FOREWORD
Written by a brilliant trader for only those seasoned traders who are willing to work at their analysis of the markets in a disciplined way, this book contains the most advanced methodology I’ve ever seen!
Connie Brown’s credentials come in the form of nine years on the front line as a research analyst and fund trader. She is herself a disciplined professional, who has grown to the point where she is a force to reckon with in the financial markets. At the same time, she publishes a daily bulletin on the Dow, the S&P, and Bonds. This is faxed to some of the world’s most sophisticated, large traders. Her predictions as to price objectives and trend of the market are unequaled anywhere in the industry.
There are 14 separate chapters in this book, each a separate subject. Six of these subjects have been written on before, and these chapters serve as improvements on old indicators. There are, also, 15 major breakthroughs in technical analysis! Seven of these breakthroughs are new—never-before-revealed material! Eight more dissect, change, and improve old concepts.
In her discussion of Stochastics and of RSI as oscillators, she introduces the concept that oscillators do not necessarily fluctuate between 0 and 100 and that all signals do not fall within the traditional default overbought and oversold bands. The oscillator may actually travel within a larger or a narrower range that can be pinpointed with precision. To correct what the writer perceives as a flaw in commercial software packages, she suggests the use of an upper resistance band and a lower support band within this range to help identify signals that might otherwise have been missed. She also introduces the concept that this effective signaling band may travel up and down within the range, and that it may expand or contract. She suggests that the trader should adjust this effective signaling range to compensate for the idiosyncrasies of strongly trending bull and bear markets, and even suggests some better parameters! This alone would change the way we look at oscillators—and, consequently, our entry timing.
But this inventive young trader does not stop there. She goes on to discuss the application of moving averages over oscillators, third-generation indicators created by applying oscillators on oscillators, and filtering indicators with variants of different lengths. She introduces the Composite Index she created to accompany RSI.
In a theme she returns to frequently, she kids the “Stochastics Default Club”—both the uneducated public that accepts the default values in software and tries to use them to trade without a clue as to why, and the educated but lazy trader who knows better but does it anyway. She remedies this deficit by giving a great deal of attention to procedures for determining and inputting the proper data to construct responsive, customized indicators. She makes a passionate case for keeping a flexible state of mind.
To the subject of cycles, Connie introduces the concept of “growth and decay,” which leads to asymmetrical cycles, and the application of a weighted factor to them, versus Fibonacci cycles. She explains the use of charts with differing time cycles to perfect cycle timing.
Approaching the subject of market price objectives, this writer naturally turns to the Elliott wave, her starting point in the industry. For some, the Elliott wave is frustrating in the extreme because the wave count appears to change when a larger cycle begins. Understanding their frustration, Connie agrees that some people are “wave-deaf”; just as a tone-deaf person cannot hear the music, they cannot perceive the beauty of the composition because they are caught up in counting the beats and analyzing the notations. She stresses that it is necessary to understand the structure, but more important to keep a sense of proportionality to the analysis.
Then she teaches the three simple rules that form the basis of Elliott wave analysis, takes the reader through an “easy to take” explanation of flats and zigzags, and analyzes a number of charts real-time “to the T,” showing as she goes how she integrates oscillators, Fibonacci ratios, and Gann into her analysis. She is a proponent of a hypothesis I’ve long espoused: Stochastics can prove Elliott wave—and help clarify an indistinct wave count!
Connie also discusses Fibonacci methodology in depth. The chapter on Fibonacci measurement truly upgrades this old friend. She rightly points out that markets may gap past a price objective and that the trader has to remove the differential of the gap in order to properly calculate the correct price objective of the affected retracement. In her discussion of the use of multiple Fibonacci swing objectives, Connie’s projections are plotted from numerous pivot levels. She has found that these levels tend to cluster into tight support and resistance levels, which are useful in and of themselves.
I was particularly impressed with the discussion and the upgrades. This chapter has been badly needed. The discussion on spikes and internal Fibonacci guidance is to be especially appreciated by the reader. The explanation of the Fibonacci price projection method—and specifically the use of multiple Fibonacci swing projections—is worth the price of the whole book!
Before tackling the subject of trend lines as price predictors, the writer challenges us to solve a puzzle, the Nine Squares. The task is to connect the squares with four lines, without removing the pencil from the page. To come up with the correct answer, the reader is required to work outside the mindset established by the puzzle. So, too, the writer asks us to suspend our preconceptions that trend lines must be established from absolute highs and lows. Because she believes spikes at tops and bottoms are caused by aberrations in the market, she prefers less conventional approaches, such as ignoring spikes or using intermediate highs or lows. She discusses the intersection of trend lines as a timing tool—a subject that has needed clarification for years! Then, she demonstrates a very unconventional use of trend lines to “reverse-engineer” a triangle that can be bisected into two right triangles by a line extended into the future that will point to a final bottom. She goes on to introduce an entirely new approach to trend lines—the intersection of trend lines from divergent highs on an oscillator with the long-term trend line. The results are astounding! This is “eyeball training” from which a good chartist can profit!
The Nine Squares connected by four unconventional trend lines in the formation of a pyramid is an excellent lead-in to the subject of Gann. Because his methods seemed enigmatic, it has been suggested that Gann used astrology to arrive at his predictions, and his work has been obscured by the veil of occultism. Connie has correctly perceived that this is not the case and has done an exceptional job of returning his use of an astronomical clock, the third oldest calculator known to humankind, from the occult to the realm of science and simple mathematics!
In doing this, she correctly arrives at the conclusion that Fibonacci and Gann took two routes to arrive at much the same place. This has led her to another valuable concept: that, just as areas of confluence in time or price within different charts with the same indicator should be respected, confluence in areas of time or price between the different methods she uses should be treated with even greater respect.
However, while she explains how Gann’s time and price wheels can be used to locate dates of changes in trend and price objectives, she is holding back on some of the specific information needed for a non-Mensa trader such as myself to actually use Gann to make money in the markets. Connie, I challenge you to prove to us it can be done—in the next book, of course!
—George C. Lane