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Let me just make a comment here about Dow Theory, and some of your other recent topics of study, which is not meant to be at all negative or discouraging.
When the Dow Theory was formed, the rationale was very simple: one set of companies made things (Industrials) and one set of companies distributed those things (Rails). If both groups were doing well, then the economy, and it was assumed the stock market as well, would be doing well. If they were both doing badly, the market as a whole either was or probably would be doing badly. If they diverged, one turning down (or up) without the other, then a change probably was in the wind. If the other index turned the same way, the change was confirmed.
This was a good theory at the time, when America was a nation of industries doing things like making steel and cars, and "transport" was largely shipping materials and goods by rail. Look at the current makeup of the Dow and see how many are that kind of industrial company, and look at the transports and see how many are a different kind of transportation. (Passenger air travel, for instance.)
I know you may have encountered these thoughts, or had them, and I don't mean to invalidate what you are doing. It's probably true still that if more sectors agree with a direction, the direction is good, and if more start to diverge, a change may be ahead. I'm just reading all this Dow Theory thinking here, and wanted to gently suggest that it had its time, at least if considered in a literal sense, some time ago.
I know the work of Richard Russell, and some years ago (quite a few) I subscribed to his Dow Theory Letters, which was an advisory service that literally came as a letter in the regular mail... there was no internet. It was pretty good and it was insightful. It was not the original Dow Theory even then (the late 1970's), no matter the title. He had moved along.
Again, I'm only writing to suggest you not spend as much time in the old classics. I am not saying they are bad. They were and are classics, and if you want to, go ahead and get what you can from them.
I remembered with some fondness some of the books on Point and Figure you have mentioned, and I probably still have them somewhere. This stuff is not necessarily irrelevant. But it is also from 50, 60 or 70 or more years ago (or a hundred ), and the world was not the same then. Sure, some things don't change much, but everything does change. For instance, do I think the fortunes of Apple (a member of the "Industrials" today) relates to American Airlines (a member of the Transports) in a way similar to the way an old steel company related to a major freight railroad in Charles Dow's day? I don't.
I'm writing this long post not to knock what you are doing, just to point out that the old classics, while classic, are also, well, old.
Can you make money through them? Quite possibly. Should you know what's in them? Sure. Are they good guides? Well, that's a good question. If you find they are, then they are. But just have a little caution about looking for too much in them. Many things work, many don't, and the main thing is usually the trader and what he or she does with them. So use what speaks to you. But this stuff is kind of old.
And good luck in your quest.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I'm not discouraged at all and I'm even grateful for thoughts from others on what I'm doing.
My current way of thought is, that there's probably more to these old things than most people would think. I'm generally more attracted to "old things" for examples music and cars, even though for my almost thirty years of age, that's probably not so common.
I try to go the way that resonates the most with my personality. I like studying these old type of stuff, whereas I'm not interested at all for example in footprint-charts or programming.
I think especially in such a difficult endeavour as figuring out the way how the market works, if one doesn't find a process he enjoys, sooner or later he'll give up. Just making money is not enough of an incentive, at least for me, to endure the long way and the many setbacks to finally be able to live from the market.
Like I see it, there are a lot of shoemakers out there, who try to teach you how to bake bread. First you have to learn to distinguish the shoemaker from the baker, and if you are able to do that, you have to study how the baker does it if you want to learn how to make bread.
Thanks for the luck, Bob! It really is a quest and that's what I'm starting to enjoy more and more.
"Thou hast been faithful over a few things, I will make thee ruler over many things"
Also started to deal with the matter of "Bullish-Support-Line" and "Bearish-Resistance-Line" a bit.
The nice thing is, that this line is non-subjective. It's always in 45° angle (or the reverse for resistance) and gets always drawn from the the low point after a first buy signal was given.
There's always one line active, either the support or the resistance line.
Below a resistance line, going long is prohibited and vice versa.
If it gets penetrated like in PEP below, that's still valid and even confirms the line. If it gets into the 2nd box below the line it is broken and also ideally gives a sell signal with that move.
PEP
"Thou hast been faithful over a few things, I will make thee ruler over many things"
Five Airline chartpairs. They are very similar to each other. Also the Relative Strength charts are almost identical.
Started reading S.A. Nelson's "The ABC of Stock Speculation".
Nelson was the man who introduced the term "Dow Theory", or in the book mostly referred to as "Dow's Theory".
His approach differs noticably. He puts a lot of weigth on the real value of the stock and recommends buying below value and kinda wait until the manipulators raise it up to its real value. Very uncommon is his suggestion of averaging down if the stock runs against you, but only in case you see it more as long-term investment.
The core message so far is the usual one, but it doesn't hurt seeing it all from as much angles as possible.
Five chart-pairs, mostly hotels today, continued reading the ABC and also startet J.P. Morgan's biography by Jean Strouse.
Also watched Ray Dalio's "How the economic machine works" again. Another goal is to really and deeply understand that "inflation, debt and credit-thing". I like how also the debt-cycles are due to human-nature and pretty similar to booms and panics in the market. People always want something for nothing. If they have something, they want more. They don't seem to understand that it will never be enough anyways and they would have to change their way of thinking.
NYSE-B-% still on a sell-signal and it starts to suck a bit and a bit of fomo kicks in, since the market is again almost at ATH's and from my perspective it should be safe establishing long positions by now.
12 Energy-sector stock-charts today. I've decided to focus on making only the stock-charts for now and making the respective Relative-Strength chart as soon as the stock becomes interesting. It's just too time consuming for now and more efficient doing it that way.
XOM
This is a very good example for how the Bearish-Resistance-Line got broken, the trend changed and now the Bullish-Support-Line is in force.
Bullish-%
The Energy-Sector is still on its max. But it is to notice, that the sector consists of a comparatively small amount of stocks and so the B-%-Index tends to be not so sensitive.
Also continued reading. Interesting was the chapter about "tipsters" in the ABC. In 1903 it was already astoundingly similar to today concerning "services" and market-letters. Even Ponzi-schemes were not uncommon. People sent the money in actual letters to the fraudsters. So the concept already existed back then, but not on such a large scale as Ponzi did it in the 20s.
A fun-fact about Morgan is, that his uncle was the writer of "Jingle Bells".
It's also interesting, that the Morgan-family was already pretty wealthy and well established in society, before J.P. made his marks in history. I don't think it's necessarily an advantage for becoming successful coming from such a background. The driving force must be a different one opposed to coming from basically nothing.
I think most fortunes get lost at around the third generation. I recall someone saying that up to the 5th generation, most fortunes are again re-distributed in the crowd.
"Thou hast been faithful over a few things, I will make thee ruler over many things"
10 charts. Finished Energy-sector and did some Consumer Discretionaries.
Also continued reading.
Pierpont actually saw quite a bit of the world before he went into business in New York. First his family moved to London, he then went to school in Switzerland and Germany and also did some traveling in Europe. If you think about it that a lot of ships back then were still sailing vessels and the railroad system still wasn't fully developed, that wasn't such an easy task.
Getting to know different cultures early in life, I think is definitely an advantage in business-matters.
They also emphasized how important it is, building a good character. Sooner or later things, the good as well as the bad, catch up to you.
His father, Junius was also involved in financing the first telegraph-cable across the Atlantic.
Doesn't look like much to me. Focus shifts definitely more into the stock-world again anyways. Hopefully I can open a trade there in the next week. Fingers are itching.
"Thou hast been faithful over a few things, I will make thee ruler over many things"
Energy-Sector went down for the first time in quite a while. Despite that, VLO and PSX had up days.
Also the Transportation Average seems to catch up to the Industrial Average quite solid lately.
_____________________________________________________________________________________
Started Dodd and Graham's "Security Analysis" today. This will take a bit longer and I see it more as a book I am working through, other than reading it.
I want to know how to determine the intrinsic value of a stock as well as what goes on behind the scenes in a stock I buy.
The direction I'm steering to is working with my P&F method, which hopefully gives me something to buy in the near future, and slowly starting to implement fundamentals as well.
The term that comes to mind is "spec-vesting".
An advice Junius gave the young Pierpont: "In making haste to be rich how many fall, slow and sure should be the motto of every young man."
"Thou hast been faithful over a few things, I will make thee ruler over many things"
It has to move two more boxes up, so that it's "officially" in a valid buying-mode. Dorsey only updated this once a week, but if it should go up during next week, I'll place orders in stocks that meet the other criteria.
Likely Technology stocks or Consumer Discretionary. I think those two sectors are currently the most favorable ones.
Finished part 1 of 7 in "Securities Ananlysis". He points out differences between investing and speculating and I like that he condemns speculation in no way. The main categories he classifies securities in is bonds, preferred stock and common stock. Generally bonds are less speculative than stocks. An investment should produce revenue and a speculation profit.
Entered the Civil War period and the young Pierpont did a first controversial deal. He actually passed it on to somebody else before it became controversial. It's called the "Hall Carbine Affair" and was about rifles for the Union army which ended up as some wartime profiteering scandal. However one sentence stood out: "Different perceptions are the basis of all free trade"
"Thou hast been faithful over a few things, I will make thee ruler over many things"
Studying is going on well.
“Securities Analysis” is about Bonds so far. I always disliked and ignored them, mostly because I didn’t understand them, but they aren’t that difficult at all. I wasn’t aware that it’s like “I give them a credit” and get interest-payment for that.
The Bonds topic also merges well with the Morgan Biography, since they used to do a lot of financing through Bonds.
One thing that kinda stands out so far is, that it appears that Pierpont really didn’t do that much "hard work" one would expect at the starting point of such a career (He is in his early 30s currently).
He had some ailments and "nervous" breakdowns regularly and like the wealthy people seemingly did back then, traveled a lot to cure them. Going to Europe for a few months for rest was nothing extraordinary.
I think it would be wrong to say that he had not a bit of an advantage because of his already in the business established father, but this fact I’m sure has also its downsides.
In the grand scheme I think it doesn’t really matter where one "comes from".
Another thing that starts to make sense, is why Morgan used to consolidate, "morganize" companies.
Especially in the highly competitive railroad business, rate-wars broke out regularly. It was not uncommon for two competing railroads to run on the same route.
So they lowered their rates to such a degree, that they both ran on a loss and the first road that went bankrupt was the loser.
But this was a problem for the financiers, because then the bonds defaulted and their investors lost their money. Also a bankrupt railroad in most cases still stayed in business and then had the advantage, that they had not to pay the interest for the loan they got through the bonds anymore and in the end the other railroad also went bankrupt. They got refinanced and the game began again.
So really the only losers here were the investors and by consolidating competing railroads, the financiers could prevent these destructive "habits".
Junius actually also financed a controversial bridge "that would take 7 Million years to build" for Carnegie. This was the first time bonds were issued for a bridge. The bridge still was made of iron, but not long after it was built, Carnegie started to transition towards steel, and Junius also helped him finance his first steel-rail rolling mill.
), and the world was not the same then. Sure, some things don't change much, but everything does change. For instance, do I think the fortunes of Apple (a member of the "Industrials" today) relates to American Airlines (a member of the Transports) in a way similar to the way an old steel company related to a major freight railroad in Charles Dow's day? I don't.
