Did W.D. Gann use Fibonacci?

It always surprises me that people just look for the short-cuts in life, the number of times my W.D. Gann page has been viewed and especially when someone puts into a search engine the search term: “did Gann use Fibonacci” or terms to that effect is frightening.

If you are one of those people, past or present, then you join the ranks of myself, as I have asked that very question and from my findings I’ve never found a satisfactory answer – even from the Gann “Experts”!  I must add that I’ve not looked at every Gann expert out there as after a while you lose the will to live after sifting through their work only to realise that most of it could be disclosed in 10 pages or less and the rest of the books/course is just padded out rhetoric.

So Did Gann use Fibonacci?  The answer is not that simple as a yes/no answer I’m afraid.

Firstly, there is no direct evidence that Gann used Fibonacci price levels, Gann used his own division of price ranges into 3rds and 8ths – some of these levels are close to Fibonacci levels but not exact matches.

Now the next question you should be asking is did Gann know of and understand Fibonacci?

The answer to that I am almost certain of that he DID – If you read Gann’s recommended reading list then in certain publications reference to Fibonacci and the golden ratio are mentioned and in Gann’s article on the Human Body reference to this also can be construed but also another different meaning too! Confused!

In my studies of Gann there is no direct reference to him using Fibonacci or the Golden Mean, he was probably more than aware of it as I’m pretty sure Gann studied everything to do with mathematics, but he opted NOT to use it directly opting for divisions in time and price of 3rds and 8ths and 16ths etc.

His most famous price division is his 50% level – even Fibonacci experts today use the 50% level – 50% is NOT and never has been a Fibonacci number!  If you do not own any of Gann’s works then it is important to know that he wrote an entire course on resistant levels and focused heavily on the 50% level throughout his works.

I am fairly certain that if Gann had discovered Fibonacci levels then he would not of written so extensively about his other price range divisions as he did.

The message here, and I’ve looked into it for my own research in the past, is that Yes Gann was aware of the Fibonacci ratio but he did not employ it to price levels to trade with/from – he used his own natural divisions of price based on geometric angles and horizontal price division of 3rds and 8ths etc.

Hope it helps – If you have cast iron evidence that suggests Gann did use Fibonacci then email me (thehovistrader@gmail.com) with details and I’ll amend if I’m wrong.

If you are new to the subject:

Fibonacci was around centuries ago and in nature the Fibonacci sequence crops up a lot, Traders (myself included) have used Fibonacci.  Elliott Wave theory really popularised the method and it is a key basis of EWT, with waves being a certain Fibonacci retracement or extension of a price swing – in my opion and findings it works sometimes but not all the time.

I recently published a blog post on the key 61.8% Fibonacci price retracement level and a random 42% price retracement level that worked more that the 61.8% level!

I have no doubt that Fibonacci plays a part and is present in the markets, I just don’t think it exists as everyone thinks it does.

Right time to Invest?

Hi,

It is essential that you know when the right time to be a buy and hold investor.

Why?

Because if you get the timing right you’ll be using investments as they ought to be used.  The vast majority of people do OK from Investments over their lifetime, but for me that’s not good enough, for me If I’m putting my hard-earned money to risk in a market I want to make sure I invest it as efficiently as possible.

If you had Invested in 2000 until now, you’ve only just broken even and should have a small profit – 13 years to break-even!  = Nightmare.

It is true that you’d of earnt Dividends during those 13 years which might of grown your account/Investment by around 5% per annum so it was not all lost.

But the major point of taking the risk of Investing your money in the markets is to grow it at a rate greater than what is available via a bank etc.

So taking our 2000-2013 example above, we’d of grown the account by approx 65% ish purely from dividends in 13 years = 5% average growth per year – good but not exceptional (as you’ll see).

Now during this period of time the markets have taken a huge beating and although you’d of got your dividends, you’d of also taken huge capital losses to the account too!  I’m assuming you’d of just sat tight and remained fully invested – hence the 5% per annum dividend returns.  If at some point you’d of pulled the plug and quit the market, you’d of no doubt suffered big losses.

I’ve posted on this subject before, as you can see 2000-2013 was not a perfect period for Buying and Holding, yes we got our dividend income/payments to offset but not great, so from a capital growth perspective this period has been terrible.

It is during periods like 2000-2013 that I do not advocate being a Buy and Hold Investor.

Now if we contrast 2000-2013 to 1982-2000, then this WAS a period to be a buy and hold Investor.

Here’s the stats for the S&P500.  Approx starting value = 120, Ending value of = 1550 approx

Growth in 18 years = 1291% / 18 = 71.7% annual capital growth + dividends?  Approx 3% per annum = 54%

= approx 75% per annum growth on Invested funds

Clearly this WAS a time to be a buy and hold investor.  just by being a buy and hold investor during that time you’d of beaten most of the professional fund managers – by doing virtually NOTHING!

If all you ever knew were WHEN the key times to be fully loaded up as a buy and hold investor and when not to be you’d be a star Investor, massively outperforming most professional money managers!

The Investors of 1999 thought they were genius, they weren’t the genius was the one who invested in 1982 and bailed in 2000.

Also the Investors of 2007, the bull markets back!

Know what market you are in and how to invest for that market, that’s how you’ll win at the long-game, during the down times that’s when it pays to become a trader or understand the internal structure that the down periods form to profit from.

This is hugely difficult for the average investor as there are many conflicting notions about the markets.

The challenge becomes to beat the market, not be beaten by it

Good Luck.

Next 3 years what’s the market going to do?

Hi,

The market should form a high/Top during 2013, you know my preferred month was May from previous posts and the W.D. Gann – Medium Term Market Predictions page.

That does not mean that during 2014 a new price high can’t be conjured up by the market, it’s highly unlikely  but could happen.

When you look at a weekly/monthly chart of the S&P500 and especially of the Nasdaq you should be able to easily tell that the overall trend of the 3 year period has been flat to down.  IF new highs are recorded during 2014 then I would expect it will be quick poke higher and then a drop – NOT continued bullish price appreciation – IF price does form a bullish continual ascent then my outlook for the future is totally and utterly screwed.

Warning:  the only way of knowing for sure if I’m right or wrong is after 2017!  this is MY outlook on the markets NOT trading advice, even though I’ll be and already am trading my outlook, you trade/invest at your own risk.  I would recommend you learn for yourself how to do this rather than relying on others, tips, blogs etc.

Here’s Chart 1 with my preferred outlook:

Outlook1

Chart 1 shows a drop and then sideways range – with the lows of March 2009 still intact

Here’s Chart 2 with my alternative option outlook:

Outlook2

Chart 2 shows price action nearly reaching the lows of March 2009 but not exceeding – this scenario also allows price to briefly exceed the March 2009 low but not massively exceeding them.

Here’s Chart 3 – this is what Elliott Wave Analysis expects:

OutlookEW

To prove and conform to EWT price really needs as a minimum to reach the 300 point area for the S&P500 or 3000 point zone and less for the Dow.

Let the next 3 years unfold and see what happens.

Be under no doubt whatsoever, if any of these 3 scenarios occur it will put immense pressure on the government – REGARDLESS of which party is in power, public mood will at some point be very very bitter:

I’ve previously made my predictions based on the Europe vote, the next UK general election and the President of the USA being booted out of office prior to his term ended – please note I have nothing against the President of the USA, I predict he’d be re-elected and was happy to back that decision with money – my analysis is purely from a stock market perspective, I let the direction of the stock market determine the outcome of key global events.

All the best

THT

A little reminder from W.D. Gann

One of W.D. Gann’s rules was to SELL Double and Triple TOPS.

See if you can see what the market has done since the top in 2000?

TT

 

Top number 2 would of yielded massive profits, as would of Bottom number 2, in case you’re still unsure Top number 2 is a DOUBLE TOP and bottom number 2 is a DOUBLE BOTTOM.

To add additional detail Tops 1,2 & 3 have aligned with key Time Cycles as did Bottoms 1 & 2.

Yes I have an exploratory short on the S&P500 for my pension plan, I did not quite manage the top but I got in very close to the current top in late May.

If you trade by Gann’s rules this is a very clear Triple TOP formed and a major Time Cycle has also landed.

Of course it’s not certain but it’s a high probability trade/position to consider.

What am I expecting from this point on?  Option 1 = falls from these highs / Option 2 = A daily double or triple top formation are perfectly possible because there’s 2 more time cycles due to hit in 2013 and they could force the market to make DT’s or TT’s.

But as it stands I have a very high probability trade staring me in the face that I can’t not trade – If it turns out May 2013 turned the market I will be aggressively adding to my current position on other trading accounts.  whatever happens I’ll be shorting the market aggressively once the tops confirmed – remember I am very bearish for the next 3 years.

How can I be so confident?  Look at the chart above, all those number points are linked to key major Time Cycles, the sequence says a top in 2013 and a bottom in 201x, so far it’s not failed so I’ll stick with it!

and you’ll notice NO Indicators in sight

There is a very high chance of a Triple bottom too in the next 3 years, also If Triple Top 3 forms and we have a decent price fall from it, one of Ganns other trading rules becomes active (not discussed or disclosed) – Once Triple Top 3 is formed that order can be placed in the market months/years in advance

It’s important to do your own research and testing, because W.D. Gann also had other trading strategies that I can’t get to be profitable.

Hope it helps

 

Europe for the UK or not?

Hi All,

This is a tricky one at present.  Here in the UK we are about to be given the chance to vote on whether we are in or out of Europe.

I’ll provide a very brief overview of our [UK’s] present position with regard to the EU:

  • Without a shadow of a doubt World War II changed Europe, Britain [UK] took a leading roll in it’s rebuilding.  The main emphasis was never, ever to have or experience the extremes of the Hitler effect.
  • The UK was given a vote on Europe in the late 1970’s, since then we’ve been a 75% committed member – the obvious observation is that there was and is no way the EU could of or would of been allowed to run itself without serious and senior UK involvement – due WWII.  From the late 1970’s to present (Mid 2013) the UK public have not been given the option of voting on Europe.
  • So in the 1970’s the UK signed up to semi-partial involvement, when I say semi-partial I mean that we have certain opt-outs and vetos, we refused to join the single currency (Euro) and the like, whereas other countries joined up in full and adopted full EU integration.
  • We always refer to the World Wars – as the UK won the battles over Germany and it’s allies and so many people lost their lives in that fight, there is no way in the British public’s mind that power or association with the powers in Europe that caused the World Wars should be granted.
  • At present the UK is basically governed by European Law and Human rights  – this is what is causing friction in British people’s minds.  Being told you can only sell Banana’s of a certain minimum length and curvature!
  • The UK is funding the EU with approx £53 Billion a day – yes a day, just for being part of the “club”
  • Being part of the EU provides a great trading ground for UK businesses and the like.

At present if we were to vote on Europe I’m pretty sure we’d tell them to clear off and reject being part of it, the problem that I can see is that we are going to get a vote on it before 2017.  As many of you know my analysis of the current bear market will still be in force in 2016 – If the stock market is down or flat significantly in the months and years to the vote we could out of haste reject Europe, through sheer anger and depressive thoughts.

Now personally I’d prefer to be working alongside the EU like the USA does, rather than being a member of the EU club, If all countries could work together efficiently and effectively then anything is possible – politicians have inflated ego’s of achieving something and leaving a legacy behind – basically having their names in the history books to impress future generations – so having an effective business run country is not likely to happen.  But I do hope.

The main point I’m making is the way the EU is run has to change, giving the UK people a vote during a bear market is likely to result in complete rejection.  The implications would obviously run for decades and may be good or bad – I have yet to work that part out.

Watch the stock markets in the year or 2 prior to the vote it could reveal all!

I’ve not included other area’s in the detail above, the content is OK for the generalisation I’m making, which can be summed up as:

“If the UK’s stock market is DOWN HARD in the 2 years up to any such EU vote, then expect a rejection of Europe by the UK voters, If the stock market is flat to MILDLY DOWN then it could swing either way, If the stock market is higher than 2013 when we go to the polls expect acceptance of joining the EU”

My expectation of the stock market from 2013-2016 is down – but I’m unsure of how hard it might be down due to QE, If we did not have QE injections then I’d be saying watch out for the March 2009 lows being targeted or exceeded.

As usual all I’ll be looking at is the Stock market, nothing else.

This is one to monitor as time goes by and I will be looking to put a wager on this closer to the time (along with one on the USA President – another post at some stage) If I can find a bookies who’ll take the wager.