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Mr. Maas,
The volume factor is not a theory, it is critical as to what the investor
psychology and reactions were that caused that pattern or any TA pattern to
form. To further confirm, I would refer anyone interested to John Murphy's
book "Technical Analysis of the Futures Markets", page 111, under the bold
heading "The Importance Of Volume". Mr. Murphy states, "The accompanying
volume pattern plays an important role in the development of the head and
shoulders top as it does in all price patterns." This is a direct quote
from the book. My copy was published in 1986. If you are going to be in
attendance at the TAG seminar next week, I am certain that John would
discuss this with you....he has answered all of my questions in the past.
Also, Mr. Murphy states on page 153 of his book concerning the diamond
formation, "It is a relatively rare pattern but is more often seen at
market tops. More often that not, it is a reversal rather than a
continuation pattern. He also discusses the volume reactions that should
accompany the pattern.
Good trading,
Al Taglavore
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> From: A.J. Maas <anthmaas@xxxxxxxxx>
> To: Metastock-List <metastock@xxxxxxxxxxxxx>
> Subject: Re: a beauty of a classic H&S
> Date: Sunday, October 08, 2000 8:06 PM
>
> E&M also write that a Diamond is "only a correction" pattern. Now, for
the
> life of me, that must be (along with their personal Volume theory) one of
> their greatest bloopers in that further excellent splendid book.
> -----------------------------------------
> For starters
> -you should not believe everything that's written.
> Second
> -personal experiences are more valuable.
> Third
> -other people's theories should not come between you and your
Charting.
> Fourth, the E&M's personal volumes theory is that of the 194x-era, where:
> -Exchanges were basicaly local affairs {now it is an International
affair, even
> an Internet-off-hours affair, where trades made outside the
Exchange will
> not ever be included in the daily volume that gets traded on that
Exchange}
> -Trading baskets hardly existed and Derivates etc did NOTexisted, eg
so
> at that time the stocks were the only traded underlays back then,
whereas
> nowadays the derivates traded greatly overexceed the stocks
traded.
> -(Personal) Computers had to be invented yet.
> Fifth:
> -Price rises or falls aren't based on volume, but these are based
> -on the supply and demand (both incl.
competition)
> -on the free market flow
> Many of these aspects that we now know, weren't known or present
back
> then. And if these latter 2 basic are now also present in other
markets than
> there where the stocks are originaly traded, eg see above
global+internationaly,
> then naturaly for minimum, a distorted picture is painted if you
would stick to
> and only focus on that one(1) of the many available markets that
might make up
> the Price. Price is thus a very broad global ruling, wheras volume
is a minor local
> and statisticly an unimportant and for Charting a minimal value.
>
> Sixth:
> -Volumes should not even come between you and your Charting, eg
between you
> and Price, because of its contradictions.
> -Contradictions(Price/Volume) in the markets:
>
> -Most recent: -the chips, pc's and other components' prices that despite
the
> huge demand, and thus increased volumes, have all
dropped
> tremendously since the early 90's.
> -the oil prices that despite the huge demand, and
thus increased
> volumes, have still leveled with the 1960-1970
price ave's.
> -internet access that was only recently quite
expensive, wheras
> despite the huge demand, and thus increased
volumes, now most
> providers will give away their FREE internet
access.
> -the automobile prices, that despite (or is it
because) of its increased
> demand, thus increased volumes, have only
quadrippled in price
> since the late 1960's.
> -the house prices, that despite (or is it because)
of its increased
> demand, and thus increased volumes, have 10+ fold
multiplied
> since the late sixties/early seventees.
>
> -Compare a trade in the futures market using futures' volumes of the
underlay.
> Now also compare it using its options volumes(eh.....what to use: calls
or puts or
> both??). Then also compare these vs local stock market volumes. Finaly
also
> compare these to its internationaly elsewhere traded volumes. For
example
> use the Dow Indu.
>
> Now who's volume figures to believe when charting a Dow's H+Ss pattern?
>
> Seventh:
> -I am for this mail bypassing the fact that for "esthablishing" the daily
traded
> volumes, on some Exchanges, "tossing a coin" is the eod rule-set to
"only
> get some figure" out to the dataproviders.
> -I am also for this mail bypassing the fact that direct trades, between
parties
> outside the Exchange, will not be included in the Echange's daily
volumes.
> -I am also bypassing the fact that large trades made on a falling or a
rising
> price during that day, will not be reflected in the eod volumes, eg a
trade
> can be "heavy" but not known is if someone's selling or buying, eg a
heavy
> traded falling trade or a heavy traded rising trade.
> -I am also not including in this mail if it is a "thin" armered stock or
a "thick"
> armered stock, where large trades in a thin armered stock will be much
> more reflected in its daily price (and volumes) than the same or a small
trade
> in a thick armered stock.
> ------------------------------------------
> The volume's myth unraffled and therefore also E&M's very personal (see
above)
> -stemming from ancient 194x's theory- unraffled.
>
> (All done in a very simplistic way only).
>
> Regards,
> Ton Maas
> ms-irb@xxxxxxxxxxxxxxxx
> Dismiss the ".nospam" bit (including the dot) when replying.
> Homepage http://home.planet.nl/~anthmaas
>
>
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