DONALD MACK – A COURSE IN TRADING

This work was published in 1934 as a yearlong course in analysis and was a confidential document available only to subscribers and clients of the Wetsel Market Bureau. The Jerry Favors Analysis gave the course a top-5 status. Each chapter contains a series of lessons dedicated to a single aspect of chart analysis, some unknown today, others still employed in their original or variant forms.

From the inside.

There is a warning! There is a great deal more to analysis than just technical descriptions, and this book might open up new avenues of appreciation that are not found in other books. If one is alert to the possibility of it being there, hidden knowledge is not so hidden. Technical applications hidden in the text just escape the attention of many practitioners of Technical Analysis as they come to grips with what might be termed its scientific methodical approach. Some of the great market masters had a method of presentation that was not uncommon in the technical literature provided by them during the time I call the Golden Age of Market Literature, 1922 to 1957. The market writers felt it was necessary to point the reader in the direction of the analytical thought or technical tool they were presenting in order to get started. The chance to explore the solid foundations of a particular technical methodology as a basis for what they had in mind was given. The basis was left to the reader to use to evolve analytical techniques and thinking. Certainly, the answers seldom come easily, and chart analysis is anything but easy; but sharp thinking and creativity are an absolute must in advance of this technical area of endeavor. This course by the Wetsel Market Bureau is a great example of how that presentation works as it teaches individual techniques and points the reader to the wider applications of the material presented. It is rich in ideas and techniques for the serious market student to take up, to experiment with, and to develop as good fortune dictates.

The market classic presented here is one volume of a unique Technical Analysis series that is bringing back many similar classic works to the mainstream of market analytics, from which they have for too long, sadly, been absent. Time has a bad habit of obliterating much that can later be realized as exemplary when chance brings it to light. If we are willing to leave behind the handicap inherent in thinking that modern is the be-all and end-all, we can gain some unique and forgotten knowledge. There is a new and surprising world out there waiting to be discovered when we realize that the past can teach us a lot.

We don’t know much about the team of technical writers who put together the course in trading. We didn’t find any references to their existence after the 1920s and 1930s. We know that it was a highly regarded market advisory publication in its time, and judging by the quality of this Course, we have no doubt that it was a solidly based service that profited its subscribers with some excellent analytical teaching and information. The introduction to the course states that the company had changed hands three years before the publication of the book and the new head of the company was Fred W. McClafferty. From the introductory comments to the course, we assume that the service was published bi-weekly, although there is a chance that it was a weekly publication. It would appear that the new owners of the service had a strong desire to establish their market credentials with existing subscribers and at the same time display to new and potential subscribers their substantial expertise in the investment analysis field.

The Wetsel Bureau numbered the pages of this course in a way that made it clear that they were going to publish a technically oriented lesson every other week for a year. An extra supplement consisting of four pages would be an accompaniment to their regular market letter. There were four pages for each of the lessons and they were numbered with a letter of the alphabet. The first four pages were numbered A-1, A-2, A-3, A-4; followed two weeks later by B-l, B-2, B-1, B-4, and ending with the 52nd week numbers Z-l, Z-2, Z-1, Z-4. It was decided to number the pages more in line with modern publishing practice and not use the original layout on our re-publishing of this classic course. The size of the pages and the print of the original work had different requirements from the modern typeset pages the reader will find in this re-publication.

The need to re-draw the charts and figures for increased sharpness and clarity was one of the factors we had to contend with, as reproduction difficulties with many of the original charts and figures left them in need of improvement. I am only referring to the figures and charts that are mentioned. The original text in any volume of this series is reproduced exactly as it was written. Correct spellings, inappropriate English, words left out, and the like are the only changes allowed in the text.

After all the parts had been printed and distributed, the company decided to join them together and publish them as one complete work for sale to non-subscribing investors. It seems safe to say that the earlier ones were extra special from a study of a large number of courses. I would like to explain in more detail why this was so and why so few are still around today. They were great material, they made vital contributions to the field of analysis, and they were excellent vehicles that advanced Technical Analysis by leaps and bounds with a quality that was unique and excellent. It is always questionable if the quality was of the highest order seen in technical market literature. I feel I have a strong basis for my claim because I have seen, compared, studied, and traded from many courses. Their importance and tremendous value should enrich future generations of technical analysts for decades to come, for they are a rich source of knowledge that should be known, used and expanded on as far as any market student can.

It can only be expected that they have to be looked at afresh, considering that so few of these monumental courses have been available to the investing public in the last forty, fifty, or sixty years or so. I can only say that any personal judgement should not be made until there is a chance to prove or disprove my contention of their high quality. There is nothing new in using the format of courses for limited distribution to investors throughout the modern history of stock and commodity markets. The desire to be a better market player has been the same since the last century. To meet the demand for quality instruction in the science and arts of market analysis, the published courses, along with the top-quality market books of the time, were well received by many of the investing public. The new knowledge, systems, methods, and unique applications were all solid representations of the great market masters quality material and had we not had access to it, we would be the loser.

These courses gave prospective subscribers a product that gave them advantages and knowledge over and above what others had, because they revealed unique material from a wealth of market knowledge. Premium knowledge worth the premium price that was charged was the extra attraction of the course. Many of the courses were sold to the relative few and disappeared into the sunset, hardly ever to be seen again. Why was this happening? They were designed to sell to the relative few at prices high enough to ensure their exclusivity. The economics of book production are more important than the first. Large printing presses can print 32 pages and over with one run of paper, which is why books are still produced on them. Higher numbers of books need to be printed on any run of a particular book for the machine to keep its unit costs reasonable. Appropriate printing methods are required for smaller numbers. When it came to printing these courses, it was clear that a suitable printing method had to be used because only a small amount of the work would ever sell. Each course was sold by sending one chapter or section out every month, or every other week, or over whatever period had been chosen, at a price paid per chapter or section. The full course was completed after all the text, charts, and so on had been sent.

Without the availability of today’s photocopiers or similar reproduction equipment that would have been an ideal answer back then, the best practical printing methodology was what is known in the USA as the Mimeograph machine. The machine is called the Roneograph in the United Kingdom and other countries. Some organizations still use this method for very small reproduction numbers, for it has some useful qualities and features. The machine’s shape and design, especially the large cylinder in the center of which a typewritten master plate was attached, may have been remembered by some readers. The letters began to break up and the printing became unreadable, so back then 800 to 1,000 pages could be printed from one master plate. During the 1930s to the 1950s, the courses were printed and distributed in the manner explained, with the total numbers available for sale coming to less than 1,000 copies. Combining all of the preceding information concerning the limited sales potential and the printing problems, the readers of this Masterclass Series will feel like they are the rightful heirs to Technical Analysis knowledge destined for them, that is material that has been seriously refined through the process of time and made even more.

Markets only do three things after taking into account their basic buying and selling functions. They can either rise in price or fall in price. If they only do three things, we have the answer to what to focus on in market analysis. We study every price, volume, and time action using whatever knowledge we have to analyze each price rise, price decline, and sideways movement. This gives us the most meaningful direction to follow in our analytical efforts and takes us to the highest levels of technical analysis. The focus of classical writing is analyzing physical aspect after aspect of every rise and fall.

The classical period that began with William Hamilton’s The Stock Market Barometer in 1922 and ended with William Dunnigan’s One-Way Formula for Trading in Stocks and Commodities in 1957 has a common thread that links every technical work produced in that. Their analytical methodology dealt with the reality of physical price, volume, and time. The emphasis on reality of past years has given rise to a great deal of emphasis on fantasy today. Price, volume, and time are physical realities to deal with directly; moving averages, oscillators, momentum indicators, and the like have no physical existence on the charts. The whole fantasy lines should be seen for what they are, despite the fact that the Divergent/Convergent lines have a basis and often work beautifully. The great market masters ignored most of the fantasy lines of today.

The inspiration that set the stage for some of the most outstanding courses, and market books, has to be seen as the greatest influence of the market masters. They saw what was probably the greatest rise of all time to the momentous market top of September, 1929, when the market hit its low point in the post World War I period. The fall of October 1929, known as the Black Day, was followed by the fall of July 1932, a low point that has not been seen since. The number of market participants who were involved in the rise and decline must have had a huge psychological effect. It wasn’t until the end of World War II that they were able to cope with the effects of the Great Depression.

The financial resources around the United States were at a low ebb in the early 1930s. 65 to 70% of the population were gainfully occupied, from the lowest levels to the highest. Even if the payment period had to be extended, a number of the top investment writers saw an area where they could provide a premium service for premium prices. During the Depression, the number of courses increased dramatically, with one or more courses specifically designed for a limited number of buyers. The mode of operation that developed was one where the author would offer material of an extremely high quality on the analytical side that could assist buyers to perform better in markets of their choice. Much of the technical knowledge that had not been seen before could be found in this material. There was special theoretical knowledge combined with actual trading approaches, methods for picking entry and exit points, and mechanical trading systems used in a straight formula approach.

It should not be surprising that this Wetsel Bureau Course from that period is completely in the mold described, both as to the fine quality of the analytics it presents and to the reasons it has escaped the attention of so many technical analysts for so long. We will find the appeal of the work in the freshness of its ideas, concepts, and methodologies. We can say that it is a perfect example of Technical Analysis in its entirety. The 50% Retracement Rule is an old friend to numbers of technical analysts and should become an old friend to those who are not familiar with it. In its simplest form, the Rule states that a recovery from the bottom will usually go to 50% of the previous move as measured by the distance from the bottom to the top of the previous move. One of Mr. Gann’s favorite rules was Don’t take my word for it, prove it to yourself. Like any rule that is passed down over a long period of time, the question of its reliability has an element of time working both for and against it as proof of that reliability is sought. The historical record shows that the 50% Rule works often enough to make it a worthwhile tool to consider. It is not enough to assume that any move at the time of analysis will always settle at 50%. The technical analyst and many others should not be left out of the equation because at any one time several other things are happening in that move, just to complicate things and make them work very hard for their bread.

I focused on the unusual approach of many of the great market masters who often accompanied their concepts and techniques with a suggestion for ideas to develop further. In all the simplicity of the 50% Rule, we have an excellent example of a much wider technical development that is not very evident, but one that goes way beyond the earlier seemingly innocuous mention above. With the figure of 50% and an example of its applications to chart analysis, readers would be limiting themselves if they didn’t now consider whether there is any potential to expand the seemingly simple. This is the basis of some very powerful tools that require some very powerful thinking. It is not the nature of the market to say that it would be easy. If the market aspirant wants to find success in the marketplace, they should switch to simpler pastimes such as quantum theory or brain surgery. The earlier vital message from the grand market masters on adding one’s personal initiative to directions they point us to comes through clearly in this paragraph. We grow more and more into it as our greatest mentor, and that means a lot of time, study, and effort, for expanding a basic principle is not always an easy one to live with.

Straights and Triples are the next technical concepts that follow the material on the 50% Retracement Rule. You need to pay attention to the link between the 50% figure and the not-so-coincidental link. There is a beautiful example of the wisdom that is so much a part of the classical market writings that we are bringing back to today’s and tomorrow’s Technical Analysis Fraternity. I trust that it won’t fall on the hard ground of computer disks and programs, but I can see in this work and other classical works that a number of techniques such as the one that follows could be computerized. The authors point out that the force behind Straights is Resistance and behind Triples it is Attraction, so it makes sense that the novice technical analyst should be interested in Straights and Triples. The advice with these and any other market tools is to prove them to yourself. The principle that should come out of this is that what you see and develop can often lead to more than what you get initially. A prime example of a debt is applying a variation of the 50% figure, and later to other applications with further directed and intelligent research. The guidelines should be kept away from the reader for a while when they carry the seeds of possible solutions to other analytical problems.

When they reach the Fourth Lesson, the reader should find the time to become better acquainted with the novel tools that were presented in the Circles and Arcs of Circles subject. The pivot is the center point for the measuring that will take place using circles and arcs of circles. The price ranges which have not been worked over the previous months or even years can be used as a guide in predicting turning points when stocks are in virgin territory.

The time factor is equally important to work with as it is to work with price, and the authors make the point that when the Circles and Arcs are drawn for predicting price movements, the time factor should never be ignored as it is equally important to work with than price. The importance that the past masters attached to the analytical usage of various time measurements can be seen in the writings of them. Modern Technical Analysis doesn’t pay much attention to time measurement. So much so that we might ask which group has the better overall insights into market analytics, the past masters or those who currently ignore much that involves time measurement. I can only reiterate that attention paid to time can be more important than the price of something. The value of the analysis is beyond reproach and practically of equal value to the time factor. The great man said, The two most important things in the market are Price and Time, of the two Time is the most important.

As the reader studies the Lessons in the text that follows, it will be obvious that the authors have devoted four of the 26 Lessons to the study ofGaps, phenomena that we all constantly come across on the charts. The amount of coverage given to one subject should show the importance of the authors attached to it. The importance of Gaps must be balanced with the need to consider their significance in conjunction with other indications that may be present. The Gap’s meaning in the overall scheme of weighing up the particular market movement at the time might be confirmed by these other indications. In connection with the authors guiding principles, the reader should check out Rule 51, a rule that at the right time might prove very profitable. The authors’ cogent remarks here on their appearances make their own contribution to the subject and are certainly worthy of repetition, since Gaps have been with us ever since there have been speculative markets.

When the first technical analysts plotted the very first charts, one major technique was used as much as it is today. This technique and its many variations are still valid and solid, and this makes their inclusion in this course a natural tool that the reader can use when considering market decisions. It’s easy to apply and use this tool, but it can also be used to mask more obvious uses. The alert technical analyst might spend a lot of time searching for the tool featured here, the almost ever-present Trend Line. The authors placed a low value on a Trend Line as an indication in minor movements, but when it came to major movements, they felt it had real value in predicting future market directions. When a major Trend Line is broken, a major movement may be expected in the direction in which the Trend Line is broken. In keeping with the earlier comments that there is more to Trend Lines, and many other techniques and tools than that given to its readers by so much current literature, sometimes two of these lines intersect. This technique is worth further study when the reader comes across it later in the text, as the result of these intersections is a strong resistance point.

One of the formations that rarely sees the light of day in more recent market literature is called Coil Formations after the conclusion of the Trend Line discussion. Coils can be defined as price movements in a variety of forms that gradually develop narrowing movements in the ranges that make up those movements. The direction in which the coil trend line is broken will usually indicate the direction of the next major movement. The l5 Ascending Coil and the Descending Coil are similar to the general coil, but they also bring in the Flat Coil which can present greater difficulties. The coverage given to them in this course is not enough to make them worth it.

In my opinion, the two Lessons that follow are the most important in the course. Why? They sustain the total foundation, which is made up of the three parts of Technical Analysis, the purity of Price, Volume, and Time. The constant call upon our attentions during and after each market’s trading period is what entices the continually changing and extremely prominent Price factor. Large numbers of market participants minimize their attention to the other two parts of the W-I-I-R-A Trinity, Volume and Time. One of the great strengths exhibited by the great market masters in their monumental classical writings is their emphasis on Volume and Time, which are somewhat ignored today. The technical authors and writers of the great classical period of 1922 to 1957 have been increasing the respect I have for them. The many who will read the works in the series will see just how much attention had been paid to Volume, for they will see how much attention had been paid to other factors.

The coverage and attention it gives toVolume and Price is up to the standards of itsTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkiaTrademarkia I hope that with the encouragement of this introduction and the material on Volume and Time in the text, the reader will pay more attention to them. The analyst working with Volume will find that linking it with Price in a mutual analytical dependence can and will open up new avenues that will make timing and buying and selling decisions more profitable and rewarding. Excellence in all three areas of Price, Volume, and Time should ensure even greater excellence in Technical Analysis, as the factor of Time is the most important thing to consider and use in market analysis. The most important key to unlocking the hidden market behind the outer FAC is here. To cover the many aspects of Volume and Time that they knew about, the authors of this course would need several books on each subject. It can only be expected that the authors would cover only the special aspects of Time and Volume that they chose at the time.

In Part U, we find more innovative coverage of aspects of analysis that have escaped the attention of modern-day market writers to the detriment of modern-day traders and investors. This is a result of the passage of time and not the fault of anyone in the field of Technical Analysis. The material in this part is an excellent example of a technique or methodology that promises greater benefts to the technically inclined who might choose to nurture it. The subjects are titled Angles of strength and weakness and Curves of strength and weakness. The cost of all the volumes, those already produced and those to come, should be more than repaid by what the student of the market develops from these two concepts alone.

It was my intention in the introduction to hint at the richness of the material that follows and to encourage readers not to be too hasty in their consideration of what is being presented to them. In this writer’s view, the use of the word richness in the preceding sentence is an understatement. If one keeps in mind the more than worthwhile suggestion to not only try to grasp the kernels of technique and concept that are being presented in this work and the other works in this Masterclass Series, but to also seek out the more hidden factors there, then this is especially so. Something not at all hidden, but that offers some solid guidelines that the reader would do well to copy and place in some prominent spot in their market-decision-making area at home or at work, are the clearly laid out Eight Rules in Part V. They should serve as excellent rules of market behavior to follow when the market action presents a problem of which course to follow.

This is a short preview of a very thoughtful and expansive course which, when read fully, should open some new vistas to the reader. I usually write an introduction to the classical works that have been published and are due to be published in this Techn.