VARIATIONS

The two reversal patterns discussed do not occur often, so I watch for some variations. First, tops do not necessarily

occur the same day of the extreme high tick reading. If the market is going to make a top, then the day after an

extreme uptick reading is recorded is important. Generally, another high tick reading is recorded following the peak

reading of the previous day. The second day's trading high may exceed the first day's high by more than two and a

half S&P points, and a bearish reversal candlestick pattern (Figure 7) will appear. This condition usually triggers a

short-term sell signal.

In the case of a bottom, after an 800 or higher downtick reading is recorded, the next day the tick reading should

again be at extreme levels. The second day's trading low may exceed the first day's trading low by more than two

and a half points. At that point, watch for a bullish candlestick pattern to appear (Figure 8) for a confirmation of a

buy signal. For bottoms, I noticed that the second downtick reading can be less than or greater than the first bottom

downtick reading. For tops, however, the second top's high uptick reading is less than the first top's.

In runaway markets, the tick index readings will exceed +600 for rallies and -800 for declines for extended periods.

When the difference between the open and closing range for the day exceeds two S&P points, the trend is still intact,

even though tick readings may have reached the upper limits of +600 for tops and -800 for bottoms. This price range

represents the body of a candlestick chart.

No turning point in the market can be anticipated until the difference between the opening and closing price on the

S&P contracts narrows to less than two S&P points, no matter how high the tick readings. In Figure 5, on

November 21, the S&P broke down, ending a consolidation pattern, with a tick reading of -1,070 recorded. No

bottom was anticipated because the body of the candlestick chart for that day was more than two S&P points. The

next day, November 22, a tick reading of -1,340 and the same condition prevailed. On November 23, a -800 tick

reading was recorded and the difference between the opening and closing price was less than two S&P points. This

condition would imply a short-term bottom. You can see on Figure 5 that this is exactly what happened.