Joseph Granville wrote his first book in 1960. He offers 55 indicators for trading.

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Here are a few pitfalls listed by Granville:

1. Listening to what others are saying instead of what the market is saying.
2. Buying a stock on good news, particularly when there's a lot of hype.
3. Buying a stock in the face of a declining short interest.
4. Guessing at tops and bottoms.
5. Being wedded to the long side of the market by way of personal principle.
6. Unwillingness to trade.
7. Ignorance of the technical indicators.
8. Overstaying the market.
9. Being blinded by the importance of dividends.
10. Being wedded to fundamentals.

He says that avoiding the first pitfall will enable you to avoid all the rest.

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Granville "reads" the market using 55 elements that indicate where the market is headed day by day. Their combination tends to vary from day to day. You have to understand what constitutes a move, or trend.

Market movement depends on the combination of elements in force at the time, and on the weightings of the elements. True weightings can be established by researching past market performance, as Granville sees it, and he provides weights based on his own research.

This is an "atomic" view of market behavior. You can imagine the elements exerting forces that tend to drive the market, like forces in a tug-of-war. The actual motion occurs in the direction of the resultant of the interacting cross currents -- the vector sum, or resultant driving force -- and depends on the strengths of the components. Strong opposing forces may cancel each other out. Or single elements might dominate, or otherwise be subdued by other forces.

The trick is to identify which combinations are in effect at a given time, and to use the directions and weightings of the forces to determine where they lead. -- up or down. So there's a difference between a foreground space of operations and a background environment -- a distinction I make here. The weightings depend on the general circumstances or tenor of the market -- the market environment.

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Granville assesses the timing of the market, which moves up, down, or sideways, as read by the technical indicators. The idea is to learn the direction of the market trend before it occurs. The market telegraphs its punches, and the model provides the means to read the messages.

According to Granville, the majority of day-to-day indicators are derived from:

1. Market Averages.
2. Most-Active Stocks.
3. Volume.
4. Highs and Lows.
5. Dow Jones 30 Industrial Stocks.
6. Pacific Coast Stock Exchange Prices.

The technical indicators build on a conceptual base using data from the above list in specific relationships, namely:

1. Advances and declines relative to the movement of the Dow Jones Industrials (DJI) average.
2. Movement of the DJI compared to movement of the Dow Jones Transport (DJT) average.
3. Quality of leadership and direction of movement of the DJI.
4. Noticeable movement of one or more Dow Jones stocks.
5. Movement of the DJI compared with the Standard & Poor 500.
6. Dullness of the stock market after a previous move.
7. Five or more consecutive same-direction moves in the DJI.
8. Movement of the market and volume.
9. Move to a new high (low) and failure to hold (i.e., failure to close well above the low).
10. Relation of the gold index to the general market.
11. After-hours trading (like on the Pacific Exchange) relative to NY close.
12. 3-day consecutive sharp one-way moves.
13. Market churning on heavy volume after a DJI move.
14. Persistent strength (weakness) in counter cyclical stocks.
15. Movement of the market in the face of news.
16. Shift in quality of stocks in the groups of interest.
17. Erratic price movement in key stocks.
18. Movement of the general market relative to the DJI.
19. Movement of important stocks like GM (or MS).
20. Absence of overnight news and closing prices.
21. Significant trend of odd lot buying, on balance.
22. Technical reaction after sharp market moves.
23. Trend of expanding new daily highs (lows).

Granville covers the 55 points in detail.

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