Wyckoff Trading Method: Tape Reading

Tape Reading

In his autobiography, Wyckoff tells the story of how he began studying the tape. He had observed some of the largest traders of the day sitting alone in their offices silently reading the ticker tape. He realized that the secret door to success lies in learning this technique. He concluded this discussion 127 by saying, “In consideration of those who believe that tape reading is an obsolete practice, I affirm that knowledge of it is the most valuable equipment a Wall Street trader can possess.”1 He added, “If I were beginning my Wall Street career now, and knew what forty years of it have taught me, I should apply myself first of all to this business of judging and forecasting the stock market by its own action.”    For purposes of tape reading, Wyckoff devised a wave chart and special point-and-figure charts that included volume. It’s no coincidence that the first chapter in the Wyckoff course that discusses charts is entitled “Buying and Selling Waves.” In the beginning of this chapter, he tells the student to hereafter “think in waves.”

I have never watched the flow of orders on a ticker tape. In my first two years in the futures business, all of the charts were handmade. Intraday charting involved maintaining a point-and-figure chart or  constructing an hourly chart from the price changes on a wall-size quote board with moveable parts. We phoned the exchange floor and someone read the hourly volumes off a chalkboard where all price data were posted. The nature of my work has kept me in front of the market for 42 years.

Buyers and sellers are locked in a perpetual struggle for dominance. Buying waves are followed by selling waves in a seesaw battle until one side gains the upper hand. It can be compared to an arm-wrestling contest in which one person attempts to overcome the force—the “pulling power”—of the other. If we could attach electrodes to the combatants’ arms and view physiological readings on blood pressure, sodium levels, cholesterol, and the like, we could look for the subtle signs of strength that telegraph when one side is gaining the upper hand. It is the same in tape reading. We judge the amount of effort (i.e., volume), the reward for that effort, the ease of movement, and so on to determine when short-term and intermediate changes in trend are about to occur. Intraday charts are best suited for finding short-term trend reversals. The trick is to use intraday charts with the most accurate picture of price/volume behavior.

In the early days of Wall Street, all intraday information was transmitted on the ticker tape. Point-and-figure charts were popular among technical traders. If one plotted every 7-point fluctuation in a stock, an entire day’s price action could be reproduced. Solely from a point-and-figure chart, one can recognize levels of support and resistance, draw trend lines and channels, and make price projections. While this is useful information, it is volume that tells a logical story of what is taking place in a market and alerts one when it is at a turning point. Humphrey Neill aptly wrote in 1931: “Tape interpretation depends upon consideration of the action of the volume . . . . The action of the volume tells us of the supply and demand; price merely denotes the value of the volume.”  For a more accurate picture of intraday price action in a single stock, Richard Wyckoff devised a volume figure chart. A crude sketch of the volume figure chart first appeared in Studies in Tape Reading. Years later, Wyckoff wrote a course on tape reading where the volume figure chart (renamed the tape reading chart) was discussed in detail. Since the construction of my own wave chart, called the Weis Wave, is an outgrowth of Wyckoff’s tape reading chart, it makes for an appropriate starting point.

Figure 9.1 is a remake of Wyckoff’s volume-figure chart showing all the movement in AT&T on June 2, 1932. It was included in his original tape reading course, which is still available (but modified) from the Stock Market Institute

Figure 9.1 AT&T Tape Reading Chart, June 2, 1932

in Phoenix, Arizona. We immediately notice the absence of the x’s and o’s that normally comprise a point-and-figure chart. In their place are numbers representing the hundreds of shares traded on every 1/8 point fluctuation. Whenever consecutive trades occurred at the same price, Wyckoff totaled the volume. We see that AT&T closed on June 1 at 85 1/8, where volume totaled 2,300 shares. The closing price, like the next day’s opening price, is circled for reference. On June 2, the stock gapped down to 84 1/4 on 3,100 shares. Zeroes between 85 and 84 3/8 show where no trades occurred. The next trades unfolded as follows: 400 @ 84 1/8 . . . 600 @ 84 . . . 1,100 @ 83 7/8 The first uptick is to 84 on 300 shares. It is followed by a downtick to 83 7/8 on 100 shares. Notice that the latter trade is not plotted in a separate column. Instead, it is plotted below the previous trade, thus creating an uptick and a downtick in the same column. This was one of Wyckoff’s innovations. No column can contain a single number, “x,” or “o.” This is the unique feature of a point-and-figure chart, where the box size and reversal unit are the same (i.e., a one-to-one ratio). A 1 X 2, 1 X 3, 1 X 6, 2 X 8, 2 X 6, 5 X 15, 100 X 300, or any combination in which the reversal is larger than the box size, will always have more than one plot per column.

The wave of selling continues as the sellers hit bids for 900 @ 83 3/4 and 800 @ 83 3/4  A meager 200 shares are bought at 83 3/4 and a total of 1,400 shares trade on the decline to 83 1/4. At this point, trading narrows into a quarter-point range. From the last uptick of 100 shares at 83 3/8, the stock drops a half-point to 82 7/8 on a combined volume of 1,400 shares. Within the decline from 2:30 p.m. on June 1, the stock has had two small areas of lateral movement. The first formed around the 85 level. When prices broke below this low on the June 2 opening, the downtrend accelerated. The second trading range formed along and above the 83 1/4 line. We cannot help noticing that so far the stock has made only slight downward progress on the break below 83 1/4. The next up-wave reads 100 @ 83 . . . 100 @ 83 1/8 . . . 700 @ 83 1/4 and marks the first 3/8 point rally of the day. The sellers do not retreat as a total of 1,100 shares trade on the next two downticks. After 300 @ 83 1/8, another 700 shares (300 and 400 shares consecutively) trade on the retest of the day’s low. On the final test of the lows, only 400 shares trade. We might infer that the selling pressure is diminishing. A bullish change in behavior occurs on the next uptick as 1,700 shares (the largest up-volume on the chart) trade at 83. The ensuing rally meets resistance at 83 1/4, the high of the previous upswing from 82 7/8. On the next down-move, AT&T drops a quarter-point on a total of 1,300 shares. Here, we have a large effort with no reward. With the market seemingly on the ropes, the stock flutters upward to 83 3/8 on combined volume of 400 shares, erasing all of the previous down-move. 

Evidence mounts for a trend reversal: the slight progress below the second congestion area indicates that the downward momentum is lessening; the lower volume on the last test of the low suggests the selling pressure is tiring; the large increase in volume (1,700 shares) that emerged on an uptick reveals the presence of demand; the final break to 83 failed to attract new selling, and the effortless rally off the low said the selling is spent. After the last test of 82 7/8 and subsequent rally to 83 3/4 , Wyckoff, in his reading of this chart, said to lower stops on any short position to 83 3/4 and place a buy stop at the same price in order to go long. His protective sell stop was placed at 82 5/8, one quarter-point below the day’s low. He noted the combined 6,300 shares that traded along the 83 and 82 7/8 lines and the stock’s unwillingness to give ground after the two tests of the low. Once the stock rallied to 83 1/4, the bundle of 6,300 shares was viewed as potential accumulation in the context of one day’s trading.

After the stock rallied to 83 3/8, the next 18 price changes are confined to a narrow range. The unwillingness of the stock to move lower indicates it is on the springboard for a larger up-wave. It begins with 1,200 @ 83 1/2 and continues without interruption until reaching 84. A total of4,500 shares are taken on this breakout. The ease of upward movement accompanied by an increase in volume is a sign of strength that begins the markup from a base area. Because Wyckoff’s tape reading chart is constructed like a point-and-figure chart, it can be used for making price projections. As with any point-and-figure chart, one counts the number of boxes or trades plotted along a line of congestion and multiplies the total by the reversal unit. The AT&T chart is 1/8 X 1/8 therefore, the number of boxes is multiplied by 1/8 (With a 1 X 3 point-and-figure chart, the length of the congestion area is multiplied by 3.) Counting from right to left and from the last downtick (400 shares) on the 83 3/8 line, we have 24 boxes: 24 X 1/8 = 3; 3 + 83 3/8 = 86 3/8. Point-and-figure counts are purely mechanical and have no magical powers. Sometimes they have pinpoint accuracy, and other times they fail miserably. No trade should be established solely because of point-and-figure counts. They represent potential. Congestion areas on point-and-figure charts theoretically depict the amount of cause or preparation that has been built for a potential move. When point-and-figure counts are fulfilled, a day trader or swing trader may want to adjust protective stops, take partial profits, or simply become more vigilant for signs of ending action.

After the breakout to 84, there is active pumping action as 1,200 shares trade on the decline to 83 3/8, 700 on the rebound to 84, and 800 on the dip to 83 7/8. It is caused by some longs taking quick profits, liquidation by buyers who bought the opening and are thankful to recoup most of their earlier loss, and new shorts selling against the opening high in hope of another downswing. That the stock gives little ground in the face of this selling says the buyers are absorbing the supply around the 84 level. The next upswing carries the stock to 84 3/8 on combined volume of 1,600 shares. Another shallow correction ensues before it ends with 100 shares at 84 1/4 —the first downtick on 100 shares since the stock moved off the 83 3/8 congestion line. It reflects a lack of selling pressure. The sellers raise their offerings from 84 1/8 to 84 1/2, where 600 shares are bought. One hundred shares are bought at 84 5/8 prior to a downtick to 84 1/2 2 on 1,100 shares. The latter transaction catches the tape reader’s attention, as it draws out the most amount of selling since shortly after the opening. It warns that the stock is beginning to encounter supply. The supply may be profit taking by longs; we don’t know. The stock rallies to 84 3/4 on a meager 300 shares. A shortening of the upward progress and dwindling of upside volume say demand is tiring. The tape reader raises stops to 83 3/8. There is no supply on the quick break to 84 1/2, but demand remains weak on the next rally (100 shares @ 84 5/8,). Then renewed supply emerges as the stock drops to 84 1/8 on combined volume of 2,000 shares. A 1/8, point uptick is followed by another 1,700 shares on the decline to 84, but there is little reward for the effort and we infer that buying is present. The next rally from 84 to 84 1/2 on 1,900 shares says demand is growing. On the ensuing downswing to 84, the combined volume is 2,200 shares. The lack of downward follow-through attests to the presence of demand once more. We have seen on earlier chart studies how prices often pull back to test previous high-volume areas where demand overcame supply (i.e., the rally from 83 3/8 to 84) or where the buyers absorbed through overhead supply. After the effervescent rally from 84 to 84 3/8, only 100 shares trade on the decline to 84 1/4. The force of the selling is exhausted—once again the stock is poised to rally. (“Anyone who can spot these points has much to win and little to lose.”) Additional shares could be purchased on the uptick to 84 3/8 and all stops raised to 83 3/4. In fairness to Wyckoff, he made no reference to adding shares, nor did he discuss the point-and-figure counts.

The stock has a vertical run to 85 1/4 on combined volume of 3,300 shares as the buyers overwhelm the sellers. We now can draw an uptrend line from the last low at 83 3/8 to the latest low at 84. A parallel line is drawn across the intervening high at 84 3/4. But the steep angle of advance has driven prices beyond the supply line of the up-channel, creating an overbought condition. The stock ignores the channel and continues higher after a minor sell-off to 85. This upswing reaches 85 1/2 on combined volume of 1,600 shares. Demand slackens slightly, but there is no sign of supply. There is no pressure on the downtick to 85 .  But demand is obviously tired on the next upswing: 100 @ 85 5/8.   . . . 100 @ 85 3/4. The stock drops 7 point on combined volume of 800 shares as the sellers flex their muscle. Fresh buy orders for 1,500 shares produce a retest of the high, but there is no reward for the effort. The minor support around the 85 3/8.  line quickly gives way as the stock slips to 85 1/8 on 1,000 shares. A two-way struggle develops as the buyers attempt to absorb the selling. It ends with a last-gasp purchase of 300 shares at 85 5/8 before prices topple 1 1/8 points to 84 1/2 About this sell-off, Wyckoff wrote one line: “Pressure on the decline is neither light nor heavy; it is a normal reaction.” He considers the decline “normal” because it does not retrace 50 percent or more of the advance from 82 7/8 But it comes close. A point-and-figure count can be made across the seven plots along the 85 5/8 line for a decline to 84 3/4 however, it is slightly exceeded. The decline stops along the demand line of the up-channel. In addition, support forms on top of the previous resistance area between 84 3/4 and 84 5/8 and within the vertical price rise. In a statement reminiscent of profile analysis, Wyckoff described the tape reading chart as “particularly valuable in showing the quantity of stock at various levels.” The total number of shares traded above 85 3/8 is 8,300. If the 6,300 shares traded between 83 and 82 7/8 could be viewed as minor accumulation, the heavy volume above 8,300 can be considered to be distribution. In light of this stopping action plus the overbought position of the stock within the up-channel, profits on the second purchase at 84 3/8- should be taken after the last-gasp rally to 85 5/8.

From the low at 84 1/2, there is very little time to react. A rebound to 84 7/8 and downtick to 84 3/4 lead to a vertical run to 86 1/2. As soon as this liftoff accelerated, we would raise the stop on the original purchase to 84 3/4. We would also broaden the up-channel by drawing a parallel line across the 85 3/4 high. Yet, at 86 1/2, an overbought condition already exists. The steep angle of advance, the combined volume of 5,200 shares on this vertical up-move, and the overbought condition spell climactic action. (Notice that 2,300 of the 5,200 volume occurred above 86, suggesting that the stock was beginning to encounter selling.) If the long position is not immediately closed out, stops should be raised to 85 3/8, just below the previous high at 85 3/4. Next, the stock drops to 86 on sales of 600, 800 and 200 shares. Look carefully at the character of the final up-wave to 86 7/8.The combined volume of 4,400 shares is rewarded with only a 3/8 point gain. When the upward thrust shortens and volume increases, we know price has met selling. Unless one was trading a larger situation not visible on the chart provided here, trades established at 83 3/8 should be closed out. Wyckoff noted in his commentary that 10,000 shares traded at 86 1/2 and above before the correction to 867. Volume increases as traders even up their positions on the close, but there is little downward progress. The shallowness of the correction testified that the buyers absorbed the fresh supply, and the stock rallied to 89 1/2 on June 3.

Wyckoff’s volume-figure chart was used to read the intraday flow of orders into an individual stock. To follow the broader market, Wyckoff plotted an intraday wave chart of five leading stocks taken from separate groups. He calculated the aggregate price of these stocks as they ebbed and flowed throughout a trading session. The resulting wave chart broke each day into separate buying and selling waves. Wyckoff compared the length, duration, volume, and activity on these waves to determine the dominant trend and to locate the early clues that pointed to a change in trend. The same behavior we observed on the volume-figure chart can be found on the wave chart. One can see shortening of the upward or downward thrust, ease of movement, stopping volume, the interaction with trend lines and support/resistance lines, and so on. While Wyckoff’s wave chart of market leaders (today it is known as the Wyckoff Wave) is still maintained by the Stock Market Institute, it has undergone many changes over the years. With the advent of stock index futures, however, the need for a wave chart of market leaders seems less compelling. But a wave chart can be useful in the study of individual stocks or futures. In his tape reading course, Wyckoff recommended keeping wave charts of individual stocks, although I cannot find an example in any of his published writings. As will be shown, a wave chart of a single stock or futures contract can be constructed from every price change. As I experimented with volume-figure charts (or tape reading charts), a method for converting the information into waves evolved.

There is no difference between a wave chart and a volume-figure chart whenever the price scale equals the minimum fluctuation of a market. When I first experimented with the idea of making a wave chart, I converted Wyckoff’s volume figure chart of AT&T into a continuous line. This removed the ambiguity of having an uptick and a downtick in the same column. More important, it allowed me to total the volume on the swings larger than 1/8 point and thus provide a better picture of where the stock encountered supply and demand. One drawback, however, is this modification increases the size of the chart. For a modern-day market, with thousands of intraday price changes, such a chart would be impractical. My final rendition is presented in Figure 9.2, where the high- volume areas are vividly apparent. I immediately decided that some of the data should be filtered. The easiest way to filter data is to increase the size of a minimum wave. I modified the volume-figure chart into a wave chart with a  1/8 point scale and a 1/4 point wave or reversal. This filters out all of the 1/8 point reactions within a wave, removes having an uptick and downtick in the same column and reduces the size of the chart. It works just like a 1/8 X 1/4 point-and-figure chart in which the box size is 7 and the reversal is 1/4. This makes the information clearer.

With the aid of this chart, the story jumps out at us. First, we see the 2,800 shares on the test of the day’s low where the large effort yields no downward follow-through. The next two rallies on 2700 and 2,800 shares speak of aggressive buying. The 5,800 shares on the breakout to 84 starts the mark-up. Later, after the 4200 share sell-off to 84, the selling pressure is

Figure 9.2 AT&T Modified Tape Reading Chart, June 2, 1932

half as large on the 2200 retest. On the next up-wave to 85 3/4, the up- volume (1900) drops to the lowest level since the markup began. This warns of an impending downturn. Three waves later, on the rise to 85 , the larger 2,900 volume shows a large buying effort with no reward. It, too, indicates that a sell-off is imminent. Although this chart was made from 1932 price/volume data, the behavior has not changed over the past 80 years. It’s truly fascinating to see the same action recurring over and over on these charts. Although I was once ridiculed for saying this, I compare the beauty of this repetitive behavior to sunrises and sunsets. In Chapter 11, all of the behavior we have discussed here will appear on stock, futures, and forex charts. While some of the subtler information on Wyckoff’s 1/8 X 1/8 volume-figure chart may be missing here, one adept at reading price/ volume behavior would have no difficulty interpreting and trading from Figure 9.2.

As we have seen, Wyckoff’s volume figure chart was constructed from every transaction. In the 1990s, trade-by-trade volume data were not available on bond futures. As a result, we used tick volume, and the numbers were very small. In order to assign a volume per trade, I decided to consider every “trade” during the day as the close at the end of each one-minute time period. This limited the data surveyed for constructing the chart (day session only) to 400 price changes (i.e., 400 minutes per day), and, more important, it provided a volume reading for each price change. I then created a data sheet listing the 400 minutes within each trading session. Whenever the same price occurred consecutively, I totaled the volume. If one constructs a volume-figure chart from one-minute closing prices and no consecutive closings occur at the same price, it is conceivable 400 data points will appear in one session. While statistically possible, it never occurred.

Figure 9.3 is an example of a 1/32 x 1/32 tape reading chart constructed from one-minute closings. Since it has a 1:1 ratio between the scale and the reversal, an up-tick and down-tick can occur in the same column as on Figure 9.1. The following list (tape) itemizes the price changes on November 29, 1993, in the December 1993 bond contract between 7:20 a.m. and 8:48 a.m. CST. On the previous day, the contract closed at 11603.

7:20 11612-6: The contract gaps higher from 11603 to 11612. Since the opening price continues an up-move from the previous day, we plot zeroes within the same column to reflect the gap.

7:21 11611-11: We plot this downtick in the next chart column.

7:22 11613-10 

 

Figure 9.3 December 1993 Bonds One-Tick Tape Reading Chart

7:23 11613-12: We enter the plots only after a price change occurs, for there may be consecutive one-minute closes at the same price. When this occurs, plot the total volume. Enter the volume (22) above the previous plot at 11611. Remember, there must be at least two numbers in a column. Since we have only one downtick to 11611 in this column, enter the uptick to 11613 above it.

7:24 11614-11

7:25 11614-10

7:26 11612-10: After this price change, we enter the 21 ticks at 11614 above the 22 ticks at 11613. In 1993, anyone familiar with intraday bond volume would view the sharp increase over the previous four minutes as evidence the opening rally has run its course. The large buying effort netted only 1/32 nd above the opening high.

7:27 11613-9; 7:28 11612-7; 7:29:11611-7; 7:30 11612-5: Since the high at 11614, the volume on the two upticks (see underlined times) diminished to 9 and 5, respectively. A tape reader would notice the weaker demand on these upticks, which indicates that the sell-off has not ended.

7:31 11611-11; 7:32 11611-6 [total 17]; 7:33 11610-9; 7:34:11610-6 [total 15]; 7:35 11609-3: A flurry of selling on combined down-volume of 35.

7:36 11611-4; a zero is placed at 11610

7:37 1610-3; 7:38 11610-4; 7:39 11610-2 [total 9]: Trading activity has slowed down after the decline to 11609.

7:40 11612-4

7:41 11609-6

7:42 11610-1: The 11609 line has been tested twice. In real time, we would draw a support line across the 11609 level. Volume remains light, thus suggesting that the selling pressure is dwindling. A minor downtrend line drawn from 11614 across the top of the last uptick to 11612 creates a wedge or apex. The narrowing of price swings into such a pattern warns that the stalemate will be resolved soon.

7:43 11608-6; 7:44 11608-6 [total 12]: December bonds penetrate the 11609 support level, momentarily shifting the advantage to the sellers. The sell-off from the 11614 high to 11608 has taken 24 minutes. Watch the action in the next five minutes.

7:45 11611-5; 7:46 11612-7; 7:47 11613-5; 7:48 11614-5; 7:49 11616-8: No downward follow-through as prices take big steps upward to a new high. The easy upward movement signals a bullish change in behavior, and the tape reader buys bonds. Protective sell stops are placed at 11607.

Following the rise to 11616, bonds hold above the previous high at 11614 without giving anyone an opportunity to buy cheaply. The rally continues in stair-step fashion. A burst of volume (21 ticks) temporarily stops the advance at 11621. The first effort to push above 11624 is thwarted because longs typically take profits around the quarter-point increments. Once the profit taking is absorbed, prices rise from 11621 to 11630 (8:21 to 8:31) with only one downtick. The market’s proximity to 11700 entices more profit taking. Bonds have almost rallied to the top of the up-channel drawn from the low of the previous correction. In addition, most of the point-and-figure projection across the 11527 line has been fulfilled. Yet we see no evidence of supply overcoming demand. Now let’s read the tape from the 8:31 high at 11630:

8:32 11628-4; 8:33 11627-3: This low-volume correction reflects no aggressive selling.

8:34 11628-7; 8:35 11628-8; 8:36 11628-4; 8:37 11628-8; 8:38 11628-6: The market trades for five minutes and gains only 1/32 nd despite the day’s largest block of volume (33). This clustering of one-minute closing prices at 11628 says the market is having difficulty making upward progress.

8:39 11629-9; 8:40 11631-8; 8:41 11631-10 [18 total]: From the low at 11627, bonds rally to 11631, one tick above the 8:31 high, on combined volume of 60: a small reward for the large effort. This up-wave spans 4/32 nds but only gains 1/32 nd above the previous high. The volume is greater than on the rally from 11608 to 11616 and on the up-wave from 11621 to 11627. The lack of upward progress in the face of such a large effort tells us the bond market has encountered supply. We either raise the sell- stop to 11628 on the long position or close out the trade immediately. Now comes the first evidence that the sellers are overcoming the buyers.

8:42 11630-9

8:43 11629-3; 8:44 11629-4; 8:45 11629-8; 8:46 11629-4; 8:47 11629-4 [total 23]; 8:48 11628-3: The total volume at 11629 is the largest on a downtick since November 28. The sell-off from 11631 to 11628 is accompanied by the largest volume since the 11608 low.

A bond 1/32 nd volume-figure chart requires a data sheet of one-minute closes and volumes plus chart paper with a grid large enough to enter the volume numbers. Anyone who has the patience to make such a chart and intensely study intraday price movement will learn a great deal about how markets work. Although greatly modified, the concept behind this chart stems from Wyckoff’s tape reading course. Its interpretation, however, is mostly a matter of simple logic gained through study and observation. From a logical reading of the tape, one gains a sense, a feel for what will happen next.

In Figure 9.3, look at the rise from the last low at 11621 where the volume equaled 4 ticks. From this low, bonds gained 9/32 nds with only one downtick. The thrust shortened on the final up-wave, and it had volume of 60 ticks, the heaviest reading for the day. The 35-tick volume on the next down-wave was the heaviest since the spring low. It doesn’t take a rocket scientist to understand the message. In Studies in Tape Reading, Wyckoff wrote:

Tape Reading is rapid-fire horse sense. . . . The Tape Reader aims to make deductions from each succeeding transaction—every shift of the market’s kaleidoscope; to grasp a new situation, force it lightning-like through the weighing machine of the brain, and to reach a decision which will be acted upon with coolness and precision.

To requote from his autobiography, Wall Street Ventures and Adventures, Wyckoff said:

The purpose of the self-training and continued application of the methods suggested in Studies in Tape Reading was to develop an intuitive judgment [my emphasis], which would be the natural outcome of spending twenty-seven hours a week at the ticker over many months and years.

The “methods” he refers to are examples of how he logically read the ticker tape. By no means am I trying to slight the information he imparts. Wyckoff knew tape reading cannot be reduced to a set of specific instructions. It’s like dancing. You can learn the basic dance steps, but in order to dance you must have the feel of the music. Wyckoff’s tape reading course explained the construction of the tape reading chart, and he showed how it could be integrated with a wave chart of market leaders. When Wyckoff began studying markets, there were no intraday quotes on the Dow or other indices. A single, closing figure at the end of each trading session was the only measure of a day’s performance. As already noted, Wyckoff created a wave chart of five or six leading stocks. He plotted the volume on the buying and selling waves, thus making it very useful for judging the condition of the overall market. It is interesting to note that Wyckoff chose to present the data as a wave chart rather than a 5- or 60-minute bar chart. A tape reader would know price movement unfolds in waves rather than in equal time periods.

An entire 3rnd volume-figure chart of bonds is too unwieldy for showing a continuum of price history. But if we change the reversal unit to 3/32 nds, we can reduce the number of wave turns per day. For example, the complete 1/32 nd chart on November 29, 1993, had 258 out of a maximum 400 waves. In Figure 9.4, the modified reversal size reduces the number of reversals (let’s call them waves) to 32. This 3/32 nd wave chart constructed from the same one-minute closes as on Figure 9.3 tells a wonderful story. We see the shortening of the upward thrust and reduced volume at 11631 (60), the emergence of supply on the down-waves to 11627 (62) and 11626 (119), the upthrust with weak demand on the final high at 11700 (48), the high-volume break where supply overcame demand on the sell-off to 11621 (290), and the light-volume secondary test on the two up-waves to 11628 (48)/(7). From this point, the force of the selling steadily overwhelms the buying as bonds trend lower throughout the session. Writing three-digit volume numbers within a chart grid was impractical. The next adjustment came easy: plot the volume as a histogram below the corresponding price movement.

Figure 9.4 December 1993 Bonds Three‐Tick Tape Reading Chart

Now that we know the basic ingredients for making a wave chart, let’s go through the mechanics of determining the waves and their volumes and plotting them on the chart. For the 3/32 nd wave chart, we begin with a worksheet referred to as a “one-minute tape.” It is simply a tabular listing of the closing price for each minute and its corresponding volume. As before, when no trade occurs during a time period, the slot is filled with a horizontal line. We are going to examine the price movement in September 2001 bonds on June 15, 2001. On the previous day, an up-wave peaked at 10123 shortly after 2 p.m. EST, and prices then declined to close at 10118. The total tick volume on the decline to 10118 was 160. If prices open lower on June 15, the down-wave from 10123 will be continued until there is a reversal of 3/32 nds or more. The “tape” of the first 11 minutes on June 15 reads as follows:

08:20       10112-10 170

08:21       12-8 178

08:22       13-11

08:23       11-12 201

08:24       12-3

08:25       12-4

08:26       13-3

08:27       13-3

08:28       13-3

08:29       10-11 228

08:30       18-7 7 (Figure 9.5 shows the price movement to this point.)

At the end of the first minute, bonds were 6/32 nds lower at 10112. This is below the close on June 14, so we continue totaling the volume. The 10 ticks in the first minute are added to the previous total of 160, for a new total of 170. The 10112 price at the end of the second minute is considered part of the existing down-wave, and its volume is added to the previous volume for a new total of 178. The uptick to 10113 in the third period is not sufficient to reverse the down-wave. A new low for the wave occurs in the fourth period. The volumes from the third and fourth periods are now added to the previous total for a new sum

 

Figure 9.5 September 2001 Bonds Three‐Tick Wave Chart

of 201. In the next five periods, bonds hold in a narrow range with combined volume of 16 ticks. If bonds close at or above 10114 in the 10th period, the uncounted 16 ticks would become part of the new up-volume. Instead, a drop to 10110 occurs in the 10th period, and the total volume increases to 228. The 08:30 period in bonds often marks the point where volatility increases because many government reports are released at this time. Something bullish was obviously announced as bonds jumped 8/32 nds higher to 10118. This instantly marked a change in direction and the new up-volume is 7. A line is then drawn across the 08:29 listing where the previous wave ended. As the data are being recorded, it is useful to keep a running total. Notice that no total is made for those time periods where prices did not continue lower or trade at the existing low of the wave. These blank spaces give us some sense of the market’s pace. While no great significance is attached to this information, it can be useful to someone who did not observe the tape and wanted to gain some insight into how frenetic the selling or buying was at turning points within the session. The market opened on a weak note with a gap down, but there was no cascade of falling prices afterward. In real time, this sort of information becomes part of the gestalt of reading the market. Here are the next 51 readings from the one-minute tape data:

08:31   18-8 15       08:48 23-2             09:05 25-6

08:32   19-9 24       08:49 24-5             09:06 25-6

08:33   19-8 32       08:50 24-4             09:07 25-2

08:34   19-10 42     08:51 24-5             09:08 25-2

08:35   19-1 43       08:52 24-2             09:09 26-2

08:36   18-5            08:53 24-4             09:10 27-3 23

08:37   19-3 51       08:54 26-2 135      09:11 27-4 27

08:38   19-2 53       08:55 28-4 139      09:12 26-9

08:39   21-6 59       08:56 28-9 148      09:13 27-3 39

08:40   22-5 64       08:57 29-7 155      09:14 27-2 41

08:41   22-4 68       08:58 —                 09:15 30-10 51

08:42   24-7 75       08:59 28-10           09:16 31-11 62

08:43   24-7 82       09:00 27-3             09:17 10200-10 72

08:44   24-1092      09:01 26-7 20        09:18 30-8

08:45   23-5           09:02 25-11 31       09:19 30-4

08:46   25-8 105    09:03 24-5 36         09:20 29-7 19

08:47   23-6           09:04 25-3              09:21 27-12 31

(Figure 9.6 is plotted through 9:21.)

The up-wave that began in the 08:30 period spanned 28 minutes. Volume totaled 155, and the market gained 19/32 nds. Notice the pace of the up-move: prices moved higher or remained at the high of the wave in 19 of the 28 minutes. This is a robust up-wave. We would not have known the up-wave had ended until the 9:01 period where bonds dropped 3/32 nds to 10126. At that point, we would have updated our chart. The sell-off from 10129 lasts only 6 minutes. At 9:10, bonds trade at 10127. There are more trades at 10127 in the next 4 minutes. In the 11 minutes since the low at 10124, the market has gained 3/32 nds on volume of 41—not an overly impressive rally. But suddenly there is a buying flurry: 10 @ 30 . . . 11 @ 31 . . . 10 @ 00. Here are 31 ticks in 3 minutes (the heaviest 3 minutes’ worth of volume to this point in the day) compared to the previous 41

Figure 9.6 September 2001 Bonds Three‐Tick Wave Chart 2

ticks in 11 minutes. Discussing the action at turning points, Humphrey Neill wrote: “The public is attracted by price changes, not by volume; that is to say, the public does not analyze the action of volume.” 7 Three minutes later, prices fall 3/32 nds. We now have two up-waves on the chart. The first lasted 28 minutes and gained 19/32 nds on 159 volume; the second lasted 14 minutes and gained 8/32 nds on 72 volume—about 50 percent the effort and reward. The second up-wave exceeded the top of the first up-wave by only 3/32 nds. In an uptrend, when the duration, length, and volume of the buying waves begin to diminish, one should be alert to a possible change of trend. The same is possible when the duration, size, and volume of the selling waves begin to increase. (This is dramatically evident at the top on Figure 9.4.) Unfortunately, as with most tape reading observations, this is not an ironclad rule. It is best thought of as a guideline. (There are in-stances when the up-waves in a rising market will inch along on declining volume because of a lack of selling. It will continue until supply emerges.) The same duality that brightens/darkens every aspect of our lives also exists in interpreting markets. We left off with the second buying wave of the day ending at 10200 and the beginning of a selling wave. Although the diminished volume on the second buying wave and the shortening of the upward thrust make us wary of a possible trend change, nothing overtly bearish has occurred. Let’s examine more of the tape:

09:22 10127-12 43      09:40 25-2 48          09:58 25-1

09:23 28-7                  09:41 25-4 52         09:59 26-1

09:24 29-7                   09:42 25-2 54         10:00 29-7 56

09:25 29-2                  09:43 26-2              10:01 29-10 66

09:26 30-3 19              09:44 25-3 59         10:02 28-3

09:27 30-2 21              09:45 26-7              10:03 28-4

09:28 29-3                  09:46 24-4 70         10:04 26-4 11

09:29 29-6                  09:47 25-9              10:05 27-7

09:30 26-9 18             09:48 27-2 11          10:06 27-2

09:31 28-6                  09:49 25-4              10:07 24-7 27

09:32 28-2                  09:50 26-8              10:08 23-7 34

09:33 28-3                  09:51 26-2              10:09 23-4 38

09:34 28-3                  09:52 25-9              10:10 22-5 43

09:35 28-7                  09:53 25-4              10:11 23-5

09:36 27-1                  09:54 26-1              10:12 23-6

09:37 26-1 41             09:55 —                  10:13 23-3

09:38 27‐3                  09:56 25‐3               10:14 22‐3 60

09:39 25‐2 46             09:57 26‐5               10:15 21‐7 67

(Figure 9.7 is plotted to this point.)

The selling wave that began from 10200 was small and lasted only 5 minutes. There is nothing bearish about this behavior. But look at the next buying wave of the day. It lasted only 5 minutes compared with previous rallies of 28 and 14 minutes. This up-move netted 3/32 nds on a move to a lower high and volume diminished. The buying power is tired. A bearish change in behavior occurs in the next selling wave. Here the duration and volume are greater than on any of the down-waves that originated during this session.

 

Figure 9.7 September 2001 Bonds Three‐Tick Wave Chart 3

Two minutes after the low at 10124, a 3/32 nd reversal occurs. Look at the pace of the advance from 10124 to 10129. During this 15-minute buying wave, prices advance or hold the high in only three periods. Such behavior reflects weak demand and little interest in bonds. The market is now vulnerable to a larger downturn. The reversal occurs at 10:04 on the downtick to 10126. A tape reader would go short and protect above 10200. Bonds continue to slide, and we see a 10121 print on the tape at 10:15. The market has now fallen through the support at 10124 where two of the last three selling waves had held. More of the tape action is listed next:

10:16   10122-5

10:17   23-5

10:18   23-6

10:19  21-6 89 (There has been no downward progress, but volume continues to build. The volume is now heavier than on the previous selling wave.)

10:20  20-7 96

10:21  18-9 105

10:22  19-3

10:23  18-9 117

10:24  19-11

10:25  17-10 138 (Traders have placed stops below the previous day’s close at 10118—a “pivot point” for some systems—as the market moves into negative territory for the session.)

10:26  18-4

10:27  18-6

10:28  16-8 156

10:29  16-9 165

10:30  15-7 172 (Humphrey Neill said the “market is honeycombed with buying and selling orders.” The whole numbers and half-numbers are favorite levels where traders place orders to buy and sell. Thus, it is not surprising to see some hesitation caused by shorts taking profits and new longs buying around 10116.)

10:31  16-3

10:32  15-7 182

10:33  15-6 188

10:34  16-5

10:35  15-3 196

10:36  15-7 203

10:37  15-2 205

10:38  15-2 207

10:39  14-10 217

10:40  13-7 224

10:41  14-5

10:42  15-1

10:43  15-6

After holding for 11 minutes between 10116-10115, the decline to 10113 seemed like the beginning of more weakness. Now that the market is trading at 10115 again, one might think the decline is ending. If short, do you cover? Often, especially when we think too much, we cannot tell the difference between noise and meaning. When in doubt, don’t get out—lower risk/increase comfort level by adjusting your stop.

10:44  15-1

10:45  13-6 243

10:46  09-10 253 (The 3/32 nd drop in this period is caused by stop-loss selling as the bond contract falls below the morning low at 10110.)

10:47  08-9 262

10:48  10-3

10:49  08-8 273

10:50  07-9 282

10:51 07-8 290

10:52 05-10 300

In the last 7 minutes, the sell-off steepened and volume increased sharply. This is either the beginning of a much larger plunge or it is a stopping point of some unknown degree that can only be determined from a view of the larger price history. From the small amount of price movement we have observed, we cannot tell if this is part of larger downtrend, a brief washout in an uptrend, or part of a broader trading range. If the average daily range in bonds is about 29/32 nds, a day trader might want to take profits and wait for another situation to unfold.

10:53  06-7

10:54  06-8

10:55  08-2 17

At this point, we know a selling wave ended at 10105: size = 24/32 nds, volume = 300 volume, and duration = 51 minutes. From experience, one would know a volume of 300 on a 3/32 nd wave chart is highly unusual. A 300-tick wave on an 8/32 nd or 16/32 nd wave chart would not stand out. On this chart, however, it reflects a great outpouring of supply—a major sign of weakness.

10:56   10-4 21

10:57   08-10

10:58   10-6 37

10:59   11-5 42

11:00   11-2 44

11:01   10-5

11:02   09-3

11:03   09-5

11:04   09-2

11:05   08-5 20 (The buying wave to 10111 tells us nothing, most likely some profit-taking by shorts.)

11:06   09-4

11:07   09-7

11:08   10-9

11:09   10-2

11:10   11-1 23 (No supply emerged on the selling wave to 10108.)

11:11   12-3 26

11:12   11-5

11:13   11-2

11:14   11-2

11:15   11-2

11:16   11-2

11:17   10-5

11:18   10-6

11:19   10-2

11:20  09-5 31 (Here, we know a buying wave ended at 10112. Although unimpressive, it slightly exceeded the high of the previous buying wave to 10111.)

11:21   09-8 39

11:22   08-5 44

11:23   08-6 50

11:24   08-2 52 (Figure 9.8 is plotted to here.)

11:25   09-3

11:26   09-2

11:27    —

Figure 9.8 September 2001 Bonds Three‐Tick Wave Chart 4

11:28    09-2

11:29    10-1

11:30    10-2

11:31    09-1

11:32   10-3

11:33   09-3

11:34   11-6 23 (The last selling wave retested the previous low at 10108 where support is forming.)

11:35   10-1

11:36   10-2

11:37   12-2 28

Here, the market has rallied above the high of the previous two buying waves. A correction of some degree is under way. If one is still short, one must decide whether to take profits, take partial profits, or lower stops. At what level would you expect the market to encounter resistance? Assuming Wyckoff went short at 10121, he probably would have taken profits at the climactic low or shortly after it showed a tendency to make higher highs. If he had chosen to trade the larger potential, he would protect just above the 50 percent retracement level. From our one-minute, filtered data, we have a decline from 10200 to 10105, so the 50 percent level is about 10118. The actual high and low of the decline are 10201 and 10105, making 10119 the precise 50 percent correction point. But is there any shelf of support within the decline where we might tuck our stop above? None appears on the chart but our record of the tape shows the lateral movement back and forth between 10116 and 10115 (10:28 to 10:44). It could provide resistance on any corrective rally. From our intensity of involvement with the tape, we have a mental picture of where to expect resistance.

11:38   13-3 31

11:39   14-3 35 (The market has now exceeded the previous high of the up-wave.)

11:40   13-1

11:41   13-4

11:42   13-2

11:43   13-2

11:44   14-1 44

11:45   14-2 46

11:46   13-1

11:47   13-2

11:48   —

11:49   —

11:50   14-1 50

11:51   15-3 53 (Now the market has rallied to the minor congestion between 10115 and 10116. Let’s see what kind of progress it makes.) 

11:52   15-4 57

11:53   14-1

11:54   13-1

11:55   14-5

11:56    —

11:57   15-3

11:58    —

11:59   15-2 69

12:00   15-2 71

12:01   14-1

12:02    —

12:03   13-1

12:04   13-4

12:05   12-3 9

A new selling wave begins with this reversal. The last buying wave gained 7/32 nds in 36 minutes on volume of 71 ticks. It failed to retrace 50 percent of the large decline from 10200 to 10105 and did not exceed the resistance between 10116 and 10115. So far, this up-wave looks like a typical low- volume correction in a downtrend.

12:06   —

12:07   11-1 10

12:08   12-1

12:09   11-1 12

12:10    —

12:11   12-1

12:12   13-1

12:13   14-1 3 (The 12 ticks on the brief selling wave from 10115 to 10112 reflects a lack of supply. The market should attempt to rally through 10115-10116 resistance again.)

12:14    —

12:15   15-14 (Here we go!!)

12:16   13-2

12:17   —

12:18   —

12:19   —

12:20  12-1 3

The market died at 10115 as volume dwindled to four ticks in 6 minutes. Within the rally from 10105, the last buying wave marked the first failure to make a higher high. With the last down-wave attracting no sellers, the market was in position to move higher. Instead, the buyers disappeared. It is not uncommon for trading to become listless at this time of day as traders in the Eastern time zone depart for lunch. Do you believe the old adage “Never sell a dull market” is correct? Figure 9.9 ended at 12:15.

12:21        12-2 5

12:22        —    

12:23        13-1

12:24        13-2

12:25        —    

12:26        12-1 9

12:27        11-1 10

12:28        12-1

12:29        —    

12:30        —    

12:31        12-2

12:32        12-2

12:33        12-2

12:34        —    

12:35        —    

12:36        13-1

12:37        12-1

12:38        11-1 20

The 23 minutes in this selling wave is now longer than any of the previous selling waves since the low at 10105. It is considerably greater than the duration of the previous buying wave. So far, the slow pace of the decline suggests the market is merely drifting.

12:39    —

12:40    11-4 24

12:41    12-3

12:42    11-1 28

12:43    —

12:44   12-1

12:45    —

12:46    —

12:47   13-1

12:48   —

12:49   13-2

12:50   13-2

12:51    —

12:52   12-1

12:53   11-1 36

12:54   11-2 38

12:55   10-3 41

Figure 9.9 September 2001 Bonds Three‐Tick Wave Chart 5

Since the low at 10105, all reactions have held at successively higher levels. Here is the first selling wave to make a lower low and it lasts 40 minutes. Should we compare the mere 5/32 nds lost on this sell-off to the 24/32 nds lost on the down-wave from 10129 to 10105 in 51 minutes and therefore assume the selling pressure is abating? Or is it better to judge this decline in context of only the rally from 10105? The answer is obvious: There is no connection between the two down-waves. The first is the dominant feature on the chart; the second is an indication the sellers are again gaining the upper hand after the anemic rally from 10105.

12:56   11-3 (We still do not know the immediate selling wave has ended.)

12:57   —

12:58   11-2

12:59   —

13:00   11-1

13:01   12-3

13:02   12-2

13:03   13-1 12 (Now it is certain a selling wave ended at 10110. The character of the next up-wave will be most important.)

13:04    —

13:05   13-2 14

13:06   13-4 18

13:07    —

13:08    —

13:09    —

13:10    —

13:11    — (Note all the empty minutes as trading activity slackens.)

13:12   12-1

13:13    —

13:14   12-2

13:15    —

13:16    —

13:17    —

13:18    —

13:19    —

13:20    —

13:21    14-4 25

13:22    14-2 27

13:23    14-4 31 

13:24    14-4 35

13:25    14-2 37

13:26    13-1

13:27    14-3 41

The market has taken 32 minutes to rally 4/32 nds on the same amount of volume as the last selling wave. So far the market has failed to equal the previous high at 10115. As shown on Figure 9.10, this buying wave now has ended. You can see the nine complete waves that evolved from the 10:52 low at 10105. I should add that all of the one-minute periods where no trade occurred are omitted. A normal one-minute bar chart would leave these periods blank; a one-minute close-only chart would extend a line from the last price through these time periods leaving long, horizontal lines throughout

Figure 9.10 September 2001 Bonds Three‐Tick Wave Chart 6

the chart. The last two waves spanned 40 and 32 minutes, respectively. We remarked earlier about the minor congestion area above 10115 where bonds traded between 10:28 and 10:44. After this brief period of lateral movement, the downtrend steepened and the volume increased as prices fell 5/32 nds to 10105. As we have seen on the bar charts, it is not unusual for corrections to test areas where trends accelerated on heavy volume. Thus the rally from 10105 has returned to the level where the sellers over-whelmed the buyers.

13:28      13-3

13:29      —

13:30     13-3

13:31     13-1

13:32     13-4

13:33     13-4

13:34     12-3

13:35     11-3 21

13:36     10-3 24

13:37     09-5 29 (The previous selling wave ended at 10110. After a weak rally to 10114, bonds are making another lower low. There is no reason to believe the recent low at 10105 won’t be tested or washed out. The details appear in Figure 9.11.)

13:38     08-5 34

13:39     09-1

13:40     08-1 36

13:41     08-1 37

13:42     09-3

13:43     08-1 41

13:44     08-2 43

13:45     09-5

13:46      —

13:47      —

13:48      —

13:49      —

13:50      —

13:51      08-1 49

13:52      07-1 50

13:53      04-5 55 (The market has fallen to a new on the chart. Now we watch to see how much additional selling emerges.) 

 

Figure 9.11 September 2001 Bonds Three‐Tick Wave Chart 7

13:54     05-3

13:55     05-2

13:56     02-5 65

13:57     02-4 69

13:58     04-4

13:59     02-1 74

14:00     02-2 76

14:01     02-2 78

14:02     02-6 84

14:03     03-1

14:04    02-1 86 (Now we see the largest down-wave since the decline to 10105. It is accompanied by heavy volume. Despite the increased effort, the market dropped only 10/32 nds below the low at 10105.) 

14:05    03-1

14:06    04-1

14:07    03-5

14:08     —

14:09    05-2 9 (Here it is evident a selling wave ended at 14:04. The shortening of the downward thrust may be an indication the selling pressure is tiring.)

14:10    04-3

14:11    05-1 13

14:12    04-1

14:13    05-3 17

14:14    04-1

14:15    04-2

14:16     —

14:17     —

14:18     05-1 21

The market has rallied to 10105, the price level where temporary support formed after the decline from 102. Following the low at 10105, the first couple of selling waves held at 10108. Thus, it is best to pay attention to the overhead resistance between 10105 and 10108. As we know, in a downtrend, previous support levels often act as resistance.

14:19        05-2 23

14:20        04-3

14:21        05-1 27

14:22        —    

14:23        06-3 30

14:24        07-3 33

14:25        06-5

14:26        06-2

14:27        —    

14:28        07-1 41

14:29        —    

14:30        06-1

14:31        07-1 43

14:32        08-1 44

14:33        08-4 48

14:34        07-1

14:35        —    

14:36        08-5 54

14:37        —    

14:38        08-1 55

14:39        —    

14:40        08-5 60

14:41        08-2 62

14:42        —    

14:43        —    

14:44        06-4

14:45        07-1

14:46        07-2

14:47        —    

14:48        07-4

14:49        08-1 74

14:50        06-4

14:51        06-4

14:52        06-2

14:53        —

14:54        05-3 13

The 3/32 nd drop from 10108 signals a buying wave ended at 14:49. It was unable to break through the overhead resistance between 10105 and 10108. This also suggests the shortening of the thrust between the low at 10105 and 10102 is only temporary.

14:55        04-5 18

14:56        05-5

14:57        05-7

14:58        06-11

14:59        05-27

At the end of the pit-trading session, we left off with a selling wave in progress at 14:55 on the decline to 10104. Nothing decisive occurred in the last four minutes. We are left with a remaining volume of 50. If the market opens at 10104 or lower on the next day, these 50 ticks will be added to the volume. If the market opens at 10107 or higher on June 18, the 50 ticks will be a part of the new up-volume total. The volume of 50 will be drawn as a solid black line, and the new up-volume will be drawn in red above it. Wyckoff’s wave chart of market leaders always ended with the day’s close, but waves really do not respect closings. By continuing waves from one day to the next, we get a better picture of their force as depicted by the cumulative volume.

On Monday June 18, bonds opened higher but then spent most of the session moving lower. Figure 9.12 shows the 21 waves identified on June 19. They began with a selling wave on a gap lower. Starting from this point, can you identify the three waves during the June 19 session that indicated the near-term trend was turning from bearish to bullish? Remember when the selling waves begin to diminish in length and volume (duration) and the buying waves increase, the trend is reversing upward. Wave one spans 13/32 nds, wave three equals 8/32 nds and exceeds the bottom of wave one. Wave five nets only 5/32 nds and does not make a new low which gives us the first bullish change in behavior. Wave six adds weight to the bullish story as bonds put in the largest up-wave of the session with the heaviest up-volume. The behavior on wave nine says bonds are on the springboard as here we have the smallest wave of the session and no selling pressure. Markup begins in wave 10. A struggle for dominance occurs around the 101 line where the market

Figure 9.12 September 2001 Bonds Three‐Tick Wave Chart 8

found initial support on June 18. The last little down-wave below 101 had a total lack of selling with no ease of downward movement to complete a beautiful upturn. I used this point-and-figure format for several years; it’s always been one of my favorites. The next step in the evolution of the wave chart provided even better information and greater flexibility. It is the subject of Chapter 10.

I know a minute-by-minute reading of an entire day’s price movement seems terribly tedious. But, like Wyckoff, I can testify to the value of making the effort. The process detailed in this chapter increased my chart reading skills tenfold. And I did this for years. Despite the huge volatility in today’s markets and the lightning fast velocity of expectations, the behavior Wyckoff observed in 1909 provides a tremendous edge.