Remembering Legends (part 1)

Remembrances of the Legends

(from the June 2000 edition of the MTA newsletter, "Technically Speaking"

by Mike Carr

                Linda Raschke and George Schade, CMT, prepared and presented a tribute to the deceased winners of the MTA Annual Award. Several highlights from the life and work of each winner were detailed.

                L.M. Lowry was selected as the first recipient of the MTA Annual Award in 1974. In his work, he looked strictly at supply and demand. He identified four factors to measure the relative balance between these two forces - total points gained by NYSE stocks, up volume, total points lost by NYSE stocks, and downside volume. The advisory service he started in the 1930s still relies on this methodology. He also was credited with saying, "An investor doesn't truly get an education until he's lived through a bear market."

                The 1975 Award winner, Edson Gould, was referred to as the most sought after technician of the 1960s and was well known for his precise, long-term forecasts. In 1962, he correctly foretold the end of the then twenty-year-old bull market in 1966. He issued a sell bulletin in January 1973, less than one week after the top. And, in 1979, he predicted the Dow would reach 2500-3000 in the 1980s, a level actually reached in 1989.

                Edward C. Johnson 2d was recognized in 1976. The man who founded Fidelity Management and Research was described as practical, unorthodox, and artistic. He viewed investment management as an art, not a science. He felt that technical tools were similar to a violin and could be used skillfully by trained artists.

                1978's Award winner was John Magee, the well-known co-author of "Technical Analysis of Stock Trends." Magee was most responsible for the second part of that book, the part on trading tactics. He sought to discover what market action really meant in terms of supply and demand.

                John Schulz, the 1979 Award winner, was best known for his 1962 book "Intelligent Charts" on the theory and practice of point and figure charting. He also led an eighteen-month effort to write the original MTA constitution.

                In 1980, three men were recognized. Along with Schulz, these three are credited with being the "keepers of the light" of technical analysis. They kept technical analysis alive in the 1950's and raised the practice of the discipline to a higher standard. Ralph Rotnem began his career in 1929 and he developed a number of indicators. He is credited with identifying the Presidential Cycle, researching seasonality, and developing the hemline indicator. Kenneth Ward began his career in 1927, and spent the next fifty years with the same firm. He put forth the idea that the MTA should be a forum to share techniques and resources rather than a venue to exchange market opinions.  Edmund Tabell developed one of the first computerized systems in 1961, using more than 6000 punch cards to identify strong stocks.

                Harold M. Gartley was recognized with the Award in 1981. He laid the cornerstone for many concepts in technical analysis. His book, "Profits in the Stock Market", published in 1930, was the first compilation of technical tools. He is noted for his studies on volume as a measure of supply and demand.

                The 1982 Award winner, Garfield Drew, was the person most responsible for the acceptance of the odd lot theory. He published the first study on odd lot data in 1940, four years after the numbers became available and only one year after the odd lot short sales figures were available. He didn't feel that odd lotters were always wrong, but he did find that they bought proportionally less at bottoms than they did on the way down.

                In 1983, William Gann was recognized. He was best known for his contributions to the time elements of technical analysis. He began publishing a market letter, titled "Supply and Demand", in 1919.

                The accomplishments of Charles Dow were acknowledged with the 1984 Award. Dow is best known for the indexes that bear his name and for the editorials he published as editor of the Wall Street Journal that became the Dow Theory. About 100 years ago, he was quoted as saying, "People should focus on earning 10-12% per year instead of 50% per week and they would do better in the long run."

                Abraham Cohen was the 1986 Award winner. He was a major contributor to the development of point and figure charting techniques. Cohen published the three-box reversal method, which allowed point and figure charts to be maintained using only daily high and low data that was accessible to all investors. He was the first editor of Chart Craft.

                E. S. C. Coppock, the 1989 Award winner, analyzed the pattern of human emotions in the stock market. In addition to publishing studies on relative strength, he developed the Very Long Term Momentum Index to identify low risk buying opportunities.

                The developer of the Negative Volume Index and the Positive Volume Index, Paul Dysart, was the 1990 Award winner. He also developed the 25-day Plurality Index to measure the breadth of the market.

                The 1991 Award went to George Lindsay, a commercial artist with an interest in history. He is best known for his model of the Three Peaks Followed by the Domed House, a chart formation which has signaled tops at least 35 times in the DJIA since 1895.

                A trader with an amazing record was honored as the Award winner in 1992. George Chestnutt managed the American Investors Fund from 1958 to 1981 and posted a 13.5% annualized gain, compared to a 4.8% average gain for the S&P 500 over the same time period. He is also the one who observed that, "The market does whatever it has to do to prove the majority wrong."

                In 1993, Humphrey B. Neill was the Award winner. A socioeconomic journalist, Neill formulated the theory of contrary opinion. This was not intended as accurate timing model, but was intended to prevent errors in forecasting. He stressed the importance of doing your own work and observed, "If we can learn to think, we shall indeed be a member of the minority."

                R.N. Elliott, who devised the Elliott Wave Theory, was the 1996 Award Winner.

                The 1999 Award winner was Richard D. Wyckoff. His Wall Street career began in 1888. He explored the accumulation/distribution cycle in great detail. In his work, Wyckoff combined bar charts, line charts, and point and figure charts to monitor the relative balance between supply and demand. He attempted to identify a directional bias that could be exploited for immediate potential.

                Rashke closed with an observation that all of the legends were well-rounded individuals with a passion for technical analysis. They were constantly observing human nature, investor psychology, and themselves. They all believed in the importance of doing your own work to reach your own conclusions.