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Why a stop and reverse? With such a strong coincidence of time, price and pattern activity from a longand short-term view indicating important change, a failure to complete the pattern by continuing to advance would indicate a very strong rally swing was likely to develop. Taking advantage of the market's failure to unfold as indicated is a powerful trading strategy that allows the trader to position him- or herself for whatever may develop in the market. Keep in mind that action should be taken at an ideal setup of the coincidence of time, price and pattern.

The trader can never be certain what the ensuing market activity will be. We have positioned ourselves for the most likely outcome, however, and will quickly reverse positions to take advantage of whatever might unfold. Three days later the market gives us the first confirmation that our analysis and trading strategy is likely to pay off, possibly in handsome returns, as the market makes a wide range decline with a close below the trading range low. If the market is to move as anticipated, a significant correction of either the August 1988 or October 1987 to August 1989 bull swings will unfold.

The final capitulation comes on January 12 as the market again makes a wide range decline and closes below the next support level. At this point we know that our analysis of all dimensions of market activity and appropriate trading strategies will pay off.

AFTERWORD

It is always easy to analyze a market after the fact and illustrate the relationships and profitable trading strategies. I have illustrated how the market can be analyzed beforehand to prepare the trader. The longand short-term pattern of the bond market activity going into late December 1989 indicated well in advance that the market was making an ideal setup for a major decline based on the characteristics of previous tops. The market's failure to unfold as expected would be likely to result in a breakout to new highs and a significant advance, but whatever might happen, the trader was able to position to take advantage of a probable major move by being prepared for when change was likely. The strategy, in fact,

took advantage of our knowledge of the position, pattern, time and price analysis of the market activity. A key to successful trading is to have the patience and discipline to take action only when the market activity from all perspectives clearly indicates the most probable forthcoming action. Never initiate a trade without a thorough knowledge of the peculiarities of the particular market. When the time, price and pattern of market activity coincide to indicate change, the trader has the best opportunity for profits. Taking advantage of the market's failure to unfold allows the trader to position himself.

Every trade will not be profitable, but every trade cab be successful. A trade may result in a loss, but as long as that loss is minimal and action was taken with reason and purpose in accordance with our trading plan, the trade is still successful.