Mastering Market Timing: Using the Works of L.M. Lowry and R.D. Wyckoff to Identify Key Market Turning Points

Richard A. Dickson and Tracy L. Knudsen deserve high-fives and extra kudos for making a significant and distinct contribution to the understanding and the application of the Wyckoff Method of technical market analysis…In my quest to understand the essence of Wyckoff, I frequently became stymied by the ambiguity of simple bar charts of price and volume when trying to decipher the relative impact of demand vs. supply in a given price action. But now, thanks to this book by Dickson and Knudsen, the separate measurements of demand and supply using Lowry’s indicators of Buying Power and Selling Pressure offer the breakthrough I’ve needed. I now have the deeper, clearer, more efficacious grasp on the Wyckoff Method that I’d been seeking

Combining the knowledge, skill, and forecasting ability of legendary stock market analysts Richard D. Wyckoff and Lyman M. Lowry into a systematized market-timing model, Dickson and Knudsen have produced a landmark book that is useful not only to market historians, but also to those wishing to follow in the footsteps of the aforementioned masters

I think the premise of Mastering Market Timing by Dickson and Knudsen is correct. One must be able to time the market’s large swings from a long term bear (down) market to a long term bull (up). Buying and holding can lose a person every cent they have made, and then some. I know this from personal experience. I was making pretty good money until the bear market of 2000 set in. Like a fool I listened to the eternal bull Louis Ruykhiser (sp) and his like thinking analyst. The result was a tremendous loss. Why? I missed the fact that a long term bear market had set in and I believed the “buy and hold” crowd.

Mastering Market Timing uses techniques set forth by Lowry and Wyckoff who had rejected the Dow Theory and other methods of analysis and turned instead to supply and demand as the basis for timing the market. This book lets the reader know what signs signal a market top and a market bottom so an investor can enter or exit the market in a timely manner thus avoiding the crippling losses that come with a major long term market move to the downside. It is key to the theories of Lowry and Wyckoff that within long term bear and bull markets an opposite trend may set in for a short time (months) before a return to the overall controlling pattern of bear or bull is reestablished.

Major market bottoms and tops form in steps, say the authors. The bottom is formed by first experiencing preliminary support, then a selling climax, then an automatic rally, then a secondary test, and finally a shakeout. This is an idealized bottom using Wyckoff terminology but the reader can easily see that the market at its bottom goes through a series of identifiable steps that, once spotted by the investor, tells him that the end of the bear is at hand. The same goes for the market top.

The problem is, I don’t really understand how this can be extremely useful because EVERY TOP and EVERY BOTTOM IS UNIQUE. The book clearly points out that many times false signals are sent and the investor must be aware of this and take these false signals into account before investing or changing an investment. Also, as the reader can see, most of these signals are based on psychological factors and any time human psychology comes into play nothing is set in stone.

This is too complex for me to follow and too unpredictable to base the investment of my small amount of investment capital in.

The authors need to compare their methods to something like the 200 day and the 50 day moving averages crossovers. I assume the more complex method found in the book will work better but will the crossover method work nearly as well?

I think the best part of the book is the “Where Are We Now” chapter (the last chapter). It shows just how tricky calling the market can be. Of course that chapter will grow stale very quickly, but as of September 2011 it is very interesting reading.

If you want to learn how to identify stock market tops and bottoms, then this may be exactly the sort of book you’re looking for. It is a text with the sole purpose of showing you a set of techniques for spotting tops and bottoms as they are developing and estimating how far the reversal trend may go.

This is, however, very much a stock market oriented study. Some specific techniques included can be applied in other markets, as they are based on charting methods, but since volume and advance/decline information is also used, the unified approach outlined is not universally applicable across markets. Also, these methods are applied to daily time frame charts and higher, so they won’t be of much use on a day-to-day basis for short-term traders.

As the subtitle indicates, the methods presented are based on those developed by Lyman Lowry and Richard Wyckoff. The latter name is one many technical traders and analysts are likely to know (Law of Supply and Demand, Law of Cause and Effect, Law of Effort vs. Result), but the former probably not as much. Both men developed their approaches to market analysis in the first half of the 20th century. Wyckoff’s focus is more on price/volume patterns, while Lowry brings market breadth into the equation. There is also a discussion of Point & Figure analysis. It’s mainly limited to use for projections, however, one should not expect a full education on the subject.

The book does a very good job of explain how these methods are used, both singularly and in combination. Market tops and bottoms going back to 1966 are examined in detail, providing the reader with ample opportunity to see how they work with real charts, not just idealized models. As such, I think Mastering Market Timing is an excellent educational resources for learning how markets form tops and bottoms and act during trending periods and will give it top marks for its intended purpose.