Explain Gann’s approach to identifying key turning points in market cycles. Most market narratives revolve around identifying moments in the financial product cycle when large-scale, complex trends manifest themselves into asset prices that can drive significant turn events in longer-term cycles. According to click here to read (1986), in the stock market, three markets evolve over time based on the profit and loss profile of the economy. These markets are commodity, bond, and stock. If there is a huge surge of activity in an economy’s current commodity production and an influx of capital seeking non-speculative, economic growth, these markets seek to mature. These cyclical factors are most prevalent during long-term periods of exponential growth within the economy’s infrastructure – when new opportunities and opportunities to generate larger returns are in great focus and the supply of common goods for consumption has diminished. This is usually manifested by a significant increase in share prices for the stock market, based on the supply and demand for the companies capitalizing on these new opportunities. If the economy is stagnating or in decline, the volume of goods and capital changes as is necessary to keep production at competitive levels, but there is no longer an impetus for share prices to move higher and capital to flow to the market. One must consider that a stock market move of a few percentage points is a small price to pay for the supply of goods, especially if the prices of commodities themselves are low. Many long-term movements in commodity markets take many right here to complete, and it’s hard to predict their emergence in advance. Prognosticators must note that long-term trends in the commodity market are usually leading indicators for the long-term trends in the stock market. Because there is never a simple relationship between short- and long-term trends, it’s better to understand that cyclical factors present themselves unevenly over the course of a market cycle, instead of trying to predict where the cycle as a whole you can try these out turnExplain Gann’s approach to identifying key turning points in market cycles. The idea of identifying the key turning points in the market cycles is a relatively new concept in technical chart analysis.

Market Geometry

John A. Gann was one of the first to recognize that price and market-mover behavior (aka trend following behavior) are often aligned with the birth and death of market cycles. Gann identified about 150 turning points in the Dow Jones Industrial Average alone between 1871 and 1997 [1]. Most of the time these turning points were just a few weeks apart. A turning point is a point in time or any milestone time during the end of a longer, multiple-phase trend that signals the beginning a shorter, one-phase trend. It is also useful in identifying the market cycles in which a market is most likely to be successful. Figure 1. Gann’s Rule of 87 Example #28: T – Trend Troughs The purpose of this post is to show how to apply Gann’s idea as a technical tool to find the key turning points in share price history. I will use John A. Gann’s examples and apply the concept to share price history over the last 100 years of the Dow Jones Industrial Average (DJIA). Note Gann’s rule is not as strong in some markets (e.g., the tech and biotech sectors) For these sectors Gann proposed his ‘new’ turning point theory of multi-factor trading which I explain in a different post.

Gann Angles

Figure 2. Percentage of the Price change Between the Turning Points for the DJIA Figure 2 below says that the DJIA is far more likely to rise from overbought to becoming oversold than vice versa. From 2001 to 2006 there was an 82.0% rise in the percentage of moves from overbought to oversold. (Overbought percent = rising price, oversold percent = falling price). Figure 3: Percentage of the Price change Between the Turning Points for the Nasdaq CompositeExplain Gann’s approach to identifying key turning points in market cycles. Gann (Bachelier 2001) identified 36 key turning points in the Dow Jones Industrial Average during the 19th Century with the Dow advancing 10% from the pop over to this site of a turning point to the high of the subsequent high. Another Dow advance of 38% was necessary after the low of the 1929 market crescendo. Another advance of 69% was needed to overcome the panic selling after the Black Monday Crash in October 1987, followed by an advance of 49% for the Dow to reach the record high set at the bottom of the market bubble in March 2000. Gann successfully plotted these turning points, so we can analyze the current market using historical performance. The market is in a giant pullback that began in October 2007 and has yet to rebound. I believe the market has now moved past its lows set in March 2009, and should begin a new cycle by the end of 2009. The lows from 1999 were driven by a record surge in equity prices that provided the base for the subsequent tech bubble.

Astrology and Financial Markets

More recently, the lows that began in March 2009 have been driven by Bernanke induced artificial liquidity designed to fend off the twin threats of deflation and a capital collapse. The stock market should continue to move higher throughout 2009 and 2010 until the economy and the stock market have overcome their recent difficulty in generating substantial demand. Many people view the bond market as a reflection of where the stock market is headed. But bonds are short in duration; the longer the duration the more risk there is in the current high yield market. My research has shown that short duration issues and stocks continue to rise concurrently through the highs of the cycle, so the current market rallies might be overhyped if the indexes continue to test their highs of 2009. The Dow continues to chart a powerful bull market, including the 1930s bear market. Two massive 20% declines from the highs of the 1920s stock bubble were necessary to overcome the prior bubble highs, followed by massive rebounds to set new