One of the most important discoveries made at
Princeton concerning economic and market
behavior is that the market system is a dynamic
complex network of nonlinear activity possessing
an incredible degree of inherent order. The
seemingly random appearance of price activity is
merely a mask that hides the true nature of events.
The proof of this statement is found most vividly
in what we call our Reversal System.
Our Reversal System stands alone in the midst of
conflicting economic theories and simplistic onedimensional
trading system. Its very existence is
based on the key principles of physics. The formula behind our Reversal System is strictly
proprietary. The numbers generated by this system we refer to as Reversal Points.
Our Reversal System fulfills a very simple purpose. In any market or economic statistic, there is
some point, if crossed, which marks the beginning of a change in trend. For example, during
1987 there must have been some specific price barrier that was penetrated which forced the long
positions to start selling. These specific price levels exist in all forms of a time series and might
be thought of as key pressure points.

By viewing economic and market behavior as a complex network of nonlinear activity, we were
able to focus on the development of a model that was completely nonjudgmental, thus avoiding
any human interpretation. Working on a pure mathematical model that was designed for
nonlinear activity, our goal was eventually achieved. Since 1970 the research, observation and
implementation of our Reversal System has led to a new level of understanding markets and their
behavior.

Reversal points are generated each time a market or economic statistic produces a new isolated
high or low, either on an intraday or closing basis. We classify our Reversals as Major,
Intermediate or Minor depending upon the importance of the particular high or low. For
example, the Reversals generated from the 1980 $875 high in gold would be classified as
“Major”, whereas the 1983 high of $514.30 would be referred to as “ Intermediate” Reversal
points. Any reaction high along the way would be classified as a “Minor” Reversal point. The
same is true when dealing with lows with the deepest low being referred to as the “Major”
Reversal.
We also differentiate between Reversals generated from highs and lows through the use of our
terms “Bullish” and “Bearish.” The Reversals generated from a HIGH are referred to as “Bearish
Reversals.” If the market should close below these points, then the uptrend will have “reversed”
into a bearish or declining trend. Likewise, Reversals generated from a low are referred to as our
“Bullish Reversals.” Should the market close ABOVE these points then the downtrend will
“reverse” into an uptrend

Unlike many of our other models, the election of our Reversal Points provides an actual BUY or
SELL signal. The “election” of a reversal is achieved only on a CLOSING BASIS! The
Reversals themselves offer key areas of support and resistance within any market. They are the
primary pressure points within price activity. Often, minor fluctuations tend to BOUNCE off of
these Reversal Points so precisely that this model, above all others, tends to offer proof to our
clients that there is indeed a hidden order within chaos.

Our Reversal Points are also generated with a view toward defining trend in the most detailed
fashion possible. From each and every high and low, the Reversals that are generated come in
sets of four precise points. Each of these four Reversal Points classifies the current trend by
Immediate, Short, Intermediate, and Long-Term price activity. Only when ALL FOUR Reversals
have been elected do we consider that there has been an important shift in trend. The election of
the first reversal warns that a move to the second is likely. An election of the second signifies a
move to the third and so on.