It was also discovered that, on occasion, two or more of the Reversals generated from the same
high or low would line up precisely or be separated by a single basis point, such as 10 cents on
gold. When this occurred, the election of such price levels sparked an immediate and abrupt
change in trend. We came to respect these Reversal Points more so than individual Reversals and
began to refer to them as “DOUBLE” Reversals. Through years of historical research, we also
discovered that on even rarer occasions, three of the four Reversals would line up which we
called a “TRIPLE” Reversal. Double Reversals materialize a few times during the course of one
year on a daily level, on a weekly level they may only develop once every two or three years. As
for the Triple Reversal, we saw this live only once in the US Treasury Bond futures in 1989.
Otherwise, this Triple Reversal has not been generated in any US market on any level since
1929!

Our Reversal System was originally discovered on intraday trading on a tick by tick basis. It was
later discovered that this model was equally accurate when extending it to daily, weekly,
monthly, quarterly and yearly levels of price activity.

The Major Weekly Bearish Reversal in gold generated from the 1980 high of $875 was $280.50.
This number was published in our monthly publications between 1980 and 1985 and these
publications are copyrighted. Our timing models were pointing to a major low for gold in 1985
in conjunction with our Economic-Confidence Model. When the 1985 low was established, the
precise low was exactly $280.50 basis New York spot! For years that number was active on our
models and if it had been elected it would have warned of a decline down to $192. Instead, this
Reversal provided the precise support from which gold then rallied back to $502 moving into the
end of 1987. Once a major reversal is generated, it remains valid until elected, no matter how
long it may take. The uniqueness of the Reversal System and its accuracy is a result of the model
taking into consideration every possible variable. Its projection is fixed because it has figured out
time, price and interaction between relationships. The difficult part is to try and figure out what
fundamentals could cause such a projection five years from the date it was generated.

For more than 20 years we have been studying this model in live markets as well as in historical
research. The following offers just a few interesting observations we have made since 1970.

At major highs and lows in activity, it is normal to generate a “Double Reversal” on a
weekly or monthly price level or higher.

Each market reacts in a slightly different manner to the Reversals. The metals, currencies
and bonds have a high degree of precision. Market movements will bounce precisely on
these specific Reversal points. Stock indexes, on the other hand, will find that absolute
precision is rare. For example, the Monthly Bearish Reversal generated from the 1987
major high in the S&P 500 nearest futures was 18100. The actual intraday low during the
1987 Crash was 18130. This tends to suggest that since the S&P is introducing a series of
500 variables into the equation, it is possible that absolute precision begins to suffer.
Whereas absolute precision is the norm in the cases of gold and many other singular
commodity markets.

Once a Reversal has been executed, its validity as a Buy or Sell signal is ended.
Nevertheless, old Reversals of major or intermediate levels have often reappeared again
from completely different highs or lows. This was the case in gold between 1983 and
1984. The Reversal in question was $404.60. This number was generated more than 10
times from separate and distinctly different highs and lows. Initially, $404.60 was a
Bearish Reversal. Once elected, it suddenly became a Bullish Reversal. Eventually, this
Reversal provided the precise highest daily closing in March 1984 just before the major
decline down to $280.50 began.

A Reversal is NOT elected should the market close precisely on it. In the case of Bullish
Reversals, a successful election requires that the market close ABOVE the Reversal.
Likewise, an election of a Bearish Reversal requires that the closing be BELOW the
Reversal.

Although once a Reversal has been elected and it can NO LONGER provide a buy or sell
signal, elected Reversals may still provide resistance or support at times during reaction
price movements.

At times, a market will elect a Reversal by barely one or two basis points. This frequently
results in an immediate move in the expected direction of the Buy or Sell signal.

When a Reversal is elected by a close greater than 1.5% away from the actual number,
the market will usually retrace back to the Reversal Point and test that price level before
moving in the anticipated direction of the signal. For example: a Bearish Reversal in gold
at $400 is elected by a closing at $390. Gold might rally the next day reaching $400
intraday and then decline to the next level of support thereafter. This may NOT be the
case when dealing with several Reversals elected simultaneously.

Reversals are generated on all levels of price activity from daily to yearly. Daily
Reversals are elected on a daily closing basis. However, in each case, the next higher
level of price activity will override the signal of a lower price level. Therefore, a Weekly
Reversal will override that of a Daily when it is the last trading session of that particular
week. Monthly Reversals will override both daily and weekly Reversals on the last
trading day of the month. A daily or weekly closing below a Monthly Reversal during the
course of a month DOES NOT constitute an election of the Monthly Reversal. Elections
of Weekly, Monthly, Quarterly, and Yearly Reversals take place ONLY on the last
trading session of a given week, month, quarter or year respectively!

The election of a Reversal normally indicates that the expected high or low that should
unfold could take place in as short a time span as 1 to 3 units of time, be it daily, weekly,
monthly or quarterly. Therefore, a low might develop the very next day following the
election of a Daily Bearish Reversal or within the next few days. The same is true for all
price activity levels.