Why do stocks that have fast advances, reverse quickly and have sharp, quick declines before breaking the angle of 67 ½°, or the 45° angle on the monthly and weekly charts?
It is because the large volume of sales moves the prices over until the 45° angle is really broken at a very high level, which can be seen by making the combination time, space and volume chart. The volume chart shows that the angle is broken while the time chart, which only shows one space for each month or week, does not show the angle broken.
For example, make up a volume chart on U. S. Steel weekly from May 31, 1929 to date, and you will see that it broke so sharply after the high in September, 1929, because the volume broke the angle before the angles were broken by the weekly or monthly chart.
We are sending you Vanadium weekly from 1929 to date with volume. This will show you how the stock works when volume of sales is charted with time and space.
Why do stocks take such a long time to recover after a long decline and remain so long at low levels?
Because the volume gets so small near the bottom that it requires a long time to overcome the square of distance. When a stock declines 100 points or more in two or three months, for example, we will say exactly 100 points, then to overcome the square of distance at a low level, it requires 100 months. A stock has to square itself on the weekly, monthly and daily high and low chart. The lower the price crosses the 45° angle, the stronger the position of the stock and the higher the stock is and the greatest distance from the base, or beginning point when the 45° angle is broken or, in fact, any other angle, the weaker the stock is.
Why do stocks often cross the 45° angle on the daily, weekly or monthly high and low chart, then have an advance for a short period of time, decline and rest on the 45° angle?
It is because whey they cross the 45° angle the first time, they have crossed it before they have run out or overcome the square of distance. Therefore, on the secondary reaction, when they rest on the 45° angle, it is at a time when they have reached the square of distance, and after that time a greater advance follows. Reverse this rule at the top of a bull market. This accounts for the stocks having a sharp, quick decline from the top and then advancing and making a slightly higher top or a series of slightly lower tops, working over until it overcomes the square of distance at a comparatively high level and breaks the 45° angle, then a fast decline follows.
What rule should be followed when stocks make higher bottoms and lower tops?
As stocks advance and make higher bottoms on the monthly, weekly or daily chart, you should always draw angles from higher bottoms. Then when you reach the last section of a bull market, and those important angles are broken from the last bottom, you know that the trend has turned down. Apply this same rule as a market declines. Draw your angles from each lower top and watch your angles until the stocks again cross the 45° angle from a second, third, or fourth lower top. The second lower top, or second higher bottom is always very important to draw angles from, and to measure time from, as well.
When a stock is in a very weak, or a very strong position, it will always show it by its position on angles, and a volume chart, made up according to the proper spacing with volume, that is, considering the total number of shares, will show when the stock is in a strong or weak position and show whether buying or selling predominates, enabling you to determine whether supply is increasing, or whether demand is decreasing.