This material has been transcribed under the direction of Tim Morge by various members of the MedianLine Yahoo Group. An attempt has been made to make the charts more readable. Minor spelling and grammatical changes have been made sparingly. I have also made some modifications.

Welcome to the FFES (Foundation for Economic Stabilization) Case Study Course applying principles of mathematical probability to the production of profits from prognostication.

The old Romans were wise enough to know that things change and fluctuate. They therefore recognized that the best way to know what would probably happen in the future was to study how changes took place in the past. To symbolize this, their two headed Janus was their chief deity with one head confidently looking to the future as the other head had studied the past.

While it is true that few things are certain to happen in the future at a definite time such as the time that a certain person will die in the future, this mathematical probability has made tremendous profits for the insurance concerns that use it, as well as similar profits for investing individuals who employed it.

What are some of the important profit making principles that you are now about to learn to use. One is the application to price fluctuations of Newton's law of physics to which the late Roger Babson attributed his fortune of over $50,000,000. The Action and Reaction Rule that states these are equal and opposite. Another is how drawing a single line will enable you to know where the price of any stock or any future is now headed and the probable time it will reach there. Then there are principles that enable you to switch positions so near to the turning points or pivots that start each new trend, that you may be constantly either long or short making money whether price is rising or falling. Also in each weekly letter on the right hand column you'll see some abbreviations that are headed "reasons for actions taken". As a course member now you'll have the glossary of these abbreviations so you can now verify on your own chart that every change of position from long to short has a scientific reason. Have you ever seen elsewhere anyone making such information available. Many of our members have taken other courses and we hope you'll find as they have that this one of yours in the best.

Besides the above principles that are unique to this Course you'll also find what we have been informed are better ways of using other well known methods, and as an example we've added channel lines to the popular moving average method in a way that you'll find helps eliminate some of the whip-saws the usual moving average followers frequently find troublesome. Then various members of the past have added improvements that bear their names, as you may do in this wide open field of probability applications to price fluctuations.

Your glossary of abbreviations is enclosed so that you may soon get the meaning of the abbreviations that summarize the rules. Other Course studies including some recent Course letters will follow soon.

So many investors have doubt as to the possibility of constantly predicting when and where prices will turn. Therefore the Marechal Chart is a good starting point for your studies as he was one of the first to use mathematics to show what the DJI would do during the coming 20 years from the time he copyrighted his chart.

Feel free to write whenever you have questions and am confident you'll be happy you've joined this wonderful group of investors who want to become "Good Stewards" as in the parables in Luke 19:11 on and Mathew 25:14 on if my memory is correct.

You investors are the life-blood of the economy. Without you there's be no banks, chains or factories, etc. where a person could choose jobs, nor would the government be able to collect the taxes they now get. Your importance has been neglected, too long.

You will find enclosed the first study of the Course concerning the ML (median line) Method. This enables you to know where the trend of anything that fluctuates at random is headed. What everyone wants to know is where the latest trend is headed, and where the next pivot (P) will be from which the reverse trend will start.

The probability of the next P being at the latest ML seems to be about 80%, and even without any additional rules that enable you to be constantly either long or short , the profit potential of this simple rule is tremendous for you.

Although Marechal never left us exactly how he was able to predict twenty years in advance what his copyrighted chart showed the Dow Jones Industrial Averages would do, you can draw in the MLs from each P bisecting the distance between the 2 latest alternate Ps, and see that nearly every time the new P occurred when prices met that latest ML. You'll also see that on the right hand side of his chart prices were too strong to drop to the ML that started from the high in 1945, which always signals that a big rise is ahead unless the next trend fails to reach the new ML. This cancels out the prior signal and signals a big move contrary to the big move previously signaled. And as there was no contrary signal after prices failed to drop to reach the ML from the high in 1945, you could be confident of realizing a big gain from your long position taken as soon as prices crossed the parallel to the ML from the high of 1945. You draw this parallel from the third top that the ML was drawn half way below on the distance to Previous P.

You can now tell from the enclosed Glossary what the abbreviations mean, in the right hand column of each weekly letter. This enables you to understand the scientific reason for each new position taken based on simple geometry. When you change a position your new methods enable you to be one of the few persons who knows how to be constantly either long or short, in this way you make profits after each rise and fall that follows the rise. You may be whip-sawed a few times but if you get you order in before the market opens the next day, should prices move against the position you have just taken, your losses will be small and often show a small profit.

You will see all this after you've done some "paper trading" which you should start on right away showing on your chart where each position was taken. You should concentrate on the ML method applying that even if you have had experience with other methods. For we learn best by concentrating on one thing at a time. When you have a question mark where the question arose and send me a copy of your chart that should also list our profits from the two contracts you take each time you change position. When you write out your question leave a space where my answer can be written and mailed back to you.

After you see that your paper trading has made well over the 100% profit rate, it will indicate you are ready to learn the Action and Reaction Method to which my friend the late Roger Babson attributed his fortune of over $50,000,000. Then after that let us know and you will be sent the rest of the Course Studies.

Median lines and MLH: the MLs enable the user to be one of the few who can tell where the prices are headed, and the place they will reach about 80% of the time, and when approximately that place will be reached. Slopes of alternate MLs of comparable length indicate the trend.

When both recent MLs slope in the same direction the trend is strong and price change rapid. A reverse ML is formed when 1ML2-3 is exactly reached at P4, and is a reliable CL for applying the AR method.

Frequently, after crossing a lower MLH, prices continue to rise along the MLH before the further drop that was signaled by passing through. So here you can use a sliding parallel through the bottom of the range of the most recent day as a sell signal if prices drop through that SH.

MLH are places beyond which each day you place a buy or sell order before the market opens the next day if prices pass through that MLH. MLs between P2 and P3 can start from nearby or more remote P1s, and prices tend to reverse at each of these MLs. The distance of each MLH from its ML is the distance of the next warning line (WL) from that MLH. When a second "space" reversal negates a previous one, there has been a "shake out" that signals a larger move in the opposite direction.

Mini median lines (MMLH): Use the MMLH as the buy/signal when you expect a reversal because of a P5, or because prices are at an RL, WL, major ML extension, etc. Also use MMLH as a stop loss right after entry.

If prices cross an MMLH and then move along it, enter when prices reverse by use of an SH.

In some markets drawing MMLH from end of ranges is best to reduce whip-saws, but use closes to draw these MMLHs between usually.

Two to four days is usually a maximum between 2 and 3 for an MML. P1 can be 1 day or more back from 2 and 3.

CL can be 0-3.0-4, Reverse ML, MPL, 2G, MA, MA Channel Line, 2P, Peak to Low, Low to Peak etc.

Normally use a down sloping R line to call a sell point, with A line measured through a bottom. Exception: still using Dt R line to call the sell point, when CL is a 0-3, the top seems to work for the A distance, as well as the bottom.

When prices pass through R lines, it often drop back as with MLs that are passed by prices, but signals probability of further move in direction before the pull-back.

Since each gap is 2 Ps they can be used for A points. When MA is used for CL, use closes for measurement above and below MA. Hagopian's Rule applies to R lines. The longer the CL the more reliable it seems.

Of the two kinds of change in the Universe, flowing change and random change, we are indebted to Newton's invention of the Calculus that enables us to find out in advance the conditions that flowing change will produce in the future. His discovery of the natural law that Action and Reaction are equal and opposite in the field of physics also has been applied in the Course to the random changes of price movements in free markets. This application of the Action-Reaction law enables you to learn in advance where the probable reversals of price trends will come in the future. We owe this application to the late Roger Babson, who credited this law as the basis for his fortune of over $50,000,000.

When we speak of any scientific law, we mean a statement that a relationship has been observed among certain given conditions. We mean "if these conditions now, then those conditions will follow, and can be expressed mathematically". We have "order" through which we can know the outcome from these conditions. We can therefore take advantage of this knowledge, and thereby progress and profit.

So Newton was one of the great discoverers of this "orderliness" that underlies all of the Creator's work, even if we are often slow in discovering it. Newton's Laws therefore as stated above, have benefited the users in both flowing and random changes.

The definition of randomness implies that future conditions are unascertainable, because there seems to be a lack of order underlying such change. Such has been the almost universal belief, still prevalent with most people as far as price prediction is concerned.

Marechal, also by mathematical methods of his own was the first to demonstrate that there is also order underlying the so-called random changes in price fluctuations. No professor in any University, no government economist, has ever been able to produce a similar chart showing as Marechal's famous chart, copyrighted in advance, what the Dow Jones Industrial Stock averages would do 18 years ahead. As one of many other examples of this mathematical orderliness regulating the flow of stock prices, the writer received from this remarkable man now approaching 90, several months before President Nixon's election, an accurate prognostication of what the DJ Industrial Averages would be the day after Nixon's election.

Many others such as classmate Dewey's Foundation for the Study of Cycles have shown the "order" underlying stock and future prices. For example the recent rise in price of Copper futures was predicted by the cyclical studies of that Foundation several years before the advance took place.

So now and during each of the past ten years your Foundation for Economic Stabilization has presented this Case Study Course on the predictability of prices, summing up the results of thirty years of research and inquiry among successful investors. By the use of these Course Rules never before published except by your Foundation, you as a Course member will have an advantage over others without knowledge of these Rules.

If one is posing as an expert looking for a government job or research grant, and another person with superior knowledge might be a possible competitor, the policy of ignoring superior accomplishment is frequently adopted. "Sweep it under the rug" policy.

Fortunately there are real experts like Garfield Drew, and classmate Edward R. Dewey of "Foundation For Study of Cycles" fame who are not afraid to call attention to the person who can outperform the rest of us. Mr. Drew whose book "Modern", rather "New Methods for Profit in the Stock Market", has this chart. He introduced Marechal to me at a dinner and seminar I was giving at the Beach Club at Craigyville Beach. And that was the beginning of a friendship of several decades wherefrom Mr. Marechal has provided me with advice of coming price movements whose accuracy has never been equaled by any of the many forecasters whose services I've engaged. And Mr. Marechal's forecasts were freely given, to me and a few of his friends.

Below is a stock market index which you will find valuable in anticipating what your stocks are going to do, whether they will continue to rise or fall and how fast. These are the facts everyone wants to know, and this method has not been revealed before to the best of our knowledge. Those who acted on this method got out of their stock either at the end of February or April right near the top.

Start with any pivot such as low pivot 1 and draw a line bisecting the distance between pivots 2 and 3. On April 1^st all the information you had as to prices ended at pivot 3. This bisecting line is always a test barrier, whatever pivot you start from. If prices fail to rise above the barrier, the rise is finished, as turns out to be the case at pivot 4. Next, as time passes and new prices develop a pivot at 4, start at pivot 2 and draw a line bisecting 3 and 4. You will see that this dash line is steeper down than the upslope of 1-4. So this is like a vector diagram of forces showing the trend will be steadily down along the dash line until medians point upward again. So continue to draw these lines so you may get in near the bottom.

Similarly in a rising market, you will notice that the fastest gains are always made when bisectors from higher and lower pivots point in the same direction.

This method is superior to the Moving Average Method of recognizing Trends in that there is less "whipsaw", and closer positions to the bottoms and top pivots are possible. One reason for this is that there is a probability that when prices so pass through the bisecting lines, they will return to it before continued movement in the newly indicated direction. (Rule #7 - Penetration Rule)

Alan H Andrews,

                               Director

copyright 1966

Further details later

and in Seminars for members

of this Case Study Course

THIS IS A VERY IMPORTANT

PRINCIPLE SO MAKE SURE

YOU UNDERSTAND IT

original here Hagopian's Rule: When prices reverse trend before reaching a line at which probability indicates such a reverse could start, proper action may be taken in buying or selling, as soon as prices cross the trend line they were moving along before reverse. (Mar. Corn, e.g.)

A large countermove is indicated and confirms the first action as above, when prices cross the first Trend Line sloping away from the original line. This line may be a trend line, a median line, a reaction line, or a moving average line. The rule still applies.

For example of May Soybeans chart, UTL2-4 is the first UTL to slope away from 2ML3-4, UTL1-3 the first on Pork Bellies, DTL2-4 and UTL5-7 on Sugar, and UTL2-4 and b-c and c-d on Wheat. The other TL that can be drawn from the low pivots, parallel or slope toward the original "Barrier Line", whichever type of line we choose to measure from.

{AR 9} original here

For those whose tuition is fully paid we show a weekly price range chart for Winnipeg Berley nearest Futures, and the 3 steps in practical analysis of such a chart to assist in realising gains.

(1) we begin to wonder about the orderliness of price movements in stocks or in commodities, we note that whenever there is a sudden drop or rally, it is a signal that a series of 10 degree T.L.s (Trend Lines) can be generated as drawn in on this chart, each a "Horn of Plenty"

(2) Gathering data and taking measurements on numerous active charts shows that these drawn in T.L.'s are frequently helpful in determining the pivots (buy and sell points).

(3) To find out just how orderly and useful these relationships are, we note that the rise can go on without any concern to those with a "long position", provided the price movement stays within the first two 10 degree lines as shown.

Upon crossing the 20' (degree) line, prices frequently drop to the 30' line, giving opportunity to add to one's long position, or "pyramid" for possible resumption of the rise along or within the 40' line. Frequently, crossing the 40' up-trend line, or UTL means beginning a substantial DTL (Down Trend Line). This is very frequently true if this downward counter move is preceded by a sharp vertical peak. The top of the price movement shown here is a rounding top, as named by Chartists.

Obviously the slope of the TLs depends upon the relative proportions of the coordinates used by the maker of the chart. But by counting how frequently these pivots occur, and the exactness of fit for each particular stock or commodity charted, indicates the reliability of the probability for their reoccurrence. And action can be taken when the odds are strongly in your favor.

The words above that are underlined are all terms used in the study of Probability. Reference to the chapters dealing with Frequency, Reliability, Exactness of Fit, in Monroney's "Facts from Figures", go into their meaning and application in detail.

Upon request you will be supplied with Stephen ???? Stocks or Horsey's Stock Picture if you wish to apply the various aids provided by this course to particular stocks that you own or are interested in. Also you will be supplied with Dupont's Chronoflex if you wish to fasten this transparent drawing paper over your charts in order to avoid drawing-in the various lines and measurements on the charts directly.

We have also designed several devices or tools, in the use of which protection is provided through the US Patent Office, which will make it easy for you to apply the principles of probability which we have developed relative to price movements. These methods will enable you to continue to make gains similar to those made by others in this course who followed the indications properly.

original here {AR 10}The NY Silver chart below was drawn by a new member, Mr. Edward Palm applying the Foundation's "Horn of Plenty Study". Mr. Palm has made, and is making an exhaustive Study of all available scientific Courses relative to Price Prediction, and was before going into business for himself the writer of the periodic letter sent to customers of one of the largest Commodity Firms.

The lines below from the "Horn" method illustrate how prices fluctuate along these regular geometric 10 degree radial lines as well as between them.

Another Course member has written us that he has made very satisfactory profits from the "Horn" method and it is apparently his favorite course method.

It seems natural for each person to select a method that appeals to him. One of our friends who is one of the County's largest Traders told the writer that he liked the Moving Average Channel line method for although it didn't get him in always at the bottom or out at the top, it did give him profits from the long trends. However this man was constantly on the lookout for other successful methods. For there may be frequent times when other methods can prevent some of the "whip‑saws" common to side wise movements of prices in their fluctuations.

You might like to put a piece of tracing paper over this chart and start your radial lines from the low on the last of November 1973 at the 275 area and see the similar fluctuations along and at these radial lines. Such practice certainly gives the investor a "feel" of the market.

Rule #1. Where prices are always headed Rule. You course members are among the fortunate few to be able to draw a straight line and know that prices are headed toward that ML. Very few investors have ever applied this ML principle of statistics to price fluctuations, and we've never seen this in any books on investment. So very few know that prices are always headed toward the newest ML.

Rule #2. The Rule of coming opposites applies all through life. E.g., "Blessed at they that mourn (when the price of their stocks fall), for they shall be comforted." For the value of their savings that they had put into stocks will fluctuate up again. And find the "Wes Usto" also in the New Testament and in prices.

Rule #3. "Turn your mind about," or "Rethink, for all good is at hand." We should mentally prepare ourselves for the coming reversal in prices, and other affairs. Here's one way for example, that you members who know the ML rules can use: When prices are skyrocketing upward, we do this preparation by thinking "If prices pivoted here today at this price, I'd draw a new ML bisecting the distance between today's price and the price from which the rise started." And we know now that if this is a Major Pivot, prices will fall rapidly to this new ML. Profits from such drops are big and quick.

Rule #4. Rule for anticipating major P's. If after a decline you can count four previous P's, the fifth one is highly probable to be the one from which a new trend starts.

Rule #5. Rule for easily detecting the major P from which you can make a quick, big profit is to watch for the EP , IEP and SEP formations.

Rule #6. The other reversal rule is that prices tend to reverse at or near any ML, as well as at any extension of each ML. And also at any MLH or extensions of MLH.

Rule #7. The Penetration Rule is that whenever prices gap past, or plunge through any ML, there is a high probability that they will quickly return to it temporarily, and then resume the trend they had before they gapped or plunged through.

Rule #8. Price Failure Rule; When prices fail to reach the ML as shown by a space between the P of reversal and the ML, the probability is that this price reversal will go further than it did on it's approach toward the ML.

Rule #9. The price failure rule is negated when the next price trend is also a failure in reaching the ML. This is almost invariably a signal (a shakeout) of a big, fast move in the direction indicated by this last "space."

Rule #10. Reliability of ML and (3) as CLs on weekly and monthly range charts is good for the MLs but as significant Ps may be hidden in any weekly range, you'll have to make allowance that this happens.

original here {AR 12}This chart shows you how to draw the Median Lines (ML) from each pivot (P). You start the line from each pivot and bisect the distance between the next two pivots extending the line for the next pivot will 80% of the time be at or near that ML. And when late prices meet this ML extension as shown in the months of September and November you see that you will have price fluctuations around the extension of the 6ML7-8. This enables you to be one of the few investors who always know in advance the probable place where a reversal of the trend will come.

You see that a parallel has been drawn from Pivot 2 and another from pivot 3. These are abbreviated with Capital letter H since that letter has two parallel vertical bars. So when you want to distinguish them from other lines you would letter them 1MLH or 2MLH, the numerals refer to the number of the pivot from which that ML is drawn. When prices drop below that H that slopes upward it signals Sell. And when prices rise above its extension the signal is Buy. And the signal is the same when the ML and its H slope downward. A profit is probable if you reverse positions when prices meet the ML. Even when prices pass beyond the ML a reversal back to the ML is probable even though that penetration predicts the probability of a further move of prices in the same direction as when they penetrated that ML.

original here {AR 13}Study WHAT DAYS OF WEEK Ps FALL ON ! Here are a few for you to add to. You'll see on your March Soybean Chart that either a P or a gap (which is 2 Ps), since June 1^st has come on every Monday except 4 days and a holiday. This includes all minor Ps of either ranges or closes. A P fell on every Wednesday except 4 plus 2 holidays. When no P on Wed it came 3 times on Thursday and the rest on Thursday. On Hogs all Mondays except one and a holiday or two. Major Ps about half come on Monday.

USE OF MONTHLY RANGE CHARTS & SLIDING PARALLEL: The enclosed Egg Chart that was sent you before to have as a confirmation of the long term probabilities as indicated by the short period range charts is a good sheet the practice the use of ML, MLH, SH.

You'll see the ML starting from Aug. 1960 and after prices pass through the lower MLH signaling that lower prices are eventually coming, prices continued to rise for 4 months along the lower MLH as they frequently do. But if you draw the little dash line (SH) you see your sell signal when prices drop through in August at about 37 for a nice 7c drop during the next 4 months. We've drawn another sample ML from that Aug. 1961 top and a SH through the top of the range in May of 1962 with the buy signal when prices rise above it. You can see that when prices drop through the MLH of this ML from Aug 1961 they rally, and the rally from this MLH that starts in Dec. 1964 at the 26 buy area is profitable. Use tracing paper and fill in the other with B & S points and add up your paper profits.

original here {AR14}All fluctuations in prices are changes in the price level about the ML first presented to investors in this Case Study Course. Each ML starts from a pivot or turning point in trend and is drawn so that it bisects the distance between the next two Pivots (Ps). Then a parallel is drawn from the second P, and another from the third P, as shown on these charts below of leading Broadcasting concerns listed on the stock exchange.

On the ABC chart below you see drawn the ML, the two parallels abbreviated MLH, with UMLH denoting the upper one and LMLH the lower. Also note the minor ML that starts with the low in Oct.1972, bisecting the distance between the high in Nov and the next low. When prices at the close on the second week in February drop below the LMLH at 39 during the second week in January that is your signal to sell short. Also another such signal was the gap-down in the third week in Jan. Further confirmation of the correctness of this short sale is given when prices drop below the major MLH the last week in Jan., at 35 area. By end of '73 price had dropped to 19. So gain was about 33% in the 4 months shown on chart below or at rate of 100% yearly. While the mathematical probability of prices reaching the latest ML is high, you'll note prices here couldn't reach it, a sure signal of a big drop ahead. Capital Cities chart and the others use the same method to show you where to buy, via passing the MLH, and on a "break-away gap".

original here {AR 15}Case Study Course Method of use of the Mini Median Line (MML) and parallel (H) lines, to determine entry and exit points enabling you members to be constantly either long or short, thus making profits on every up and down fluctuation on any stock or any future. Use of the MML method at P5 or P7 is especially important after probability shows end of trend is near.

Original Alan H. Andrews Materials

THIS IS A VERY IMPORTANT

PRINCIPLE SO MAKE SURE

YOU UNDERSTAND IT