRAFT
MonthlyHighandLow:19281935

CHART.2UNITEDFRUIT
WeeklyHighandLow:1935

andbreakthelastimportantbottomby3points,thensellshortonasmallrallyandplaceastoploss
order3pointsabovetheoldbottom.Afterastockbreaksthebottomofapreviousyearby3points,
itisashortsale.
Inabearmarketwhenastockdeclinesandbreaksanoldbottomby3pointsormore,thenif
itisgoingloweritshouldnotrally3pointsabovethebottombeforeitgoeslower.Forexample:
UnitedFruit:Thisstockmadealowof847/8inMay,1933andalowof841/4inJune,
1935:ralliedto903/4inJuly,andafteritbroke81or3pointsunderthesepreviouslows,itnever
rallied3pointsabovethemuntilitdeclinedto60inOctober,1935.RefertoChartNo.2onpage
37.
Whateveryoudo,itshouldbeaccordingtoadefiniteruleandafterthemarketshowsa
definite trend.Wait forassureanindicationtobuyorsellasyoucanpossiblyget.Don'tget
impatientandjumpintothemarketjustbecauseyouwanttomakeatrade.Remember,astockis
nevertoohightobuysolongasthetrendisup,providedyouplaceastoplossorderforprotection
incasethetrendreverses.Astockinashortsaleatanytimeandatanypricesolongasthetrendis
down,regardlessofhowhighithasbeenpreviously.
PRICEATWHICHFASTMOVESSTART
Thehighertheprice,thefasterastockmovesandthewiderthefluctuations.Stocksmove

upfasteraftertheysellabove50andevenfasteraftertheysellabove100,andwhentheygetabove
150and200persharethefluctuationsareverywideandrapid.Youcanprovethistoyourselfby
goingoveranyofthestocksthathavebeenactiveandhadbigadvancesandseewhathappened
aftertheycrossed50aftertheycrossed100,andaftertheywentabove150and200.
Thesameonadecline:Stocksmovedownrapidlyfromextremehighpricesinthefirst50to
100pointsdeclinefromthetop.Afterastockgetsbelow100themovesaresomewhatsmallerand
whenisgetsbelow50,theyareevensmallerandriddlesarealsosmaller,especiallyifthestockhas
badabigdecline.Thelowertheyget,thelesstheyrally.
TIMETOHOLDAFTERBUYINGOFSELLING
Afteryoumakeatrade,ifthestockclosesshowingyoualossthefirstday,youareapttobe
wrongandtradingagainstthetrend.Ifitclosesagainstyouthethirdsuccessiveday,youarewrong
ninetimesoutoftenandshouldgetoutofthistradeimmediately.
Whenyoubuyorsellandthetradeimmediatelymovesinyourfavorandcloseswithaprofit
thefirstday,youarerightandwiththetrend.Attheendofthreedaysifitstillshowsyouaprofit,it
isalmostasuresignthatyouarerightandwiththemaintrend.
Therefore,getoutatoncewhenyouseethatyouarewrongandholdwhenyouseethatyou
areright.
BUYINGOUTRIGHTFROM1929TO1932
Ihavewritteninallofmyformerbooksthatitneverpaystobuystocksoutrightbecauseit
doesnothelpanyifthetrendhappenstogoagainstyou.Ihavestatedthattheonlytimeitissafeto
buystocksoutrightiswhentheyaresellingaround$10pershareorlower.Somanypeoplegetthe
mistakenideathatbecausetheyhaveastockpaidfortheycannotloseonit.Thatisjustwherethey
arewrong.Whenyoubuyastockoutright,youdonotworrybecauseyouthinkyouwillnothavea
margincall,butyoualsofailtorealizethefactthatyoucanloseallthemoneythatyoupayforthe
stock,becauseitrangotonothingandheassessed.Therefore,whenyoumakeatrade,theideaisto
knowwhatyouaregoingtodoifitgoesagainstyou.Youshouldprotectitwithastoplossorder
andlimityourrisk.Holdingonandhopingnever,helpedanyoneandneverwill.Whenyouare
wrong,getoutatthemarketandtakeasmallloss,butwhenthemarketmovesinyourfavor,hold
onforbigprofits.Don'tthinkthatbecauseyouarewellacquaintedwithastockandbecauseithad
goneupformanybullcampaignsinthepast,thatitwillgoupinthefuture,becauseoldleadersgo
andnewonescometotaketheirplaces.Youmustkeepuptodateinthemarketandbuyandsellthe
newleadersinordertomakeprofits.
WATCHBOTTOMANDTOPSOFPREVIOUSCAMPAIGNS
Whenastockbreaksthebottomoftheprevioushearcampaignby3points,thenyoushould
watchforsupportaroundthebottomofthenextformercampaign.Forexample:
Whenstocksstarteddownin1929,youshouldwatchthebottomsof192324,theprevious
campaign.Thenifthoselowswerebroken,youshouldwatchthebottomsofthe1921campaign,
fromwhichthegreatBullMarketstarted.Itthesebottomswerebrokenby3pointsthenextlows
wouldbe1917,then1914andafterthatthe1907paniclows,then190304and1896extremelows.
Youshouldlookupeachindividualstockandseewhatyearsitmadeitspreviousextreme
lows.Whenyoufindthatastockhasreachedtheextremelowofitshistoryandthenholdfor
severalweeksorseveralmonthsandfailstobreaktheoldbottomby3points,youjudgethatitisin
astrongpositionandtimetobuywithastoplossorder3pointsundertheoldlowlevel.
IndustrialAverages:In1932,aftertheAveragesbrokethelowof85,whichwasmadein

1931,thenextimportantbottomtowatchwasthelowof64in1921.TheAveragesdeclinedto70
in1932,andheldforsometime,butfinallydeclinedandbrokethelowof64.Thenyouwouldtook
forthenextbottomandwouldfindthatin1907and1914theseAveragesmadealowat53.When
theydeclinedandbroke53in1932,thesupportleverofthesetwopanickydeclines,youwould
havetolookforthenextbottom,whichwas43in1903,fromwhichabigbullcampaignstarted.In
July1932theDowJonesIndustrialAveragesdeclinedto40failingtoget3pointsunderthe
1903low,asignofsupport.Themarketbecamedullandnarrow,thevolumeofsalesdroppedto
thelowestofanytimesince1929,accumulationtookplaceandthetrendturnedupagainfromthat
point.
Inanextremebearcampaign,like192932,whenastockdeclinesbacktotheoldlevels
made20to30yearsbefore,thenholdswithoutbreakingthesepreviouspaniclevelsby3points,it
indicatesthatitisreceivingsupportandthatitisabuywithastoplossorder3pointsundertheold
lowlevel.
U.S.Steelisanexample.InJune,1932,itdeclinedto211/4,whichwasonly5/8points
lowerthantheextremelowinthe1907panic.Itwasabuyprotectedwithastoplossorderat19.A
rallyfollowedthatlevel,butU.S.Steeldidnothavesobiganadvancefrom1932to1935asother
stocksbecauseithadbeensplitupandtheamountofstockincreasedfrom5millionsharestoover
8millionshares.
Itisjustasimportanttowatcholdtopsofpreviouscampaigns.Thefurtherbacktheyare,the
moreimportantwhentheyarecrossedby3points.Forexample:
WestinghouseElectricmadealowof38in1918andalowof40in1919.In1921the
lowwas387/8,sellingaroundthesamelevelfor3years.Thisshowedstrongsupportandindicated
thatthestockwasbeingaccumulatedformuchhigherprices.Itcontinuedtoworkhigherandin
1925crossedthe1915highat747/8andadvancedto84,whichshowedthatitwasgoinghigher.
Thenexttoptowatchwasthehighof116in1902,thehighestofitshistoryuptothattime.
Whenitcrossedthislevel,itindicatedmuchhigherprices,andaccordingtotheruleyouwould
continuetopyramidallthewayup.Thestocksoldat2925/8in1929.
Followthetrendofeachindividualstockinthesamewayandwhenitcrossesthetopofa
previousyearorthetopsofpreviouscampaignby3points,itisanindicationthatthestockisgoing
higher.
In a bear campaign you should watch tops of former campaigns as well as bottom of
previous campaigns. In the bull market that culminated in November, 1916, the DowJones
IndustrialAveragesreachedanewhighlevelof110,thenfollowedasharpdecline.In1919these
averagesmadeanothernewhighjustunder120;theninthepanickydeclinein1921reached64.
Afterthebullmarketculminatedin1929,therewasasharpdecline inOctober,1931andthe
averagesbroke3pointsunder120,theold1919top,whichwasanindicatoroflowerprices.Then
wewouldwatchthenexttopof110.Whentheaveragesbroke3pointsunderthattop,theydeclined
to85inOctober,1931.ThenonNovember9,1931,ralliedbackto119oraroundtheoldtopat120.
Whentheyfailedtocrossthisoldtop,itwasanindicationthatstockswerestillinabearmarketand
thatpricesweregoinglower.
HOWTODETECTEARLYLEADERSINABEARMARKET
Stockswhichadvancefastandmaketopandaredistributedbeforeotherstocksreachtop
indicatethattheywillbeearlyleadersinabearmarket.
When stocks break the bottoms of previous years or the low point for several months
previous,aheadofotherstocks,theyindicatethattheywillbeearlyleadersorstocksthatdecline
firstandreachbottomaheadofthegenerallistofstocks.Forexample:
Chrysler Motors: In March, 1926, Chrysler Motors sold at 28 , The big bull market
followedandinOctober,1928itreachedextremehighat140.Thiswas11monthbeforethe

DowJonesAveragesandthegeneralmarketmadetopinSeptember,1929.Youcouldhavebeen
shortofChryslerwhileothersstockswereadvancing.Manymotorstocksdidnotreachhighuntil
AugustandSeptember,1929.ItisimportanttostudyandseewhathappenedtoChryslerin1929
whilethebigadvanceinotherstockswastakingplace.LookattheMonthlyandWeeklyCharts.In
January,1929Chryslerhigh135;trendturneddownandinMay,1929,itdeclinedto66,down74
pointsfromthe1928high.August,1929,highoftherally79,stilldown61pointsfromOctober,
1928high.Then,whenthegreatcrashfollowedinOctoberandNovember,Chryslerwhichalready
showeddowntrendandwasinaweakposition,declinedto26inNovember,1929.OnApril,1930,
highoftherally43,whichshowedweaknessbecauseitfailedtohaveanybigrally.June,1932,low
5.Stayedaroundthelowlevelfor4months,down135pointsfromthehighofOctober,1928.
Whenastockadvancedsharplyinthefirstorsecondyearofabullmarketandmakestop
andthenfailsfortwoyearstocrossthetopmadeinthefirstorsecondyearofthebullmarket,itis
signofweaknessandthestockshouldbesoldshortwhenitshowsthatthetrendhaswatchingthe
MonthlyandWeeklyCharts.Forexample:
CornProductswasoneofthestocksthatwasanearlyleaderin1933.InAugust,1934,it
declinedto56;thenshowedaccumulationandthetrendturnedupagain,butwhentheadvance
started in March, 1935, Corn Products moved up slower than it had in 1933In July, 1935, it
reachedahighof783/8.BystudyingtheWeeklyChartandtheDailyChart,itwaseasytoseethat
CornProductshadmadetop.Refertoweeklychartsonpages4445.Itfailedby12pointstoreach
thehighofAugustandSeptember,1933,whichshowedthatthesellingwasbetterthanthebuying.
InOctober,1935,itdeclinedtoalowof60,down18pointsfromthehighofJuly,1935.
CHARTNo.3aCORNPRODUCTS
WeeklyHighandLow:19331934

CHARTNo.3bCORNPRODUCTS
WeeklyHighandLow:193435

while the averages and other individual stocks were advancing during August, September and
October,1935.ThisprovesthatbyfollowingtherulesyoucouldhavebeenshortofCornProducts
andmakingmoneyandatthesametimecouldhavebeenbuyingWestinghouseandotherstocks
andmakingmoneyonthelongside.
NotethatCornProductsduringtheweekendedJuly13,1935heldinanarrowtrading
range.Then,intheweekendedJuly20,therewasasharpdeclineto70onalargevolume.This
wasasureindicationthatthetrendhadchangedandturneddownandthatyoucouldsellitshort.At
thesametime,theDowJonesAveragesshowedstronguptrend,butjustbecausetheAverages
showeduptrendwasnoreasonthatyoushouldbackthetrendandbuyCornProductswhenit
indicatedthatitwasashortsale.
HOWTODETECTEARLYLEADERSINABULLMARKET
Stockswhichdeclineandmakebottomandshowaccumulationbeforeotherstocksreach
bottomindicatethattheywillbeearlyleadersinabullmarket.
Whenstockscrossthetopsofpreviousyearsorthehighpointofthepastfewmonthsahead
ofotherstocks,theyindicatethattheywillbeearlyleaders.
Ineverybullmarketthereareearlyleadersorstocksthatadvancefirstandthenmaketops
aheadofotherstocks.Thestocksthatmadebottomearlyandaccumulatedin1931whileother
stocksweredecliningwereamongthefirsttoadvancein1932and1933.Forexample:

AmericanCommercialAlcohol:April,1929extremehigh90;October,1931extremelow,
5,makingbottom8monthsbeforethelowofthegenerallistin1932.Notethenarrowrangeand
bigaccumulation.InMay,1932,whenotherstocksweremakingnewlows,thisstockcrossedall
topsofthepastyearendshoweduptrend.September,1932high27;February1933low13,two
pointshigherthanthepreviousbottom.InMay,1933crossedthe1932highandinJuly,1933
reachedahighof90,thefailedtocrossthislevel.Thisbeingadoubletop,iswhereyoushould
havesoldoutlongandgoneshortwithastop3pointsabovethe1920high.July,1934low20;
Decemberhigh34;June,1935low22.Holding1pointsabovethepreviousbottom,it
showedgoodsupport.Itheldfor7monthsbetween23and28,andinOctober,1935crossed28,
showinguptrend:inNovember,1935crossedtheDecember,1934highat34.Itwillhaveto
advance3pointsabovethatleveltoindicatehigherprices.
U.S.Smelting:Thiswasanotherearlyleaderthatshowedplainlyaheadoftimethatitwas
goingtohaveabigadvance.April,1929high,727/8;September,1931low123/8;inNovember
ralliedto26;June,1932extremelow10,whichwasthelowestinitshistory.NotetheYearlyChart:
1907low24;1915low20;1916high81,therecordpriceuptothattime;1923low18;1929
high727/8,makinglowertopssince1916;theninJune,1932madeanewalltimelow.
Bigaccumulatetookplaceinanarrowtradingrange.InApril,1933U.S.Smeltingcrossed
26,abovealltopsbackto1930.SeeChartNo.4onpage48.Hereyoushouldstartbuyingand
wouldpyramidasthestockworkedhigher.Afastadvancefollowed.InJuly,1933,itcrossed73,
the1929high,asureindicationformuchhigherpricesandaplacetobuymore;thencrossed81,
thehighof1916,thehighestinitshistory.Herewouldhavebeentheplacetobuymorestockand
continuetopyramid.In1933,September,OctoberandNovembermadehigharound105,andin
February,1934crossed105,whereyouwouldbuyagain.Itreachedextremehighof141inJuly,
1934,up131pointsfromitslow,atthetimewhenotherstocksweremakingbottoms.Afterthis
quickadvanceagainstthetrendofthegeneralmarket,thestockworkedlower,showingdowntrend,
whileotherstocksstillshoweduptrend.InSeptemberandDecember,1935itsoldat92.
CHARTNo.4U.S.SMELTING
MonthlyHighandLow:19241935

U.S.IndustrialAlcohol: InJune,1932,itmadealowof13;advancedinSeptember,
1932to36;thenonthesecondarydeclineinFebruary,1933declinedtoalowof13,holdingone
halfpointabovethe1932low.Thisdoublebottomwasasignofstrengthandaplacetobuy.In
1933,inJuly,U.S.IndustrialAlcoholadvancedto94.This wasduetotheRepcal ofthe18 th
Amendmentandanoverestimatedthepublicoftheearningthatwhiskeystocksandotherindustrial
alcoholcompaniescouldmake.Thepublicwentwildandboughttoohigh.Thissharpadvancefrom
alowof13 inFebruary,1933,toahighof94inJuly,1933wasentirely toofastandthe
movementcollapsed.InSeptember,1934,U.S.IndustrialAlcoholdeclinedto32.TheDowJones
IndustrialAveragesreachedlowonJuly26,1934.InDecember,1934,U.S.IndustrialAlcohol
ralliedto47.Afterthatitwasaslowmover,laggedbehindthemarketanddidnotcross47again
untilSeptember,1935.
Ifyouhadfollowedthetrend,youwouldhaveboughtthisstockallthewayupin1933and
thenassoonasthetrendturneddownontheWeeklyChart,youwouldbegintosellitshort.
UnitedFruit:InJune,1932,extremelow10.Showedgoodaccumulation,turnedupand
indicatedthatiswouldbeanearlyleaderswhenitcrossedthe1932highat321/8inMarch1933.It
wasagoodleaderin1933,1934andearlyin1935.1933high68;1934high77;May1935high92
.Aslongasitcontinuedtomakehigherbottomsandhighertops,youwouldbuy,butwhenthe
trendturneddowninJuly,1935,aheadofotherstocks,youwouldfollowtotrendandsellisshort.
ChryslerMotors:InJune,1932,extremelow5;September,1932,high21.March,1933
declinedto7,ahigherbottomthat1932by2points,asignofstrengthandaccumulationanda
goodplacetobuy.April,1933,ChryslerstartedactivityonincreasedvolumeandinMaycrossed
the1932top,asuresignofhigherprices.Thencrossedthe1931highat25andthe1930highat
43.February,1934high60onbigvolumeofsales.TheDailyandWeeklyChartsshowedthat
thiswasatopandthetrendturneddown.AugustandSeptember,1934,Chryslersoldat29.Asit
heldnearlyhalfoftheadvancefromthe1932lowtothe1934high,itwasinstrongposition.
March,1935,madeanotherbottomat31,holding1pointsabovethe1934level,adoublebottom,
asignofgoodsupportandtimetobuy.August,1935itcrossedtheold1934topat603/8,asure
indicationofhigherpricesandaplacetobuymore.December,1935,advancedto932/8.Fromthe
lowinMarch,1935tothehighinDecember,1935,Chrysleradvanced627/8pointsandatnotime
reactedmorethan9pointsawonderfulopportunitytopyramid,whichwasplainlyshownallthe
timebythestrongestuptrend.
HOWTODETECTSTOCKSINSTRONGPOSITION
ItiseasytopickthestocksinstrongpositionifyoufollowtheruleslaiddowninTRUTHOFTHE
STOCKTAPEandWALLSTREENSTOCKSELECTORandtherulesinNEWSTOCKTREND
DETECTOR.
Example:
Westinghouse:June,1932,low155/8,thesamelowas1907.Accordingtoourrule,this
was a place to buy with a stop 3 points under the old bottom. September, 1932, high 43 ;
February,1933,low193/8,ahigherbottomby3 points,showinggoodsupport.Thestock
remainedinadull,narrowtradingrangeforsometimeandbytherulesfordetectingachangein
trendyouwoulddiscernthatthiswasaccumulationandwouldbuythestock.Onereasonwhyyou
shouldbewatchingWestinghousewasthatthisstockwasneversplitupandneverdeclaredastock
dividendduringthe1929boom.
In July, 1933, Westinghouse crossed 43 , the top of September, 1932. This was an
indication forhigher prices andyoushouldhave boughtmore whenis crossed theold top.It
advancedto58inJuly,1933.TheDailyandWeeklyChartsshowedatthetime,thatitwas
makingtopandyouwouldselloutandgoshort.InOctober,1933,itdeclinedto285/8,makinga

higherbottomby9pointsthanFebruary,1933,stillshowingastronguptrend.Thenitheldfora
longtimeinanarrowtradingrangewithasmallvolumeofsales,asignofaccumulation,andfailed
tobreakthebottomat285/8.
ItadvancedinFebruary,1934toahighof47,whereagaintherewaslargevolumeandthe
DailyandWeeklyChartsshowedthatitwasmakingtopandthatiswastimetogetoutandgo
short,asthetrendofmoststocksturneddownafterFebruary,1934,whenthetradingwasrunning
at the rate of 5,000,000 shares per day after stocks had had a big advance. In July, 1934,
Westinghousedeclinedto277/8onlypointlowerthanthebottomofOctober,1933,andifyou
boughtaround29,theoldbottom,witha3pointstoplossorderat26,thestopwouldnothavebeen
caught. After the low of July, 1934, Westinghouse remained in a narrow trading range until
December,1934,asingofaccumulation.Adetectivewhohadbeenwatchingthisstock,would
haveseenclearsignsofaccumulationwhenitfailedtobreaktheoldbottombyonepoint,and
wouldhaveboughtthestock.
InMarch,1935,whenmostallofthestocksreactedandtheDowJonesIndustrialAverages
madebottom,Westinghousedeclinedtoalowof323/8;thenactivitystartedandvolumeofsales
increased.InApril,1935,itcrossed47,the1934top,astrongindicationofhigherpricesanda
placetobuymore.
In July, 1935, Westinghouse crossed 58 , the 1933 high, another strong indication of
higherpricesandaplacetobuy.Accordingtooutrule,isshouldnotdecline3pointsunderthisold
top,whichwouldbe55,inordertomaintainastronguptrend.Afteritcrossed58itreactedto57
only,andthenadvancedto98inNovember,1935.Thiswasagoodstocktopyramidasit
showeduptrendallthewayagoodstocktopyramidasitshoweduptrendallthewayfromMarch,
1935toNovember,1935.
NEWLOWSLATEINABEARCAMPAIGN
Whenstocksdeclinelateinabearcampaign,orafteraprolongeddeclinewhichhasruntwo
orthreeyears,andbreakintonewlowlevels,theyarenotlikelytodeclineasfarastheywouldif
theybrokeintonewlowlevelsearlyinthecampaign.Youruleshouldbethatafterastockdeclines
tonewlowlevelsandthenralliesback3pointsabovetheoldbottom,itisanindicationthatthe
declineisover,thatliquidationhasbeencompleted,andthatthestockisgettingreadytoturnup
again.
AmericanTel.&Tel.:1907paniclow88.InJune,1932itbroke88afterthebearmarket
hadrun33monthandinJuly,1932,declinedto70,or17pointslowerthantheoldlowof
1907,butlaterinthatsamemonthralliedandclosedat89.Abovetheoldlowof88.Thedecline
below88wasafinalwaveofliquidationandthequickrallythatfollowedwasanindicationthat
finalbottomhadbeenreached.InAugustthestockadvancedto91,or3pointsabovetheoldlowof
88,anindicationofhigherprices;theninSeptember,1932,advancedto121.Followingtherule,
youwouldhaveboughtAmericanTel.&Tel.At91,whenitwas3pointsabovetheoldbottomat88
,eventhoughtitwasup20pointsfromtheextremelow,andthenwouldhavemade30pointsonit
inlessthan2months.Anotherproofthatyoushouldalwaysfollowtherulesandgowiththetrend
ofanindividualstockandchangewhenthetrendchanges.
ConsolidatedGas:Thisisanotherstockthathadafinalwaveofliquidationin19341935
whenotherstockshadcrossedprevious highs.1923low561/8.In1932,itbroke561/8and
declinedto32;ralliedto66inSeptember,1932.TheninJuly,1934,itbroke32,thelowof1932,
anddeclinedto152/8inFebruary,1935;ralliedto34inAugust,1935and34inNovember.
Whenitfailedtoget3pointsabovethe1932lowof32,asignofweakness,youshouldhavesold
outandgoneshort.Itdeclinedto255/8inSeptember,1935.Whenitcancross35,orget3points
abovetheoldlow,itwillthenindicatehigherprices.

NEWHIGHSLATEIN1929BULLMARKET
TheDowJones30IndustrialAveragesmadetheextremehighonSeptember3,1929and
U.S.Steelandmanyotherleadingstocksreachedhighonthatdate,butveryfewpeopleknowwho
donottaketroubletokeepuprecords,thatafterthebigcrashinSeptember,1929,somestocks
werestillworkinghigherandmadethehighoftheyearinearlyOctober,1929.
Timken Roller Bearing: The high for Timken during September, 1929, was 119 .
Extremehighof1392/8reachedinOctober,1929.Itmade20pointshigherinOctober,whilethe
Averageshaddeclined100pointsfromthehighinSeptember.
U.S.IndustrialAlcohol:September,1929high226.EarlyOctober,1929,high2435/8,
makingatop17pointshigherinOctoberthaninSeptember,despitetheheavysellingandthesmall
inthegeneralmarket.Thetimewasnotyetupforthislatemovertomaketop,and,therefore,it
advancedagainstthetrendoftheAverages.
YouwouldhavemadeamistakeifyouhadsoldTimkenRollerBearingandU.S.Industrial
AlcoholshortjustbecausetheAveragesandotherstockshadturneddownandwereshortsales,but
ifyouhadfollowedtheruleandboughtthesestocksaccordingtothetrend,asindicated,youwould
havebeenlongofthemuntiltheyreachedtopandgaveasignalfordowntrend.
NEWHIGHFOLLOWINGYEARAFTERENDOF
BULLCAMPAING
Afteramarketreachedfinaltopofabullcampaign,usuallythereisasharp,quickdecline,
then asecondary rally,from which aprolonger bearmarket follows.After theextreme topin
September, 1929, there was a panicky decline in October and November, one of the worst in
history. Then stocks advanced and made a secondary top in April, 1930, with the DowJones
IndustrialAverages nearly100pointslowerthanthe1929tops.Yet,afewstocksmadethese
extremehighsinApril,1930.
Itisinterestingtostudywhatkingofstocksrecordednewhighsanddeterminewhythey
madethem.MostofthestockswhichadvancedintoanewhighterritoryinApril,1930,werestocks
thathadasmallamountofstockoutstandingandwereeasytomanipulate.Whenthesestocks
crossedthe1929highs,theycertainlyindicatedhigherandyoushouldhavefollowedtheirtrendup
untiltheyindicatedtop,eventhoughtotherstockswerestillinabearmarketandsellingfarbelow
the1929highs.
CocaCola:Thisstockwhichhadbeensplitupin1929,advancedin1930anddidnotreach
highuntilJune,1930.Itrecordedahighof1913/8atthattime.Inviewofthefactthatithadbeen
lateinmakingitstop,itwouldnaturallybelateinmakingabottom.Whilemanystocks,infactthe
majority of stocks, made low in Jun, 1932, Coca Cola declined and did not make low until
December,1932,whenitsoldat68;thenshowedaccumulationandthemaintrendturnedup.It
continuedtoworkhighereachyear,makinghigherbottomandhighertops,untilitadvancedto298
inNovember,1935andwasagainsplitup4for1.
ElectricPower&Light:InthepanickydeclineofNovember,1929,thisstocksoldata
lowof291/8;inApril,1930madeahighof103,up17pointsabovethehighofSeptember,
1929.AfteritcrossedtheSeptember,1929,high,youshouldhavefollowedthetrendupuntilit
showeddefinitesignsofturningdown.Then,whenitbrokebackundertheSeptember,1929,top
andshoweddowntrend,youshouldhavefolloweditdownontheshortsidejustthesameasany
otherstock.
InJuly,1932,ElectricPower&Lightdeclinedto2.InSeptember,1933,itadvancedto
16;thenworkedlowerin1933,1934and1935.Whenotherstocksadvancedin1934and1935and
thisstockfailedtocrossthehighofSeptember,1933,itindicatedashortsale.InMarch,1935,
whenthePublicUtilityStockswereunderpressureduetoadverselegislation,ElectricPower&

Lightreactedanextremelowof11/8.Therefore,asthisstockwasworkingdownandmakingnew
lowsfromtimetotime,showingdowntrend,youshouldhavebeenfollowingitstrendandselling
short.
VanadiumSteel:February,1929,high116.April,1930,high143.April,1935,low11
.OneofthereasonswhythisstocksadvancedtosuchahighlevelinApril,1930,wasbecause
therewasasmallavailablesupplyofstockandasmallnumberofsharesoutstanding.Atthetime
the directors oftheCompany made alot ofmoneyspeculation instocks.Thenfollowed poor
businessandthecompanyduringthedepressiongotintoabadfinancialcondition.Afterthestock
declinedto11inApril,1935,itworkedupveryslowly,beingalatemoverinworkingupjustas
itwasin1930,becausethesteelbusinesswasslowandthelasttorecoverfromthedepression.
NationalSteel:Itisimportanttocomparethepositionofthisstock,whichhasasmall
floatingsupply,withothersteelstocks.Thiscompanyshowedgoodearningsduringthedepression,
muchbetterthanVanadiumorevenU.S.Steel.NationalSteelwasalatemoverandmadetopin
April,1930,at76.July,1932,low13.Itmadehigherbottomsin1933,1934and1935.InJuly,
1935,itcrossedthetopofFebruary,1934,anindicationofhigherpricesandapointtobuymore.In
November,1935,advancedabovethetopofApril,1930.Thiscompanywithitssmallcapitalization
iswellmanagedandhasabetterfuturethanU.S.Steel,BethlehemSteelandsomeothers,butyou
mustalwaysfollowthetrendofastock,regardlessofwhatyouthinkaboutit,andwhenthetrend
turnsdown,youshouldfollowitdown.
STOCKSTHATCROSSED1929HIGHS
IhavestatedbeforethatIdidnotexpecttheAveragestoeversellatthe1929highagain,but
thatindividualstocksfromtimetotimewouldcrosstheir1929highsandmakenewhighs.For
example:
AmericanSafetyRazor:June,1932,low133/8.Itworkedhigherduring1933and1934
andneverhadmorethantwoorthreemonthsreaction.In1935,February,MarchandApril,held
around75,the1929top.May,1935,crossed75,whichwasasuresignofhigherpricesasitwasin
newhighterritory.July,1935advancedto95.Thisstockshoweduptrendallthewayfrom1932
andwasanearlyleader.Youshouldhaveboughtitrightalongandthenboughtmorewhenit
crossedthe1929high.
BycomparingGillettewithAmericanSafetyRazor,youwillseewhatwouldhavehappened
ifyouboughtthisstocktofollowAmericanSafetyRazor.InDecember,1933,Gillettemadeanew
lowat75/8;thenheldinaverynarrowtradingrange.Itreachedalowof12inAugust,1935.
ColumbiaPictures:April,1930,high54.December,1931,low25/8.Thisstockmade
lowsixmonthbeforeotherstocks.InJuly,1932,whenotherstocksreachedextremelow,Columbia
Picturescrossedtopsandalreadyshoweduptrend.March,1933,low65/8,showinggoodsupport4
pointshigherthanthe1931low.InMay,1933,crossedthe1932high,asuresignofmuchhigher
prices.Itcontinuedtoworkhigher,makinghigherbottomsandhighertopsandinMay,1935,
crossed55,abovethehighof1930.Thiswasanothersuresignofhigherprices.InJuly,1935,it
soldat81.WhileParamount,RadioKeithOrpheum,andWarnerBrother'sstocksinthemoving
picturelinewereinthehandsofreceiversandholdingatlowlevels,thisstockwasworkingup.
Alwaysbuythestocksinstrongpositionandleavethoseinweakpositionalone.
Congoleum:December,1930,low6.Itshowedalonglevelofaccumulationandmade
lastlowat7inMarch,1933;thencontinuedtomakehigherbottomsandhighertopsuntilJuly,
1935,whenitcrossedthe1929highat35.
McKeesportTinPlate:June,1932,extremelow28;Septemberhigh565/8;Decemberlow
401/8;andinFebruary,1933,whenothersstockswereatlowlevels,itadvancedto57,abovethe
September,1932top,asuresignofmuchhigherprices.Extremehighhadbeen103in1931.It

showedintheearlystagesofthecampaignthatitwasinastraightupbullmarketandarealleader.
InAugust,1933,itmadeahighof95;inOctoberreactedto67;February,1934high94;
July,1934low79,raisingbottomsallthetime.InApril,1935,whenitcrossedthe1931

CHARTNo.5NATIONALDISTILLERS
MonthlyHighandLow:19251935

high,itwaseasytodetectthatitwasinastrongpositionandmakingforanewhigh.RefertoChart
No.5onpage67.
National Distillers: June, 1929 high 58 ; October, 1929 low 15; June, 1932 low, 13,
makingadoublebottomagainstMay,1926lowat12andholdingonly2pointsunderthelowof
October,1929,anindicationofstrongsupport.Bigaccumulationtookplace,andwhileotherstocks
weremakingnewlowsrightalong,thisstockwasholingup.Against,1932high27;February,
1933low162/8.Thishigherbottomindicatedthatitwasgettingreadytoadvancetohigherlevels.
InApril,1933,itcrossedthe1932highat27and1931highat361/8,anothersuresignfor
higherprices,whereyoushouldbuyitandthenpyramidallthewayup.InMay,1933,itcrossed
the1928and1929higharound58andinJuly,1933reachedahighof124,wheneverybodygot
bullishandwastalking500to1000forthisstock;thenwasthetimetoselloutandgoshort.A
sharpdeclinefollowed.
Thisshowsthewisdomoffollowingthetrendofanindividualstockandnotthetrendofthe
Averagesofjustanygroup.
STOCKSTHATDIDNOTADVANCEMUCHFROM1932
TO1935
Bygoingoveralargelistofstocks,youwillfindmanythatdidnotadvancemuchfrom
1932to1935;infact,duringthatperiodsomeofthemmadelowerpricesthaninMaytoJune,
1932.Forexample:
AmericanInternational:July,1932low2.July,1933high151/8.1933low4,1934
low4,1935low4.InDecember,1935itwassellingat10,whileotherstocksthatmadelows
around3to5in1932hadadvanced25,50and75points.BylookingattheMonthlyCharton
AmericanInternationalyouwillseethatitnevershowedthatitwasgoingtofollowtheadvancein
otherstocks.Therefore,youwouldleaveitaloneandbuythosethatweremakinghigherbottoms

andhighertops.
StandardGas&Electric:June,1932low75/8.March,1933low51/8.December,1934
low35/8.March,1935low1.Thisstockmadenewlowlevelseachyearwhileotherstockswere
advancingcrossingformerhighs.Itsoldat63/8inDecember,1935.
NationalDairy:InJune,1932,itsoldat143/8andinFebruary,1933lowwhiletheDow
Jones30IndustrialAverageswereselling9pointshigherthantheir1932lows.Thenyoucertainly
wouldnothaveboughtNationalDairyinMarch,1933,asanearlyleaderorastockthatwould
advancefast,becauseisshowedthatitwasinaweekposition.However,itdidadvancein1933,but
notnearlysomuchasotherstockswhichhadsoldaroundthesamelowpriceasNationalDairy.
InJuly,1933itreachedhighat25.AgainthetrendturneddownandinDecember,1933,
itdeclinedtoalowof11,makingadoublebottomorslightlyhigherthanthelowofFebruary,
1933.Thiswasaplacetobuyifyouwantedtobuythisclassofstocks,whichisaslowmover.In
July,1934,itmadeahighof18;theninMarch,1935,declinedtoalowof127/8andheldina
slowtradingrange.Thefactthatitwas2pointshigherthanthelowofDecember,1933,showedthe
stock was getting supportand would eventually workup.Itdid notcross the1934high until
November,1935.Therefore,youwouldnotexpectthisstocktodeclinejustbecausetheAverages
orsomeotherstocks whichhadhadabigadvance, declined, becauseNational Dairyhadjust
advancedtoanewhigh.Regardlessofwhetheritgoesverymuchhigherorverymuchlower,itis
notlikelytodeclineasotherstockswhichhavehadbigadvancesorthosethatareup75pointsor
morefromthelowsof1932andwhichmaydeclinesharply.
U.S.Realty:1929high,119;June,1932low2;July,1933high14;March,1935low3,
onlyonepointabovethe1932low;December,1935high11.AsthisstockcontrolsNewYork
relestateisoneofthelastthingstomoveup,U.S.Realtymaybeoneofthelatemovers,butwill
havetocross1933highsbeforeitsshowsstronguptrendagain.
LoftCandy,ContinentalMotorsandotherstocksdidnotshowactivityorcrossthehigh
levelsofpreviousyearsasotherstockdid.Youshouldalwaystradeinstocksthatcrossformer
highsandmakehighertopsandhigherbottoms,astheyarethebesttobuy,andleavethedead,
inactiveonesalone.
STOCKSINWEAKPOSITIONINABULLMARKET
Afteranextremelowhasbeenreachedinabearmarketandstockstorally,thosethatonly2
to3monthinthebeginningofthenextbullcampaignandthennevercrossthetoplevelsofthefirst
rallyareinaveryweakposition.
FromJuly,1932toSeptember,1932somestockshadsharprallyof2months,thennever
crossedthetopofthatrally.Thecauseofthiswasshortcoveringintheseweakstocksandaftera
sharprecoverytherewasnotenoughbuyingdemandtokeepthesestocksmovingupwiththetrend
andtheygraduallyworkedlowerorremainedinanarrowtradingrange.Forexamples:
American Home Products: This stock declined to 25 in June, 1932; then rallied two
monthsto43inAugust,1932;anddeclinedto25againinDecember,1933.Attheendof1935,it
wassellingaround36.Itnevercrossedthetopofthetwomonthsrallyin1932,whichshowedthat
itwasinweakpositionandnotoneofthestocksthatyouwouldselectforaleader.
HOWTODETECTINDEPENDENTMOVERS
AuburnMotors: AuburnMotorshasoftenbeenanindependentmover,thatis,moving
oppositetothetrendofmotorstocks.Itadvancedwhenothermotorstocksweredecliningand
declinedwhenothermotorstockwereadvancing.
May,1933,low28;August,1932high81;February,1932low31,ahigherbottomby2
pointsthanthe1932bottom,asignofsupport.July,1933high84,only3pointsabove

August,1932high.Thenthetrendturneddown,andAuburndeclinedswiftlytoOctober,1933,
reaching31,thesamelevelasFebruary,1932.March,1934,ralliedto573/8,makingalowertop
andshowingweakness.June,1934,brokealllowsaround31and29,anddeclinedto17inJuly,
1934.October,1934,ralliedto30.Itmetsellingrightundertheoldbottomsandwhenitcouldnot
getthrough,itshowedaweakpositionandindicatedlower.1935,inMarch,madeanewlowforall
timeat15;thenstartedupandinAugustcrossed30,abovetwoformertops,andgotthroughtheold
bottoms,anindicationofhigherprices.InOctober,1935itadvancedto45.
ChryslerMotors:ComparethepositionofChryslerandAuburnatdifferenttimesandsee
howonebegantoshowweaknesswhiletheotherwasshowingstrength:
1932InJuneChryslersoldat5,andinthesamemonthAuburnadvancedto771/8.
1333InFebruaryChryslermadealowof7andAuburnmadealowof31.
InSeptemberChrysleradvancedto527/8,whileAuburnwassellingat45,down39points
fromitshighof84inJuly.AuburnwasthenshowingweaknesswhileChryslerwasgetting
stronger.
1934InAugustChryslermadelowat29,Auburnlow17.
1935InJulyChryslercrossedthe1934topsat603/8
CHARTNo.6
UNITEDFRUIT
CHRYSLERMOTORS

while Auburn was far below the 1934 top. While Auburn moved up in October, 1935 to 45,
Chrysleradvancedto88,sellingatahigherlevelthanAuburnsoldinJuly,1933.
Thisismoreproofthatyoumustfollowthetrendoftheindividualstocksandbuythosein
thestrongestpositionandsellshortthoseintheweaknessposition.
WhydidChryslermoveupmuchfasterduring1935thanAuburnandothermotorstocks?
Becauseithadmadehighearlyinthepreviousbullcampaign,reachinghighinOctober,1928;

therefore, its time period was different than other stocks. Auburn made high late in the 1929
campaign:reactedto603/8,andthenadvancedto295inApril,1931,whileotherstockswere
onadecline.Thisagainprovesthatyoumusttradeaccordingtothetrendoftheindividualstocks.
BUYINGONESTOCKANDSELLINGANOTHERSHORTATTHE
SAMETIME
UNITEDFRUITANDCHRYSLERMOTORSCOMPARISON
Acomparisonofthesetwostocksandtheirweeklyhighandlowmovementsfortheyear
1935istoprovetoyouhowimportantitistostudyindividualstocksandtradeaccordingtothe
trendoftheindividualstockandnotbuyonestockjustbecausesomeotherstockisgoinguporsell
onestockshortbecausesomeotherstockhappenstobedeclining.Judgeeachstockaccordingtoits
positionanddetermineitsindividualtrendandgowithit
1935
Week
ended
Jan.5

UnitedFruithigh75;ChryslerMotorshigh42.UnitedFruit33pointshigherthan
Chrysler.

Mar.16

Chryslerreachedlowoftheyearat31;UnitedFruitsellingat751/8,or441/8points
higherthanChrysler.
AtthispointifyouhadfollowedthetrendonChrysler,whichshowedup,andhad
boughtChrysler,andthen,whenthetrendshoweddownonUnitedFruit,hadgone
short,youwouldhavemadebigprofitsonbothdeals.

Aug.10

UnitedFruit72,down20pointsfromthehighofweekendedMay18.
Chrysler62,up133/8pointsfromthehighofweekendedMay18.atthistime
UnitedFruitwasonly9pointshigherthanChrysler.

Aug.24

OnareactionChryslersoldat57.
UnitedFruitwassellingat65,only7pointsaboveChrysler.

Sept.14

Chrysler74,UnitedFruit74.UnitedFruitdown18 pointsfromthetopofMay;
Chryslerup245/8pointsfromhighofweekendedMay18.Hereyouwouldhavehada
profitof24pointsinChryslerifyouhadboughtitatthetimeyousoldUnitedFruit
shortandyouwouldhavehad18pointsprofitinUnitedFruit.Thetrendwasstilldown
onUnitedFruitandthetrendwasstilluponChrysler.Youwouldtradeinbothstocks
accordingtotheirindividualtrend.

Oct.5

Chryslerlow69.UnitedFruitextremelowofthedecline60,down32pointsfrom
thehigh.AtthistimeChryslerwasselling8pointshigherthanUnitedFruit.

Nov.23

Chryslerhigh90,UnitedFruit73.Chrysler16pointshigherthanUnitedFruit.

Dec.38

Chryslerreachedextremehighoftheyearat937/8.UnitedFruitagaindeclinedto60
7/8.AtthistimeChryslerwas33pointshigherthanUnitedFruit.

TheWeeklySwingChartonUnitedFruitandChrysleronpage62showsyouhowthese
stockswerefarapartandthenhowtheyworkedandcametogether;thenoneworkedlowerandthe
otherworkedhigher.

Thisisnottheonlycomparisonofthiskindthatcanbemade.Therewaremanyotherstocks
in1935thatweredecliningwhileotherstockswereadvancing,butthisisampleproofofthelarge
profitsthatyoucouldhavebeenmakingbykeepingshortofUnitedFruitrightalongandatthe
sametimepyramidingonthelongsideofChrysler,buyingallthewayup.
Bysellingstocksshortthatareinweakpositionorshowdowntrendandbuyingthestocks
thatshowuptrend,youcanoftenmakemoneyontheshortsideandthelongsideatthesametime.
STOCKSTHATRALLYORDECLINEONLYTWOTOTHREE
MONTHS
Asarule,inabullmarketastockthatisgoinghigherwillnotreactmorethantwotothree
monthsandshouldresumetheupwardtrendinthethirdmonth.Ifastockisgoingloweritwill
continuethedeclineinthethirdmonth.
Chrysler:Afteritsoldat28inMarch,1926,itneverhadmorethantwomonthdeclineat
anytimeuntilitadvancedto140inOctober,1928.Afteritreactedtopat140itneverrallied
overtwomonthsuntilitsoldat26inNovember,1929,whichshowsyouhowimportantthisruleis.
InApril,1930,thehighwas43anditneverralliedovertwomonthsuntilthetimeitsoldat5in
June,1932.
DowJonesRailroadAverages:
TheDowJones20RailroadAveragesreachedthehighestintheirhistoryinSeptember,
1929whentheysoldat189.TheydeclinedsharplyinthepanicofNovember,1929;thenralliedto
158inApril,1930;anddeclinedto13inJune,1932.ThelowestpriceatwhichtheseAveragessold
inAugust,1896,was42.Therefore,whentheybroketheirlowestaveragelevelinhistory,they
indicatedmuchlowerpricesandyoushouldhavesoldrailroadstocksshortandfollowedthem
downuntiltheAveragesandtheindividualstocksthatyouwereshortofshowedthattheyhad
reachedbottomandthatachangeintrendwastakingplace.
Oneofthesignsofweaknessinabearmarketisarallyofonlysixtosevenweeksofnot
morethantwomonths,notgettinghigherinthethirdmonth.FromMarch,1930tothelowin1932
atnottimedidtheRailroadAveragesadvanceovertwomonths;andfromFebruary,1931,whenthe
highwas111,untiltheydeclinedtoalowof13,theyneverralliedmorethanonemonths.Thiswas
asignofgreatweakness,indicatingheavyliquidationandarealpanickybearmarket.
SHOULDSTOCKSWITHSMALLNUMBERSOFSHARES
OUTSTANDINGBESOLDSHORT?
Inabearmarketorwhenthetrendofastockisdown,itisjustassafetosellshortstocks
withasmallnumberofsharesoutstandingasitistosellshortstockswithalargenumberofshares
outstanding,becausetheyallgodownafterdistributionhasbeencompleted,andstocksthathave
soldveryhighgoverylow,aswasprovedinthegreatpanicof1929to1932.Example:
CaseThreshingMachine:Withonly130,000sharesoutstanding,Caseadvancedto515in
November,1928;thendeclinedtoalowof16inMay,1932.Thisstockbadmanysharprallies.If
youhadfollowedthetrend,solditshortaslongasthetrendwasdown,coveredandwentlong
whenthetrendshowedup,youwouldhavemadealargeamountofmoneyasitworkeddown
nearly500pointsfromthetop.
AuburnMotors:Thisisanotherexampleofastockthatsoldat514inSeptember,1929and
declinedto15inMarch,1935.
Auburnhadonly166,000sharesoutstanding,yetitdeclined499pointsfromtheextreme
highin1929totheextremelowin1935.HowmanypeoplewouldsellAuburnshortafteritwas
downto100andafteritsoldat50?Yet,aslongasthetrendwasdown,itwasashortsaleevenat
25or20.Thesameonthelongside!Astockisgoodtobuynomatterhowhighisgoesaslongas

thetrendisup.Auburnwasjustasgoodtobuyat400whenthetrendwasupasitwastosellshort
at40whenthetrendwasdown.
RadioCommon:Whilethiswasnotastockwithasmallnumberofsharesoutstanding,it
reachedextremehighat549inMarch,1929;wassplitup5forone;declinedtoalowof2in
June,1932.Howmanypeoplein1929dreamedthat Radiowouldeverdecline to2 again?
Probablynotoneinamillion.Thisdeclineof546pointsin32monthswasthegreatestdeclinein
anystockfrom1929to1932,whichiscertainlyconvincingproofthatbuyingstocksoutrightnever
paysbecausetheycangodowntonothing.Thereisonlyonewaytotrade,thatis,toplacestoploss
orderandlimitriskstoafewpointsoneverystockyoubuy.
Nomatterhowsmallorhowlargethevolume,whenthetrendturnsdown,stocksgodown,
andwhenthetrendshowsup,stocksgoup.
WAITFORDEFINITEBUYINGSIGNALATBOTTOM
Attheendofapanicoralongdecline,thereisalwaysplentyoftimetobuystocksnearlow
levels.Allyouhavetodoistostudypastrecordsandhowstocksactedatthebottomin1932to
provetoyourselfthatisrequiresalongtimeforaccumulationtotakeplaceatthebottombefore
stocksstartup.Youcanmakemoneymuchquickerbywaitingtobuywhenthetrendturnsup.
Afteryouhaveallowedseveralweeksorseveralmonthstoelapse,ifastockholdsbottomlevels,it
showsaccumulationandyoucanbuywithastoplossorderunderthebottom.
JohnsManville: Thisisagoodexampleofhowlongastock,thathassoldatveryhigh
levels,canholdatlowlevels.JohnsManvillesoldat 242in1929.Itdeclinedto10inApril,
1932andheldaroundtoduringApril,May,JuneandJuly,1932accumulationfornearly4months
atlowlevels.InthelatterpartofJuly,1932,JohnsManvillewasoneofthegoodstockstopyramid
in1934and1935becauseitcontinuedtocrosstopsandmakehigherbottomsandhighertops,
reachingahighof99inNovember,1935.
Ittakestimeforaccumulationtobecompleted.Donotmakethemistakethatismadebyso
manytraderswhohangoverthetapeandtrytocatchthebottomeighthandthetopeighth.They
neverdoitandlosealloftheirmoneyintheend.Donotguessandtrytoanticipatewhatthemarket
isgoingtodo.Waituntilyoudetectadefiniteindicationofachangeintrendandgetadefinite
buyingsignal.Donotpayanyattentiontoaveragesorstocksinthesamegroup.Remember,you
mustfollowthetrendoftheindividualstock.
CHAPTERVI
VOLUMEOFSALES
TheVolumeofSalesistherealdrivingpowerbehindthemarketandshowswhetherSupply
orDemandisincreasingordecreasing.Largebuyingorsellingordersfromprofessionaltraders,the
publicoranyothersourceofsupplyanddemand,areboundedtoberegisteredonthetapeand
showninthevolumeofsales.
Therefore,acarefulstudyoftheVolumeofSaleswillenableyoutodetermineveryclearlya
changeintrend,especiallyifyouapplyalltheotherrulesfordetectingthepositionofastock.
RULESFORDETERMININGCULMINATIONSBYVOLUME
OFSALES
Rule1

Attheendofanyprolongedbullcampaignorrapidadvanceinanindividualstock,
thereisusuallyalargeincreaseinthevolumeofsaleswhichmarkstheendofthe

campaign,atleasttemporarily.Then,afterasharpdeclineonheavyvolumeofsales,
whenasecondaryrallytakesplaceandthevolumeofsalesdecreases,itisanindication
thatthestockhasmadefinaltopandthatthemaintrendwillturndown.
Rule2

Ifthestockholdsaftermakingasecondlowertopandgetsdullandnarrowforsome
time,workingisasidewaysmovement,andthenbreaksoutonincreasedvolume,itisa
signofafurtherdecline.

Rule3

Afteraprolongeddeclineofseveralweeks,severalmonths,orseveralyears,atthetime
astockisreachingbottom,thevolumeoftradingshoulddecreaseandtherangein
fluctuationshouldnarrowdown.Thisisoneofthesuresignsthatliquidationisrunning
itscourseandthatthestockisgettingreadytoshowachangeintrend.

Rule4

Afterthefirstsharpadvance(whenthetrendischangingfromabearmarkettoabull
market)thestockwillhaveasecondaryreactionandmakebottom,justthesameasit
hadasecondaryrallyafterthefirstsharpdecline.Ifthevolumeofsalesdecreaseson
thereactionandthenthestockmovesup,advancingonheaviervolume,itwillbean
indicationofanadvancetohigherlevels.

Theserulesapplytothegeneralmarket,thatis,tothetotalsalestradedinontheNewYork
StockExchangedaily,weeklyormonthlyaswellastoindividualstocks.
Summary:Salesincreasenearthetopanddecreasenearthebottom,exceptinabnormal
markets, like October and November, 1929 when the market was moving down very fast and
culminatedonlargevolumeofsales,makingasharpbottom,fromwhichaswiftreboundfollowed.
Asarule,afterthefirstsharprally,thereisasecondarydeclineondecreasedvolume,asdescribed
aboveunderRule5.
MONTHLYRECORDOFVOLUMEOFSALESONNEWYORK
STOCKEXCHANGE
19291935
TounderstandtheimportanceofVolume,astudyofthetotalnumbersofsharestradedinon
theNewYorkStockExchangeisnecessary.
InJulyandAugust,1921,atthebottomoftheBearCampaign,thevolumeofsaleswas
around10,000,000to12,000,000sharespermonth.InMarch,1928salesreached84,000,000shares
permonthforthefirsttimeinhistory.Afterthatthevolumeofsaleswasverylarge,withthisgroup
of stocks working higher right along after the reaction in June, 1928. The volume increased
enormouslyinNovember,1928,reaching114,000,000shares,thelargestforanymonthuptothat
time.SalescontinuedheavyinDecember,1928,and,infact,rightuptothetopin1929.
1929
September Saleswereover100,000,000shares.TheAveragesreached386,thehighestpricein
history.
October

ForthefirsttimesinceMay,1929,theAveragesbrokeunderthelowlevelofaprevious
month,whichshowedthatthetrendhadturneddown.Allrecordsforvolumeofsales
werebrokeninOctober,salesreaching141,000,000shares.

November AtthebottomofapanickydeclineinNovembersalesdroppeddownto72,000,000
shares.

December Sales83,000,000shares.
1930
January

Sales62,000,000shares.

February

68,000,000shares.

March

Volumeofsalesreached96,000,000shares.

April

Totalvolumereached111,000,000sharesonaverysmallgaininpriceoftheAverages.

May

IntheearlypartofthemonththeAveragesbrokeundertheAprillow,whichwasthe
firsttimethattheyhadbrokenamonthlylowsincebottomwasreachedinNovember.
SalesforMaywere78,000,000shares.Asharpdeclinefollowed.

June

Saleswere80,000,000shares,withthemarketmovinglower.

July
August

&Onasmallrallythetotalsaleswereonly80,000,000sharesfortwomonths.

September Themarketwasslightlyhigherearlyinthemonth,thenadeclinestarted,whichcarried
pricestonewlowlevels,salesof50,000,000sharesbeingrecorded.
October

The market broke to new low levels. Stocks at this time broke the low levels of
November,1929andsalesincreasedto70,000,000shares.

December The DowJones Industrial Averages declined 46 points under the low levels of
November,1929.Thesalesthismonthwere60,000,000shares.
1931
January

ArallystartedandinJanuary,1931thesaleswere42,000,000shares.

February

Themarketmadetopoftherallyonsalesof64,000,000shares,whichshowedthatthe
volumeoftradingwasincreasingontherallyandthatstocksweremeetingresistance.
NotethatthistopwasjustunderthelowlevelsofNovember,1929,whichshowedthat
stocksmetsellingwhentheymovedupundertheoldlowlevelsofthepanic.

March

AdeclinestartedinMarchandthesaleswere64,000,000shares,aheaviervolume,with
pricesmovinglower.

April

Saleswere54,000,000shares.

May

Sales47,000,000.

June

Therewasasharpdeclineonavolumeofsalestotaling59,000,000,whichcarriedthe
Averagesdowntonewlowlevels,reaching120,theoldtopof1919andthelastlowof
May,1925.AquickrallyfollowedtotheendofJuneandearlyJuly,theAverages
reaching157,butfailingtocrossthehighlevelmadeinMay1931.

July

Thesalesweresmaller,only33,000,000andthemarketnarroweddown.

August

Thesaleswere24,000,000,stillanarrow,dullmarket,notmakingmuchprogresson
theupside.

September Activitystartedandsalesreached51,000,000.OnthisincreasedvolumetheAverages
declined45pointsduringthemonthofSeptember.Thisshowedgreatweaknessand
indicatedafurtherdecline.

October

AsharpdeclineoccurredwhichcarriedtheAveragesdownto85onsalesof48,000,000
shares.

November Arallyfollowed,culminatingonNovember9.TheAveragesreached119,backto
theoldtopof1919,tothelastlowof1925,andtothebottomofapreviousrally.
Failingtopenetratetheseoldbottomsandcrosstheprevioustop,themarketshowed
weakness and indicated that the trend was still down. Sales in November were
37,000,000,thevolumedecreasingontherally.
December TheAveragesdeclinedtoanewlowforthemove,making72onsalesof50,000,000
shares,thelargestsinceSeptember,1931.Thisindicatedthatbigliquidationwasstill
goingon.
1932
January

TheAveragesreachedalowof70onsalesof44,000,000sharesforthemonth.

February

Ralliedto89onsalesof31,000,000shares.

March

TheAveragesmadeaboutthesamehighonsalesof33,000,000shares.Thenthemarket
wentdeadontherally,stocksnarrowingdown.

April

TheDowJones30IndustrialAveragesbroke70,thelowofJanuary,anddeclinedto55
onsalesof30,000,000shares.

May

The Averages broke 53, the old low levels of the panic of 1907 and 1914, which
indicatedlowerprices;thendeclinedto45onsalesof23,000,000shares.

June

Therangebetweenextremehighandextremelowaveraged10pointsandtheAverages
reachedanewlowonsalesof23,000,000shares.

July

OnJuly8,1932,theextremelowwasreached,withtheAveragesdownto40.The
volumewasverysmallandtheAveragesandindividualstocksmovedinaverynarrow
trading range, indicating the last stages of a bear market. Late in the month the
AveragescrossedthehighofJune,whichindicatedthatthetrendwasturningup.Sales
were23,000,000shares.Therangewasabout13pointsonAverages.
AtthelowinJulytheAveragesweredown345pointsfrom1929high.Thevolumeof
salesforthethreemonthsMay,JuneandJulyaggregatedonly69,000,000shares,
thesmallestsince1923,incontrasttoover100,000,000sharespermonthatthetopin
September,1929and141,000,000inthemonthofOctober,1929.Thisindicatedthat
aftersuchadrasticdecline,liquidationhadrunitscourseandthetrendwaschanging.
The market really had been sold to a standstill. Traders and investors sold out
everythingbecausetheyfearedthingsweregoingtogetworse.Itwasthesameold
story:Abullmarketbeginingloomandendsinglory.Alloftheindicationswereplain:
Thesmallvolumeofsalesandnarrowrangeoffluctuationsindicatedthattheendhad
beenreachedandthatachangeintrendwascertain.
DuringthelatterpartofJuly,1932,theadvancestarted.

August

TherewasasharprallyinAugustonsalesof83,000,000shares,morethanforthe
entirethreemonthspast.Thiswasonshortcoveringandwiseinvestmentbuying.

September Topoftherallywasreachedonsalesof67,000,000shares,withtheAveragesup40
pointsfromthelowofJuly8.AfterthisadvancetoSeptemberonalargevolume,
distributiontookplaceandthetrendturneddown.(NotethatthetotalvolumefromJuly
8tothetopinSeptemberwas168millionshares.)TheAveragesfailedtogohigherin

thethirdmonth.AtnotimefromApril,1930toJuly,1932hadtheAveragesormostof
theindividualstocksralliedovertwomonths.Therefore,toshowachangeintrendtoa
prolongedbullmarket,theywouldhavetoadvancethreefullmonthsormore.
October

AfterSeptemberstocksworkedslowlydownonssmallervolumeofsales.InOctober
thesaleswere29,000,000

November Saleswere23,000,000
December Sales23,000,000
1933
January

Saleswere19,000,000shares

February

Thewholecountrywasinastateofpanic.Bankswerefailingrightandleft.People
were panic stricken and selling stocks and bonds regardless of price. There ware
business failures, and when President Roosevelt was inaugurated on March 4, he
immediatelyactedandclosedallthebanksintheUnitedStates.Thismarkedtheendof
thesecondarydeclineandstartedaconstructivemovement.
TheDowJonesIndustrialAveragesdeclinedto50inFebruary,whichwas9points
higherthanthelow ofJuly,1932.Sales wereonly19,000,000shares,thesmallest
volumeofanytimeinover10yearsandthesmallestvolumeforanymonthsincethe
topinSeptember,1919,asuresignofbottom.

March

Arallystartedonincreasedsales.Thevolumewas20,000,000shares.

April

TheUnitedStateswentoffthegoldstandard.Thisstartedarapidadvanceinstocksand
commodities. Sales on the New York Stock Exchange were 53,000,000 shares this
month.

May

Theadvancecontinuedandthevolumeoftradingreached104,000,000shares

June

Thevolumeincreasedto125,000,000.

July

Thesaleswere120,000,000shares.
FromMarchlowtoJulyhigh,1933,thetotalnumberofsharestradedinontheNew
YorkStockExchangewas422,000,000sharesandtheAveragesatthetopinJulywere
up60pointsfromthelowofFebruary,1933.Veryfewpeoplekeeprecordsandstudy
enoughtounderstandwhattheenormousvolumeof422,000,000sharesmeant.This
wasthegreatestvolumeofsalesofanybullcampaigninthehistoryoftheNewYork
StockExchange.Itwasgreaterthanthelastadvancein1929.(FromthelastlowinMa,
1929toSeptember,1929,theAveragesadvanced96pointsandthetotalsalesonthe
NewYorkStockExchangewere350,000,000shares.)Itwasoneofthewildestbuying
wavesinhistory.Commoditiesadvancedbyleapsandbounds.Peopleboughtstock
regardlessofprice.Justthinkaboutit:Salesof350,000,000inthreemonthsMay,
June,andJuly,1933equaltothevolumefromMay,1929toSeptember,1929.The
signswereplainthatvolumewastellingthestoryofawaveofinflation.Commodities
andstockshadadvancedsorapidlyandeverybodyhadboughtonsuchthinmarginthat
awideopenbreakoccurredinfourdaysfromJuly18thto21st,carryingtheDowJones
Averagesdown25pointsto85.CottonandWheatbrokebadlyatthesametimeon
heavy liquidation. At shit time Dr. E. A. Crawford failed. He was involved in
commodities,saidtobethelargestamountcarriedeverknown.

August &AfterthesharpdeclineinJuly,arallyfollowedinAugustandSeptember,whichcarried

September theAveragestowithintwopointsoftheJulyhigh,makingadoubletop.Thevolumeof
salesonthissecondrallywassmaller.InAugustthesales were42,000,000andin
September43,000,000shares.Inthesetwomonthsthevolumewasonlytwothirdsof
thetotalvolumeforJuly,1933.
October

TheDowJones30IndustrialAveragesdeclinedto82,thelastlowbeforethestartof
alongadvance.Salesdecreasedto39,000,000andthemarketbecameverydulland
narrow.AslowrallystartedfromtheOctoberlows.

November Saleswere33,000,000shares.
December Sales35,000,000.
1934
January

Thesalesthismonthwere54,000,000.

February

Sales 57,000,000 shares, with the top in February only slightly above the high of
January.TheAveragesfailedtogetoveronepointabovethehighofJuly,1933,making
adoubletop.Salesof111,000,000sharesintwomonthsandthethirdtimeatthesame
levelwassignaloftop.Individualstocksespeciallyshowedplainlybythelargevolume
andtheslowprogresstheyweremakinginFebruarythattheyweregettingreadyto
startdown.ThetrendturneddowninthelatterpartofFebruary.

March

Salesreached30,000,000shares.

April

Therewasaslightrallyon29,000,000shares.

May

Priceswereloweron21,000,000shares.

June

OnJuly26,1934,stocksmadebottomonsalesofnearly3,000,000sharesfortheday,
withtheDowJonesAveragesdownto85,slightlyabovethelowlevelofOctober,
1933.
ForthemonthofJuly,1934totalsaleswereonly21,000,000shares.Individualstocks
movedinanarrowtradingrange,whichshowedthatbottomwasbeingmadeandthe
foundationlaidforanotherbullcampaign.Thefactthatanextremehighwasreachedin
July,1933wasanindicationthatyoushouldwatchforachangeintrendinJuly,1934,
accordingtomyruletowatchforachangeintrendoneyear,twoyears,orthreeyears
fromanyimportanttopandbottom.

August

Themarketrallied11pointsonAverages;sales16,000,000shares.

September ThemarketreachedwithinonepointoftheJulylow.Salesweredownto12,000,000
shares,asuresignofbottom,beingthesmallestsalespermonthinmanyyears.
October

The market rallied in October on a slightly increased volume of sales, 15,000,000

shares.

November Thesalesincreasedto21,000,000shares.
December Priceswerehigher;sales23,000,000sharesforthemonth.
1935

January

Therewasincreasedactivityonsalesof19,000,000shares.

February

Themarketthetopoftherally.Salesonly14,000,000shares,whichwasasignthat
therewasnotenoughbuyingpowertocarrypricesthrough.

March

Therewasabigdecline,whichwasthelastbeforethemarketadvancedtonewhighs.
Saleswere16,000,000shares.

April

Increasedactivityshownandstocksstartedadvancing.Volumeofsaleswas22,000,000
shares,whichshowedthatabullmarketwasunderway.

May

TheDowJones30IndustrialAveragescrossedthehighlevelsof1933andthetopof
February, 1934, on sales of 30,000,000 shares, Individual stocks showed increased
volumeandmanyofthemmoveduptonewhighlevels.

June

TheAveragescrossed120,whichwasabovethelasthighofNovember9,1931,asure
indicationofhigherprices.ThesalesforJunewere22,000,000shares.

July

NewhighswerereachedbyindividualstocksandtheAverages.Salesforthemonth
were29,000,000shares.

August

Morenewhighsforindividualstocksandnewhighs,fortheindividualAverages.Sales
reached43,000,000shares,thehighestsinceJanuaryandFebruary,1934.

September Theadvancecontinuedandsaleswere35,000,000shares.
October

TheDowJones30IndustrialAveragesadvancedto142.Thetotalsalesforthemonth
were46,000,000shares.

November Sales57,000,000shares,practicallythesameasFebruary,1934whenstocksmadetop.
TheAveragesreached149,up109pointsfromthelowofJuly,1932.Duringthe
weekendedNovember23,1935,whentheAveragesreachedtop,thetotalvolumeof
saleswasnearly19,000,000shares,thelargestsincetheweekendedFebruary10,1934
whentopwasreached.Aftersuchanenormousvolume,withtheAveragesup53points
sinceMarch,1935,accordingtomyruleitwastimetowatchfortopandachangein
trendinstocksthathadhadbigadvances.
December A reaction followed which carried the Averages down over 10 points from the
Novemberhigh.Thevolumeofsalesforthemonthwas45,000,000shares.
JULY,1934,TONOVEMBER,1935
ThetotalsalesfromthelowofJuly26,1934tothehighofNovember20,1935were
407,000,000shares.ThetotalnumberofpointswhichtheDowJonesIndustrialAveragesadvanced
fromJuly,1934toNovember20,1935was65points.Notethatthetotaladvancefromthelowof
March,1933tothetopinJuly,1933was60points.Therefore,withtheaveragesinNovember,
1935up65points,5pointsmorethaninthe1933campaign,itwastimetowatchforatleasta
temporarychangeintrend.
Notethatthevolumeofsalesduringthe15monthscampaignfromJuly,1934toNovember,
1935wasabout15,000,000shareslessthanduringthe5monthscampaignfromMarch,1933to
July,1933.ThisshowsthataftertheSecurityAdministrationLawbecameeffective,itreduced
tradingconsiderably.
IfyoucontinuetostudytheVolumeofSalesontheNewYorkStockExchangeandwatch
thepositionoftheDowJonesIndustrialAverages,youwillbeabletodetectculminationswith
greateraccuracy.

CHAPTERVII
APRACTICALTRADINGMETHOD
Tobeprofitable,amethodfortradinginthestockmarketmustworkinpracticeaswellasin
theory.SeveralyearsagoIoriginatedinpracticaltradingmethodandsince1932havemadesome
important improvements whichIhavetestedinmyactualtrading.Iamgivingmyreadersthe
benefitofthisvaluablediscovery.
WiththismethodyouusetheWeeklyHighandLowChart,whichisthebestchartfor
tradingpurposes,butwhenstockareveryactiveandsellingatveryhighlevelsyoucanusethe
DailyChartandapplythesamerulestodetectachangeintrend,buyingandsellinglevels,and
pointsforstoplossorders.
Iamgivingtherulesandmakingthetradesonpapercoveringaperiodofmorethan10
yearstoprovetoyouthatbigprofitscanbemadebyfollowingtheserules:
Rule1AmountofCapitalRequired:
Tomakespeculationorinvestmentasuccessfulbusiness,youmustknowtheamountof
capitalrequiredtobegintradingandcontinuetotrade.Tobesafe,Iconsiderthatatleast$3,000
shouldbeusedfortradingineach100sharesofstockandifyoufollowtherulesyouwillmake
money.Fortradingin10sharelots,acapitalof$300shouldbeused.
Neverriskmorethan10%ofyourcapitalonanyonetrade.Ifyouhaveasmanyastwoor
threelosses,thenreduceyourunittrading,riskingonly10%ofyoure
........[page46,textskipped].....willneverlooseallofyour...[textskipped]....
When profits have increased to the amount of your capital, say $3,000, then you can
increaseyourtradingunitto200shares,butafteryouhaveaccumulatedalargeamountofprofits,
keepalargeamountofcapitalbehindeachtrade.
Safety must be your first principle at all times. When large profits have accumulated,
establishareservefundforprotection,placingthismoneyinasavingsbank,firstmortgagesorgilt
edgeinvestmentsforincome.
Rule2AlwaysUseStopLossOrders:
Neverfailtoplaceastoplossorderoneachtradethatyoumake,andletthesestoploss
ordersbe1,2or3pointsawayfromthepriceatwhichyoubuyorsell,andunderanyconditions
evenyoufirsttradeneverriskmorethan5pointsor$500oneach100shares.
Asarule,a3pointsstoplossorderisthesafesttouseasitwillbecaughtlessthanany
other.
Afteraprolongedadvance,whenstocksareadvancingveryfastandathighlevels,ifyou
havebigprofitsthenfollowupwithastoplossorder5pointsbelowthehipa[page46???high]price
ofeachdayor1to3pointsundertheloworclosingpriceoftheday.Incaseastockissellingat
veryhighlevels,followupwithastoplossorder10pointsunderthehighpriceofeachday.
Whenyoumakeinitialtrades,neverrisk10pointsofyourcapitalonanyonetrade.Five
pointsbethelimit,andwhenitispossible,alwaystrytomakeatradewhereyourriskisonly2or3
points.
Followupprofitswithstoplossorders1,2,3or5pointsundereachweek'sbottomonht
longside,andfollowdownwithastoplossorder1,2,3,or5pointsabovethetopofeachweekon
theshortside.
Rule3HowtoDetectBuyingPoints:
Buyagainstdoubleortriplebottomsandplaceastoplossorder1,2,or3pointsbelowthem.

Buywhenastockholds1,2,3,ormoreweeksaroundthesamelowlevel,andplaceastop
lossorder1,2andnevermorethan3pointsunderthelowestweeklybottom.
Buywhenastockcrossedtheprevioushighlevelsby1to3points.Inmostcasesitissafer
towaituntilitadvances3pointsaboveanoldtopbeforeyoudecidethatthetrendhasgivena
defineindicationthatisisgoinghigher.Then,afterithascrossedanoldtopby3points,itshould
notreact3pointsundertheoldtop.Forexample:Iftheoldtopis50anditadvancesto53,thenit
shouldnotreactto47again.Thereforeonareactiontoaround51to48,youshouldbuyandplace
stoplossorderat47,or3pointsundertheoldtop.
Whenastockadvancesintonewhighterritory,thatiscrossesthehighestpriceofitshistory,
itusuallyindicateshigherpricesandissafetobuy.Ifitisgoinghigherthestockseldomreact3
pointsundertheoldhighlevel.
Watchthetopsofpreviousyears.Whenastockcrossthetopofapreviousyearby3points,
itisnearlyalwayssafetobuy,especiallyifitreactbacktotheoldtoporslightlyunderit.
In a bull market reactions only last 2 or 3 weeks before the main uptrend is resumed,
thereforeitissafetobuyattheendoftwoorthreeweeksreactionafterthestockshowsthatitis
makingbottombyholding2to3days.
Rule4HowtoDetectSellingPoints:
Sellagainstdoubleandtripletopsandplaceastoplossorder1,2,or3pointsabovethem.
Whenoldbottomsorlowlevelsofpreviousmovementsarebroken,sellshortandplacea
stoplossorder1,2,andnevermorethan3pointsabovetheoldbottom.Itisalwayssafesttowait
untilastockbreaks3pointsunderanoldbottom,thensellatthemarketoronasmallrallyand
protectwithastoplossorder3pointsabovetheoldbottom.
Then,afterastockhasbrokentonewlowlevels,followdownyourshortpositionwithstop
lossorderonepointabovethehighofthepreviousweekandwatchforapointwherethereisanold
bottomorpreviouslowleveltocovershortsandbuyagain.
Asarule,arallyinabearmarketonlylasttwotothreeweeks,thereforeattheendofthe
secondorthirdweek,itissafetogoshortwithastoplossorder3pointsabovethehighofthe
previousweek.
Watchthebottomofpreviousyears.Whenastockbreaksthebottomofapreviousyearby3
pointsitisnearlyalwayssafetosellshort,especiallyifitralliesuptotheoldbottomorslightly
aboveit.
Rule5HowtoPyramid:
Itisimportanttoknowhowandwhentopyramid.Whenstocksareatlowlevels,between
20and50,youcanbuyorsellevery5pointsapartifyoucapitalandmarginwarrantit,thatis,
whenyouhave5pointsprofitonthefirsttrade,buyorsellanadditionalamountandplaceastop
lossordersothatyouwillnothaveanylossonthetwotradesifthemarketshouldreverseandcatch
thestop.
Whenstocksaresellingbetween80and200pershare,youshouldonlybuyorsell10points
apart.Afteryoumakethefirstcommitment,thenwaituntilyouhave10pointsprofit,thenbuyor
sellasecondlot.Afteryouhaveboughtorsoldthefourthorfifthlotinapyramid,thenyoushould
decreasethetradingunit.Forexample:
Ifyouhavebeenbuying100shareseach5or10pointsupandhaveaccumulated500
shares,thenitissafertoreduceyourtradingto50sharesevery5or10pointsup.Ifyouhavebeen
tradingin200sharesandhavebought4or5lots,thenreduceyourtradingto100sharelots.
Reversethisruleontheshortorsellingside.
Thebigmoneyismadebyalwaysfollowingthemaintrendofastock.Neverbuyasecond
orthirdlotunlessthefirsttradehadmovedinyoufavor.
Neveraveragealoss.Toaveragealossinthegreatestmistakethatanytradercanmake.

Rule6WhentoReversePosition:
Byreversingposition,Imeanthatifyouhavebeenbuyingandpyramiding,thenthereisa
changeintrendandanindicationtoselloutlongstocks,youshouldalsosellshort.Forexample:
Ifastockadvancestoaround75,wherethereisanoldtop,andholds1or2weeks,you
shouldselloutlongsandgoshortandplaceastoplossorderat78or4pointsabovetheoldtop.
Then,ifthestopat78iscaught,youshouldcovershortsandgolongagainbecauseyoumustkeep
withthetrendallthetime.
Applythesamerulewhenastockisdeclining.Whenthereisachangeintrendandthetime
comestocovershorts,thenyoushouldbuyforlongaccountagain,justasIshow,inallthetrades
madeinChryslerMotors.
Rule7VolumesofSales:
ByfollowingtherulesgiveninmybooksonVolume,youwillbeabletodetectwhentops
andbottomsarereachedandachangeintrendtakesplace.
Nearlyalwayswhenstocksareadvancingrapidlyandreachhighlevels,theVolumeofsales
increases.Afterthefirstquick,sharpreaction,thereisasecondaryrally,andifthemaintrendis
goingtoturndown,theVolumewillbesmallerthanitwasontheadvancewhenthefinaltopwas
made.(SeeexamplesofVolumeonChryslerattheendofthisChapter.)
Afteraprolongeddecline,adecreaseinVolumeinanindicationthatliquidationhasabout
runitscourseandachangeintrendisdue.
Inpanickymarkets,whenstocks havesharpdeclines,theyoftenmakebottomonlarge
Volume and a rally follows onfairsized Volume, then there is a secondary decline when the
Volumefallsoffconsiderably.
LookuptheVolumeofeachindividualstockandjudgeitspositionaccordingtotheamount
ofstockoutstanding.Forexample:GeneralMotorswith44,000,000sharesmustmovemuchslower
andrequiremoretimetoadvanceapointthanAuburnMotorsorJ.I.Casewhichhavesuchasmall
number of shares outstanding. Chrysler Motors has only 4 million shares compared with
44,000,000ofGeneralMotors,whichisthereasonChryslermadeagreaterrangeduring1932to
1935thanGeneralMotors.
THEFOLLOWINGOFRULESMAKESPROFITS
Thehumanelementsbeatsmosttraders.Themarketdoesnotbeatthem.Eliminatehuman
judgmentandguesswork.Donotbuyorsellonhopeonfear.
Themanwhowillmakeuphismindtofollowrulesstrictlytotheletterwillmakeprofits.
ProvetoyourselfthattherulesworkwhichIgiveyouandthemfollowthem.Buyorsellwhenthe
rulesindicatethatitistimetobuyorsellandthendonoclosetradersandtakeprofitsuntiltherules
indicatethatitistimeforachangeintrend;thenmakeyourtradesaccordinglyandyouwillmakea
success.
CHAPTERVIII
FUTUREOFSTOCKS
FulfilledPredictions
WhenIwrotetheTRUTHOFTHESTOCKTAPEin1923,Isaidthatchemical,airplane
andradiostockswouldbetheleadersinthenextbullmarket.Theydidleadinthe19241929Bull

Campaignandthesegroupofstocksshowedsomeofthegreatestadvances.
In the chapter on Stock of the Future on page 191 of WALL STREET STOCK
SELECTOR,whichIfinishedinApril,1930,Isaidthatchemicals,radonstocks,airplaneand
movingpicturesstockswouldbetheleadersofthefuturebullcampaign.Thispredictionshasbeen
fulfilled.RadioBsoldat$3persharein1932andadvancedto$92pershareinDecember,1935.
UnitedAircraftsoldat6in1932andlateradvancedto467/8.AlliedChemicalsoldat42in
1932,thenadvancedto171in1935.Inthisnewbook,Ishowyouhoweasyitwastodetectthese
stocksthatdevelopedintoearlyleadersandhadbigadvanceswhileothersheldinanarrowtrading
range,ordeclinedduringthebullmarket.
InChapterIX,page198ofWALLSTREETSTOCKSELECTOR,writteninApril,1930,I
wroteasfollows:
Thepubliclearnedaboutautomobilestockin1915and1916,whentheyhadtheirbigadvancesand
againin1919,butfrom1924to1929thepublicboughtautomobilestocksonascalegreaterthaneverbeforeIn
any group of stocks. Therefore, the motors are greatly overbought and most of the companies are greatly
overcapitalized.Theyhavepaidstockdividendsandincreasedtheirstocktosuchanextentthattheycannotpay
dividendsduringtheyearsofdepressiontocome.Therefore,theautomobilestockswillamongthebestabort
salesInthecomingbearmarket.

Thispredictionswasamplyfulfilled.AuburnMotorswhichsoldat514in1929;263inApril,
1930and295inApril,1931,declinedto15inMarchandApril,1935.ChryslerMotorswhich
soldat140inOctober,1928and43inApril,1930,declinedto5inJune,1932,adeclineof135
points.GeneralMotors,whichsoldatahighof54inApril,1930,declinedto75/8inJune,
1932.Certainly,thesedeclinesweredrasticenoughtoprovethatIknewwhatIwastalkingabout
whenIsaidin1930thatmotorswerethebesshortsales.
Onpages203204ofWALLSTREENSTOCKSELECTOR,Iwroteasfollows:
INVESTORSPANIC
Aboutevery20yearsthereisaninvestorspanicoraseveredepression,broughtaboutbyInvestors
sellingstockatlowlevels,Thisisdueto8(???)prolongeddeclineandlossofconfidence.Buyingpowerhaving
beenreducedandinvestmentsellingcontinuallycomingintothemarket,forcepriceslowerandlower,untilbanks
callleansonhighclassinvestmentstocks,withthefinalresultofawideopenbreakorasharp,severedecline.
Thisoccurredi1837to1839,1857,1873,1893,1896,1914and1920to1931.Thepanicof1929wasnot
investorspanic.Itwasagamblerspanic.
Variouscauseshaveproducedthesedifferentpanic,buttherealbasisbehindallofthemhasbeenthe
moneymarket.Thebanks,havingbecomeoverloadedwithloadsduringperiodsofprosperity,forcedsellingand
producedthepanic.Mostbankersgettoooptimisticafteraprolongedperiodofprosperity;thenafteraprolonged
declineandbusinessdepressiontheybecometoopessimisticandareafraidtomakeloans.Infact,insteadof
makingnewloanstheycalloldloans,whichmakesthesituationworsethanitwouldbeotherwise.Itisthesame
withmostofthenewspapers.Theyknowthatitispopulartotalkoptimisticandtheygototheextremeingood
timesandthenwhenconditionsgethad,theygenerallypaintthepictureblackerthanitreallyis.
Certainly,duringallofthesepanics,someofthebrokersandbanksmusthaveseenthehandwritingon
thewallandhaveknownjustexactlywhatwascoming,buttheynevertoldtheircustomersaboutit.Thenthe
investorsmuststop,lookandlisten.Hemustthinkforhimselfandnotdependuponhisbankerorhisbrokertoget
himoutofthemarketattherighttime,becausepasthistoryprovesthattheiradviceatcriticaltimes,cannotbe
dependedupon.
Thecominginvestorspanicwillbethegreatestinhistory,becausethereareatleast15to25million
InvestorsintheUnitedStateswhoholdstocksintheleadingcorporations,andwhenoncetheygetscared,which
theywillafteryearsofdecline,thenthesellingwillbesoterrificthatnobuyingpowercanwithstandit.Stocks
aresowelldistributedinthebandsofthepublicthatsincethe1929panicmanypeoplethinkthatthemarketis
panicproof,butthisseemingstrengthisreallytheweaknessfeatureofthemarket.Thepublichasneverbeen
goodleadersandneverwillbebecausetheirhopesandfearsareeasilyexcited.Ifstockswereallinthehandsofa
fewstrongmen,theninvestorsandthecountrywouldbesafe,butwhentheyareinthehandsofmillionofpeople

whoareunorganizedandwithoutleadership,thenthesituationisdangerous.Awisemanwillsellbeforeitistoo
late.Thispublicwillholdonandhope;thenallwillbecomescaredatthesametimeandsellwhennobodywants
tobuy,thusprecipitatingapanic.Thiswaswhatcausedthe1929panic.Thespeculatorsandgamblersallgot
scaredandsoldatthesametime.
Greedandloveofmoneywillcausethenextpanicandtheloveofmoneywillbethecauseofthenext
war.'Warishell!'.Youmightaskwhatthathastodowithstocks.Warhasalwayscausedpanics.Wariscoming
andapaniciscominginstocks,andthistimethepanicinstocksmaybethecauseofwar.Peopleoftergeta
misconceptionofanideaorquotethingswrong.Weoftenhearpeoplesay,'Moneyistherootofallevil.'They
thinktheyarequotingtheBible,buttheyarenot.TheBiblesays,'Theloveofmoneyistherootofallevil.'In
fact,theloveofmoneyandthequestforpowerhadbeenthecauseofallwars,ashistoryproves.Loveofmoney
hasbeenthecauseofallfinancialtroublesanddepressioninthepast,andthecomingpanicwillbethegreatest
theworldhaseverknown,becausethereismoremoneyistheUnitedStatesthaneverbefore,thereforemoreto
fightfor.Menfightharderformoneythananythingelse,oncetheyareitslippingaway.

Itisamaterofrecordthatthepanicof19311932wasthegreatestinhistorywiththemostsevere
declineseverrecordedinthehistoryoftheNewYorkStockExchange.Thispredictionswasbased
onmyMasterTimeFactor,whichenablesmetotellmonthsandyearsinadvancewhencertaintime
cyclesrepeatandcauseextremehighandlowprices.Thisisenoughtoconvinceanymanthatmy
discoveries based on mathematical science, can be depended upon to forecast future market
movements.
HOWTRADERSANDINVESTORSWEREFOOLEDIN1930
TO1932PANIC
Investorsandtraderslostmoneyinthisgreatpanicbecausetheylistenedtootherpeople
whoknewlessaboutthemarketthantheydidandwhoweresimplyguessing.Manyasocalled
wiseeconomistsaidthatthebottomsinNovember,1929,wouldnotbebrokenandthatthisdecline
hadcorrectedalltheweakspotsinthemarketandthatthebullmarketwouldberesumed.Theysaid
thesamethingaboutthebreaksin1930,1931and1932.Whenthemarketactuallyreachedbottom,
theydidnotknowwhattosaybecausetheyhadbeenfooledsolong.Theyhadnotstudiedpast
historyenoughtoknowthatafterthegreatestpanicinhistorymustfollowandthatitwouldrequire
a long time to liquidate stocks. Every time stocks made bottom, the newspapers, government
officialandeconomistssaidthatitwasthelastbottom,butstockswentdown,down,untilpeople
lostfaithandhopeineverything.Theywentlowerthananybodydreamedtheycouldgo.Thatis
whathappenswheneverybodydecidesthatstockscannotgodownorthatstockscannotgoup
theyalwaysdotheopposite.Thepublicisalwayswrong,becausetheyfollownowelldefinedrule
andarenotorganized.PeoplebelievedthattheGovernmentbybuyingcotton,wheatandloading
moneycouldstopthedepression,butwhenonceacycleisupandpricesareduetodecline,nothing
can stop them until it has run its course. The same when the main trend turns up, neither
governmentinterferencenoranythingelsecanstoptheadvanceuntilitrunsitscourse.
Everyinvestorandtradershoulddohisownstudyingandlearnrulesandapplythemandnot
relyonotherpeoplewhoknownomoreaboutthemarketthanhedoes.
HOWTRADERSANDINVESTORSMAYBEFOOLEDINTHE
FUTURE
During the year 1935, especially the last half of it, newspaper writers, statisticians and
economistswereallwritingandtalkingabouttheabundanceofcheapmoneyandthelargebank
reverse.TheytalkedaboutinflationandledpeopletobelievethattheGovernmenthadchanged
conditionsandmoneyratesandthatstocksmustcontinuetogoonupandupjustbecauseitiseasy
togetmoney.Theyforgetthefactthismoney,inmanycases,itheldbypeoplewhoaretoosmartto
buystockswhentheyaretoohigh.Anotherfacttheyhaveoverlookedinthatthemoneyisnotin

liquidform.Alargeamountofmoneyondepositinthebanksandheldbyinsurancecompaniesand
savingbanksisnotincash,butingovernmentbounds,whichifforceduponthemarketwould
breakthebondsmarkettopiecesandresultinapanic.Wheneverybodyisconvincedaneventis
goingtohappen,itusuallyhasalreadyhappenedorhasbeendiscounted.Peopletalkaboutinflation
andhowhighstocksandcommoditiesaregoing.Myopinionisthatwehavehadinflationever
since 1933 and that everything is discounted and that the market is getting ready to discount
deflationbeforetheelectionintheFallof1936.
WHATHASHAPPENEDTOCAUSETHENEXTBEAR
MARKET
ThepresentAdministrationatWashingtonwithitsNewDeal,orIthinkitwouldbemore
propertonameittheraw deal, decidedtomakeit theirbusinesstoruneveryothers man's
business, regardless of whether they knewtrusters know nothing about running any kind of
business.Alltheyknoworhaveisatheoryonpaperwhichwillnotworkinpractice.Theirideawas
tocrackdownonbusiness.IftheycouldhavehadtheirwayandGeneralJohnsoncouldhave
crackdown,ashetriedto,onHenryFord,hisfactorywouldhavebeenclosedandthousandof
peoplewouldhavebeenputoutofbusinessandmenoutofemployment.TheNewDealersassume
theattitudethatfromhimthathathitshallbetakenandgiventohimthathathnotanddoesnot
work.Theirpolicyiscreationanationofloafers.Theyareteachingpeopletodependuponthe
Governmentandtodependuponotherpeoplewhopaythetaxes,whichistheworstthingthatcould
happenandmustresultinseriousconsequencessoonerorlaterfortheentirecountry.Thiscountry
wasdevelopedbymenwhohadthecourageandtheconfidencetoworkfromsuntosun.Theywere
progressiveandwentintoanewcountryandbuiltupthiscountrybywork,andwecanneverbuild
thiscountryupbyspendingandnotworking.Youcannottakethefruitsofoneman'slaborandgive
ittoanother.Youcannottaxonemanwhoworksandrunsasuccessfulbusinessandgivethe
money to other people who fail in business. It would be just as logical to tax one line of
manufacturingbusinessandgiveittoanotherbusinessthatisfailingasitistotaxpeoplewhybuy
goodsandgivethemoneytofarmersforploughingupcrops,destroyingwhoreallyworktopayfor
whattheyget,cannotaffordtocatpork.Thefarmercanrunhisownbusiness.Hehasalwaysbeen
abletorunhisbusiness.Ifhecannot,thenhewillhavetogodownjustthesameasanyotherman
whofailsinbusiness.Itisaquestionsoftheoldlawofthesurvivalofthefittestandthereward
mustgotothosewhowork.Noonehaseveryetbeenabletogetsomethinggoodwithoutpayingfot
it.Itcannothedone.Wecannotbeatthelawofcompensation.Naturepaysoffforworkdoneand
themoreworkdone,themoreamanreceives.
Noonemanorsetofmenisgreaterthanallofthepeopleofthiscountry.Themajorityof
thepeoplevotedtoelectRooseveltanddidnotknowtheywereelectinghimtodirectalotof
braintrusters torunthe country.Congress has submitted toRoosevelt andpermitted brain
trusterstorunthings.TheGovernmentisnodifferentfromanyotherbusinessorindividualwho
spendstwoorthree times as muchasitearns andmayeventually gobankrupt. Government's
interferencewithbusinessandtheGovernment'sheavyexpendituressimplymeantroubleahead
andadayofreckoningmustcomeandthebillmustbepaidbythetaxpayers,justthesameasinthe
lastpanicwhichwastheresultoftheWorldWarandotherfoolishactsbyourownGovernmentand
foreigngovernments.Wehadtopaywiththeworstdepressiontheworldhaseverseen.Wecannot
escapeitinthefuture.Itwill causeanotherpanic instocks.Whenitcomes,bothtraders and
investors willsellstocks,asusual,afteritis toolateorinthelaststages ofthebearmarket,
althoughstockswilldeclineonasmallervolumethaninpreviouscampaignsduetotherestrictions
oftheSecuritiesExchangeLaw.
IfthepoliciesthatarenowbeingpursuedinWashingtoncontinueforanotherfouryears,
thiscountrywillberuined.Banksthatareloadedupwithbillionsofbondsforcedonthembythe

Government,willbeunabletosellthemtopaytheirdepositors.Savingbanks,insurancecompanies
andtrustcompaniesloadedupwithgovernmentbondswillfindthemdepreciating15to30percent
andthenjustsupposetheGovernmentinflatesandprintspapermoney,whatwillthemoneybe
worth?ThereisonlyonehopeforthisCountryandthatistostopthisrecklessspendingandget
downtobusinessandworkoutofit.GovernorLandonofKansashasdemonstratedthathecanrun
thestategovernmenteconomicallyandhasreducedthedebtandisnotspendingmorethantheyare
taking in. This country will recover from the mistakes that have been made by the Rosevelt
Administrationifthespendingisstoppedandthebudgetisbalanced.Infutureinsteadoftaxing
businesstodeath,businessmenshouldbeallowedtoruntheirownbusinesstosupportlegitimate
expendituresoftheGovernmentandnotanationofloafers.