Long Term Secrets To Short-Term Trading

Figure 7.35 Oops! after the 17th trading day of the month. 
That could be, but let me hastily add I first became aware of this "window of opportunity" in 1962 when I 
read Art Merrill's classic, The Behavior of Prices on Wall Street. I believe Merrill, a delightful, white-haired 
grandfather figure, was the first to note the rally tendency at this time and fully discussed it in his works. 
All I have done is add my Oops! entry, a reasonable stop and exit, to a known market bias. To the best 
of my knowledge, no one noticed this same pattern or tendency exists in Bonds until 1988 when I revealed it 
to my students; so again, we have lots of out-of-sample experience. This is not a conclusion looking for a 
promise. Merrill and others, notably Norm Fosback and Glen Parker, have suggested the end-of-the-month 
stock rally is due to mutual funds balancing and window-dressing their holdings. Once I discovered that 
Bonds rally at this time, I took the position that stocks rally not because of the funds but because of Bonds. 
As go Bonds, so go stocks. Always keep in mind Bonds (interest rates) are the dog that wag the tail, which is 
stocks. 
Virtually any time you have a bullish outlook or bias in the market, Oops! buys are worth taking, just as 
Oops! sells are worth taking when you have a bearish outlook. This pattern works wonders, given an 
underlying reason. It is the single best pattern I have discovered; enjoy it, treat it with care, use it with 
wisdom. 

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Chapter 8 
Separating the Buyers from the Sellers 
If it is true there is a buyer for every seller, how can prices move up and down? 
Which came first, the chicken or the egg, the buyer or the seller I suppose this is the ultimate Zen 
koan that speculators must answer before attaining enlightenment. On the surface, it seems prices should 
never vary much if you must have a seller to give shares or contracts to a buyer. Shouldn't they balance 
each other out,. 
In a perfect world they would but this is an imperfect world and an even more imperfect game of 
chance. Reality, as read in your daily newspaper or spoken in quotes from your broker, tells us prices do 
move, often wildly. The reason for price changes is not the amount of shares or contracts bought and sold; 
after all, they are matched. The reason price fluctuates, is thar one side, the buyer or the seller, blinks. 
In other words, one side in this equation wants to establish a position and will pay up, or sell down. 
The imbalance that causes price change is. not one of volume but of immediacy, the side that wants it and 
wants, it now, is the side that pushes prices higher or lower. 
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122 
As mentioned, we can break down the amount of buying and selling that took place in a given day by 
using the opening price. This chapter describes the elements of a trading system and approach I used to make 
more than $1,000,000 in 1987. 
Consider this: each day the commodity opens for trading at a price established by an open outcry based 
on the buy and sell orders that have built up overnight. 
On March 27, 1998, May Bellies opened at 46.20, traded down to a low at 45.95 and up to a high at 
48.60. Buyers were able to "push" prices 2.40 points above the open and .25 points below the opening. We 
have two swings here, the upswing of 2.40 points and a downswing of .2 5. Price closed for the day at 48.32 
up from the previous day's close at 46.40. 
The following charts show the greatest swing values marked off so you can visually see the actual 
workings in a real market. Figure 8.1 is of Soybeans in March 1990. Each day you have a buy swing and a 
sell swing. The direction of the close ± the open tells us which side won the battle. In this case, after the 
open, a selling wave was established and price went down that .25 in Bellies amount; we then closed 
higher. If the day after the up close, price moves more than .25 points below the opening, we have a new