You want to learn how to identify stock market tops and bottoms? Then Mastering Market Timing: Using the Works of L.M. Lowry and R.D. Wyckoff to Identify Key Market Turning Points by Richard Dickson and Tracy Knudsen may be exactly the sort of book you’re looking for. It is a book 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 book. Some of the specific techniques can be applied in other markets, to be sure, as they are based on charting methods. Since volume and advance/decline information is also used, however, 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 (though certainly they can be used to frame the larger market pattern).
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.
Actually, one of the bottoms outlined is the one from 2009. The book was written in early 2011 (charts are through February/March) and interestingly it projects a top in the S&P 500 near 1350. The index hit 1366 in May and revisited the 1350s in July.
Make sure to check out all my trading book reviews.
If you like this post or find it informative, I encourage you to sign-up for the newsletter.
About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
- Top Trading Reads from 2011