Praise for Trading from Your Gut

Cycles: Waxing and Waning Anxiety
Prices move in cycles. Unfortunately for traders, these are not
pretty sine-wave cycles. Market price patterns don’t repeat in regu-
lar form that’s easy to predict. However, the market does exhibit a
clear up-and-down movement. The cycles occur because of pauses
and changes in momentum. Momentum runs in one direction for a
while until it exhausts its fuel; then the market pauses and continues
or turns the other way for a while.
Figure 4.1 depicts a chart of IBM from March 2009 through the
beginning of July 2009. I have labeled the points of several short-
term daily cycles in order starting with A through J. Notice that
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T
RADING FROM
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UT
From the Library of Daniel Johnson

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ptg
although the price of IBM moved steadily higher from late March
(labeled A), the rise in prices was interspersed with declines that
took place about weekly. You have a rise to A followed by a decline
to B, followed by a higher rise to C and a decline to D. These cycles
of rising and falling prices continued through the time of this
writing. Each leg of the cycle generally lasted between three and
six days.
C
HAPTER
4 • T
HE
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TRUCTURE OF THE
M
ARKETS
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A
C E G
I
B
D
F
H
J
IBM (International Business Machines) NYSE
2-Jul-2009
Op 103.80 Hi 103.91 Lo 101.73 CL 101.73 Vol 7.0M
Chg -3.11 (-2.97%) 
IBM (Daily) 101.73
110.0
107.5
105.0
102.5
100.0
97.5
95.0
92.5
90.0
87.5
85.0
82.5
Mar
9
16
23
Apr 6
13
20
27 May
11
18
26 Jun