2 | Method For Forecasting The Stock Market \ How To Forecast

       Every movement in the market is the result of a natural law and of a Cause which exists long before the Effect takes place and can be determined years in advance. The future is but a repetition of the past, as the Bible plainly states: "The thing that hath been, it is that which shall be; and that which is done is that which shall be done, and there is no new thing under the sun." -Ecol. 1:9.
       Everything has a major and a minor, and in order to the accurate in forecasting the future, you must know the major cycle, as the most money is made when extreme fluctuations occur.
       The major cycle of stocks occurs every 49 to 50 years. A period of "jubilee" years of extreme high or low prices, lasting from 5 to 7 years occur at the end of the 50 years cycle.
        "7" is a fatal number referred to many times in the Bible and it is ruled by the Saturn, which brings about contractions, depression, and panics. Seven times "7" equals 49, which is known as the fatal evil year, causing extreme fluctuations.

1 | Method For Forecasting The Stock Market \ Kind Of Charts

Kind Of Charts

       You should keep a yearly, monthly, weekly and overnight chart. You will find on the weekly chart that stocks will often reverse the minor trend and run up two or three weeks, but the third week it will not make a higher top or a higher bottom;
yet at other times it will hold for several weeks without advancing above the level made in the first two weeks' rally. In cases of this kind, it is always safe to buy or sell with a stop 3 points above or below the two weeks' reverse move. If the market is going higher, it should continue  up the third week, or down, as the case may be. The rules apply in the bear market as in a bull market.
       The daily chart, in order to show a reversal in trend, must go 3 points above the last top or bottom. The Daily Chart is based on Bottoms. As long as higher bottoms are made, it continues upward. As long as lower bottoms are made, it continues downward. The basis of all movements are calculated from bottoms. For a market to advance, bottom must be progressive or increasing, and if a market declines, bottoms must decrease.

Trigger Lines

Andrews used the lines on the next chart but did not have a name for them. An appropriate
title for them is Trigger Lines. On the chart below, there is a standard Pitchfork using pivots A, B, and
C. There are two additional lines on this chart. One is a dotted line connecting pivots A and B. This is
the upper Trigger Line. The second is a dotted line connecting pivots A and C. This is the lower Trigger
Line.
Used with several trading rules, these two lines trigger signals to buy long or trigger signals to
sell short. Thus they are aptly named Trigger Lines.

The Pitchfork (Upper and Lower Parallel Lines)

The chart on this page shows a Median Line drawn using pivots A, B, and C. After drawing the
Median Line, Andrews added 2 parallel lines starting from В and C. This creates an upper parallel line
and a lower parallel line. The three lines on the chart below make what is now known as the Alan
Andrews Pitchfork. As far as I can determine, Andrews never used the name Pitchfork. It is included in
this book because the term is widely applied to the lines and is well known.

Pitchfork and Trigger Line Trading Rules

Below are some of the rules Andrews provided for using the Pitchfork and the Trigger Lines.
Buy Rule 1: When the price breaks above a downward sloping upper parallel line it is an
indication of market strength and can be considered a buy signal.
Sell Rule 1: When the price breaks below an upward sloping lower parallel line it is an indication
of market weakness and can be considered a sell signal.
Buy Rule 2: On a downward sloping Pitchfork and an upper Trigger Line, if the price does not
fall to the Median Line and then rallies and breaks above the upper Trigger Line, this is a signal to buy.
Sell Rule 2: On an upward sloping Pitchfork and a lower Trigger Line, if the price fails to rise to
the Median Line and then falls and breaks below the lower Trigger Line, it is a signal to sell.
Below is the first example of these rules. This chart shows May 2001 Corn futures. On this
chart there is an upward Pitchfork using pivots A, B, and C, plus a lower Trigger Line. The price moves
up from pivot С but does not reach the Median Line. When the price falls below the Pitchfork lower
parallel line, it can be considered an early sell signal or simply an indication that the lower Trigger Line
may give a sell signal soon. When the price falls below the lower Trigger Line, the sell signal is given.

The top chart on this page shows June 2002 Eurodollar futures with an upward Pitchfork
drawn using pivots A, B, and C. Also on this chart is a lower Trigger Line. The price moves upward
from pivot С but does not reach the Median Line. When the price falls below the Pitchfork lower
parallel line, it is an indication that a sell signal is coming. When the price falls below the lower
Trigger Line, the sell signal is present.

The chart below shows March 2002 Soybean Oil futures with a Pitchfork drawn using pivots A,
B, and C. There is also an upper Trigger Line. After pivot C, the price falls but is unable to reach the
Median Line. When the price moves above the Pitchfork upper parallel line, it indicates a buy signal is
coming. When the price breaks above the upper Trigger Line, the signal to buy is triggered.

The top chart on this page shows June 2002 Crude Oil futures with a downward Pitchfork
drawn using pivots A, B, and С along with an upper Trigger Line. After pivot C, the price falls but is
unable to reach the Median Line. When the price moves above the Pitchfork upper parallel line, it
indicates a buy signal is coming. When the price breaks above the upper Trigger Line the buy signal is
given.

The chart below shows June 2002 Euro-Currency futures with a downward Pitchfork drawn
using pivots A, B, and С and an upper Trigger Line. After pivot C, the price does not fall to the Median
Line. When the price moves above the Pitchfork upper parallel line, it is an indication of a coming buy
signal. When the price breaks above the upper Trigger Line, the buy signal is activated.

The chart below shows June 2002 Gold futures with a downward Pitchfork using pivots A, B,
and С and an upper Trigger Line. After pivot C, the price falls but is unable to reach the Median
Line. When the price moves above the Pitchfork upper parallel line, it indicates a buy signal may
be coming. When the price breaks above the Trigger Line the buy signal is present.

The chart below shows Intel, symbol INTC, with a downward Pitchfork and an upper Trigger
Line drawn using pivots A, B, and C. After pivot C, the price falls but is unable to reach the
Median Line. When the price moves above the Pitchfork upper parallel line, it indicates a coming
buy signal. When the price breaks above the upper Trigger Line, the signal to buy is given.

Median Line Trading Principle 4

Another observation Andrews made about the Median Line deals with situations in which the
price fails to reach the Median Line. In these situations, Andrews observed the price reverses direction
and moves a greater distance than the size of the previous swing. This observation can be used to set
a price target after the price fails to reach the Median Line.
Median Line Trading Principle 4: If the price does not reach the Median Line, the price moves in
the opposite direction more than the previous swing size.
The chart on this page shows June 2002 Eurodollar futures. This chart shows a Median Line
drawn using pivots A, B, and C. After pivot C, the price falls but fails to reach the Median Line. After the
price fails to reach the Median Line, the first price target is the high price at pivot C. This chart shows
that the price moved back up above the price target at pivot C.

The top chart on this page shows the stock for McDonalds, symbol MCD, with a Median Line drawn
using pivots A, B, and C. After pivot C, the price declines but fails to reach the Median Line. After the price
fails to reach the Median Line, the first price target is the high price at pivot C. The price moves up and
touches this price level twice before the price breaks through to higher price levels.

The chart below shows the stock for Compaq, symbol CPQ, with a Median Line drawn using pivots A,
B, and C. After pivot C, the price moves up but fails to reach trm Median Line. After the price fails to reach
the Median Line, the first price target is the low price at pivot C. This chart shows that the price falls below
this pivot С price target.

The top chart on this page shows the stock for Xilinx Inc., symbol XLNX. There is a Median Line
drawn using pivots A, B, and C. After pivot C, the price falls but fails to reach the Median Line. After the
price fails to reach the Median Line, the first price target is the high price at pivot C. The chart shows
that the price moves up above the pivot С price target. The chart below is for Ameritrade, symbol AMTD, with a Median Line drawn using pivots A, B,
and C. After pivot C, the price moves up but fails to reach the Median Line. After the price fails to reach
the Median Line, the first price objective is the low price at C. On this chart, the price falls below this
pivot С price target.

Median Line Trading Principles 1-3

Andrews made several observations about the Median Line which are important for traders.
These are not absolute rules; they are general observations made by Andrews which will help a trader
know what to expect when using the Median Line.
Median Line Trading Principle 1: When a Median Line is drawn from the most recent swings the
price should return to the Median Line approximately 80 percent of the time.
Median Line Trading Principle 2: When the price returns to the Median Line there often will be a
pivot made on the Median Line.
Median Line Trading Principle 3: When the price returns to the Median Line the price often will
form several small swings around the Median Line and touch the Median Line more than
once before moving on.
Here are a few examples of these Median Line trading principles. Below is a daily chart for May
2002 wheat futures. The Median Line is drawn using pivots A, B, and C. After pivot C, the market
moves back up to the Median Line at point D. When the price reaches the Median Line, a top pivot is
made and there is a fast reaction downward.

The first chart below shows a weekly stock chart for General Motors, symbol GM. A Median
Line is drawn using pivots A, B, and C. After pivot C, the price moves up and returns to the Median
Line at point D.

Below is a chart for May 2002 Copper futures with a Median Line drawn using pivots A, B,
and C. After pivot C, the price returns to the Median Line at point D. When the Median Line is
drawn from the most recent price swing, the price returns to the Median Line in the majority of
cases.

Median Line Theory

Andrews always held that the Median Line is based on the laws of physics. He believed that
principles from physics could be applied to financial markets. The diagrams below show the
principle on which the Median Line is based. These principles are that natural cycles return to their
centers, and for every action there is a reaction.
The top and bottom diagrams on the left show a sine wave cycle which is only partially complete.
In these diagrams, A is the starting pivot and the Median Line is drawn through the center of В
and C. In the second two diagrams on the right, the sine wave moves back to the Median Line at
point X. At point X, the sine wave completes one cycle. When a swing in the financial market
returns to the Median Line, it also complete one cycle. Andrews believed that the price returns to
the Median Line about 80% of the time.

Median Line

The trendline for which Andrews is best known is the Median Line. The chart on this page
shows an upward sloping Median Line. Three pivots are needed to draw a Median Line. Two of the
pivots must be the high and low of a price swing. The mid-point between these first two points must
be calculated. This is calculated through simple division and addition. The range between the high and
low is divided by two and added to the low value. The same is done for the amount of time between
the high and low. On the chart below, the middle point between pivots В and С is used to draw the
Median Line.
Next, a third pivot which occurs before the price swing described in the paragraph above is
selected. Usually this is the pivot immediately before the price swing described in the paragraph above
but can be any pivot. This third pivot is the Median Line starting point. On the chart below, pivot A is
the starting point for the Median Line. The Median Line is drawn by connecting the starting pivot A and
the middle of the В - С price swing.
Note that the line between pivot В and С is not required to draw this Median Line. This line has
been added to help the reader easily see the pivots used to draw the Median Line.

Multi-Pivot Line

Andrews used a trendline that he named the Multi-Pivot line. This is a trendline which runs through
more than two pivots. This trendline does not have to run through the exact high or low of each pivot; it
only needs to be close to each pivot. Andrews believed that the greater number of pivots through which a
trendline runs, the more important the trendline is for finding future support and resistance levels and
pivots.
The chart below is for General Motors, symbol GM. On this chart there is a trendline which runs through
five pivots. This is a Multi-Pivot Line and should be considered more important than a standard trendline
which uses only two pivots.