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If you will study pages 257, and 258, in the appendix and reread this section, it will be very helpful toward increasing you knowledge.

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S&P 500 CASH

The charts (in the supplemental materials) which we are going to use for these exercises are reproductions of the charts I personally use to trade. You will see how I have found it easy to monitor, on the charts, all of the technical data with notes I nave made. I believe this would be much more useful than reproducing a cleaner or prettier chart.

Look at the high that occurred on July 17, 1985, at a price of 196. The 1982 low (weekly chart) was 101, so 196 is two full cycles up in price (720 degrees). The two previous drives up had highs of 170 (180 degrees) and 184 (90 degrees). This is more than enough to indicate significant resistance. The price of 196 is, also, on a natural resistance angle on the spiral chart and the "square" of 14. The start of the drive up on the weekly chart was the price .of 147, Notice that was 180 degrees down from the previous high of 173. From 147 to 196 is 49 points. If 147 were put into the middle of the spiral chart, price would have moved three cycles to 49, also another natural "square" of number 7. The next low that occurred on the week of October 12th was 160, thus making 196 three cycles up from that low or 36 points. Using the technique of placing a high or low in the middle of the spiral chart and moving outward, can be an effective tool. Personally, I believe that, most of the time, this technique borders on overkill. It is easier to simply be aware that corrections can be squares of numbers. On the weekly chart you can see price is in the third drive up, so the wave movement could, also, be completing a larger five wave movement. The very last high was 190, or 45 degrees away from 196, and a drop below that would be significant sign of weakness. If 196 wes an important high and price was going to correct, what would be the objective in price, how could we position to trade a possible correction of the trend?

First, we should mark the 50 percent of ranges on the chart. These are 186, 178, 172 and 148. You should notice that these 50 percent marks are exactly or within a point of previous highs or lows. Therefore, 50 percent marks are vibration points or centers of gravity. In other words, important highs or lows may be centers of gravity and, therefore, become 50 percent marks into the future. We know the fifty percent marks are very important support and, in a very strong trend, price will also tend to bottom a point or two above that support. Support could also be found where it had previously been shown at 185.

Using the spiral chart, 45 degrees down is 189-190, 90 degrees down is 182, and 135 degrees is 176. Putting 0 degrees at the 147 low, notice that the lows were harmonic to the 147 low, just as 196 was a harmonic to the highs. So, if the vibration is still intact, we may find low on a harmonic to 147 or 185-186, 177-178 or 172-173. If we put 196 into the middle of the spiral chart then 184 and 181 are support. Looking at previous moves down, the bear market of 1984 was 26 S&P points in length, and, thus, equal to a 170 objective. The largest previous move down in this trend was