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Now look at the Treasury bond market to discover how an analysis of the form and pattern of that particular market would give us usable information to make profitable trading decisions. First, look at the history of the Treasury bond market to see what we would learn from the history of the market's form and pattern as they unfold.

Note the form and pattern of the 1981-86 bull market (Figure 1). From the September 1981 low, the market made a strong advance into the May 1983 high. Note the nature of market activity at that high. The initial high was made in November 1982. Six months later, in May 1983, the market exceeded the November high slightly and then sharply declined, closing the month near monthly lows and resulting in an outside reversal month.

Then, the market continued to decline into the July 1984 low. From the 1984 low, the market made two relatively short advancing swings, making the highs in January and June 1985. The June 1985 swing high topped slightly above the swing high of May 1983 before consolidating for four months. In November 1985, price broke decisively above the resistance level, with a monthly close above the prior swing highs of June 1985 and May 1983 and closing near the high of the month. The market continued to advance strongly into the extreme high of April 1986.