A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006.

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Entry from October 02, 2015
“The bigger the top, the bigger the drop” (Wall Street adage)

"The bigger the top, the bigger the drop” is a stock market technician’s adage. Alan Shaw and Robert Colby, analysts at Smith Barney, Harris Upham & Co., used the adage in 1984 and probably coined it. A blue chip stock such IBM, they explained, had a big “top” and potentially a big “drop.”

“The bigger the base, the higher in space” is a related saying.


Market Technicians Association
Alan Shaw
Alan Shaw, now retired after 46 years on Wall Street, joined the brokerage firm of Harris Upham and Co. in 1958. He began his career as a fundamental securities analyst and, in the early 1960s, became actively involved in Technical Analysis. He served as Research Director at Harris Upham prior to its merger with Smith Barney in 1976. At the time of his retirement in April 2004, Alan was a Managing Director of the Technical Research Department at Smith Barney having turned over the management of the Department in 2000 to his protégé, Managing Director, Louise Yamada.

Having attended Susquehanna and Adelphi Universities, Alan received an honorary doctorate degree in May 1999 from Susquehanna University in recognition of his Wall Street accomplishments. Alan is a Chartered Market Technician (CMT), and was an Allied Member of the New York Stock Exchange and a Supervisory Analyst. A member of the New York Society of Security Analysts, Alan was a founder and first president of the New York Society of Junior Security Analysts, and was a founder and the second president of the Market Technicians Association. In 1997, he received the annual Market Technicians Association lifetime achievement award.

14 June 1984, The Advocate (Stamford, CT), “2 analysts see the market’s top (IBM) toppling” by Dan Dorfman, pg. D2, cols. 2-4:
This gloomy forecast was just fired off to clients by the two top fellas in technical research at Smith Barney, Harris Upham & Co.—the well-regarded Alan Shaw and his savvy sidekick, Robert Colby.
(...)
In technical terms, explains Colby, the bigger the top, the bigger the drop. “And we have a whopper of a top in IBM,” he says.

22 February 1985, Alton (IL) Telegraph, “Over-the-counter stocks outdoing listed exchanges” by Vartanig G. Vartan (N.Y. Times News Service), pg. B-12, col. 3:
In so doing, he (Alan R. Shaw, chief technical analyst at Smith Barney, Harris Upham & Co.—ed.) bore in mind two guidelines: “The bigger the base, the bigger the rise; the bigger the top, the bigger the drop.”

Google Books
Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets
By Stan Weinstein
Homewood, IL: Dow Jones-Irwin
1988
Pg. 127:
BIGGER IS BETTER
There’s an old saying among technicians — “the bigger the base, the bigger the move” (the corollary being, “the bigger the top, the bigger the drop"). I heartily subscribe to that statement.

Google Books
Market Magic:
Riding the Greatest Bull Market of the Century

By Louise Yamada
New York, NY: John Wiley & Sons, Inc.
1998
Pg. 59:
Recall that, in technical analysis, one assumption is that moves tend to have relationships to one another. Simplistically, the bigger the base, the higher in space; the bigger the top, the bigger the drop.

Google Books
The Heretics of Finance:
Conversations with Leading Practitioners of Technical Analysis

By Andrew W. Lo and Jasmina Hasanhodzic
New York, NY: Bloomberg Press
2009
Pg. 94:
Some people say that the bigger the top, the bigger the drop, or that the bigger the base, the higher in space. But the point is that there is a relationship between the extensiveness of patterns and the moves that follow.

Twitter
Richard Russell
‏@DowTheoryMan
The bigger the top, the bigger the drop. And we’re forming one huge top.
8:55 PM - 27 May 2010

Twitter
Eric
‏@ebarrett
“Louis Yamada: the bigger the top the bigger the drop” just ask gold
6:23 AM - 17 Nov 2010

Google Books
Deemer on Technical Analysis:
Expert Insights on Timing the Market and Profiting in the Long Run

By Walter Deemer with Susan Cragin
New York, NY: McGraw Hill Professional
2012
Pg. 56:
The old saying is, “The bigger the base, the higher in space” or “The bigger the top, the steeper the drop.” Big swings in one direction beget big swings in the other direction.

Business Insider
October 2, 2015
This beaten-down currency looks like it’s ready for liftoff
J.C. Parets, All Star Charts
Canadian dollars have been one of my favorite shorts around the world for a long time. We’re talking about one of the most beautiful bases I’ve ever seen in my career. The old sayings are “The bigger the base, the higher in space” and “The bigger the top, the bigger the drop.”

I learned these from technical-legend Louise Yamada, who told me that she picked these up from Alan Shaw, a retired technician and legend in his own right. 

Posted by Barry Popik
New York CityBanking/Finance/Insurance • Friday, October 02, 2015 • Permalink