2017 Market Outlook – Gann Style

Gann used to market his annual predictions for a lot of money – essentially all he was doing was looking back 10 and 20 years and projecting market movements for the forecast based on what the market actually did 120 and 240 mths prior.

I was going to do this last year but didn’t have time, so here it is now – half way through the year.

This is a very simple method and real easy to do – I’m not saying it works – What we’ll do is come back to this blog in Jan 2018 and update the “Current” chart to show what the market did and if there’s some correlation

Notice the big plunges that both the 1997 and 2007 market had in the latter stages of the year – also notice the 1997 plunge and subsequent market action up into 1998, Now get a chart of 1987 and see the formation the market made from plunge to end of 1987!

Gann’s market predictions were a little more detailed and specific than this, but not too much

Here’s the CURRENT market action of the FTSE100 Index:

FTSE100 - 2017 - 6 mths

Now here’s the FTSE100 Index from 2007 (SIDEWAYS):

FTSE100 - 2007

Now here’s the FTSE100 Index from 1997 (UP:

FTSE100 - 1997

 

Gann Series – PRE-Intro

Keep an eye out for my new Gann Series – Introduction coming towards the end of this month – It will be ad-hoc posting over the course of time as it’s something extra I plan to do.

It will be an “eye-opener” to make you think, explore and research for yourself – I’m NOT a Gann Expert – I know enough to know that in his course’s and books he actually revealed very little about his true method (and I don’t know his true method!) I am sure a few thousand people around the globe do know his precise methods from their research but researching those people would also take you decades of time! – Some may be well-known, I don’t need to know as I’m not that interested in subscribing to this or that or other peoples books.

I’m NOT knocking Gann – his methods he details in his courses and books are still more informative, interesting AND relevant than most of the trading/Investing books published since his time – which says something about today’s authors/traders etc!

For ME, all I want is to know the significant trend direction for the next X years so that I can have that into my mind when trading – I only trade LONG too – I think I’ve found that with my personal cycle analysis of the 17 yr cycle – this can then be broken down in smaller cycles BUT where my cycle analysis FAILS, is it does NOT tell me whether a cycle turn will be UP or DOWN, so you have to trade warily of that fact.

For me I would love to know and understand Gann’s true methods, but I doubt I’d change the way I trade, it would just enhance my confidence in positions if you knew when they should end etc.

My style of writing is to the point and very direct – I’ve read too many books [98% of which have been binned] that are filled with rubbish info with only 5-10 pages of essential info – just give me a book with the 5-10 pages of good stuff then!

If you make 20% a year from Investing/Trading you’ll do very well over the years due to the compound nature of money – I’ve shown you over the past few months that you can make decent returns by trading/Investing simply using market FACTS – See my pages on FTSE250/Nasdaq100 & Gold using a very simple method.

Unfortunately people don’t make money trading – they use methods such as moving averages, Elliott Wave Analysis and Indicators and think that they’ll work just because a book selling them info is published “so it must work”!!!!!!

In Gann’s courses he details LOTS of stats on the market, lots of stats on bull and bear markets etc and he also gives you basics to trade – I use one of his methods very successfully, as it catches trends and bottoms nicely – BUT if I put all his dates/time cycles on my charts I’d have loads of potential turn dates overlapping one another and no definite date to watch – you can’t use this to risk money on (well I can’t and won’t anyway) – Over the course of the series we’ll be extracting bits from his course to analyse and test in current markets to show you – the Law of averages (this is NOT a NATURAL LAW) says that some will work and some won’t – we’ll see when we look at that blog post in the months ahead.

As you’ll figure out as we go through this series – most of Gann’s work was generalisations – he hid his true work as you’ll see.

Watch out for the Intro post coming to you this month.

Until then happy trading and wishing you every success in all parts of your life.

 

 

Time Cycles – Long Term Projections/Predictions

Right we’ve kicked into touch any theory that the markets are random, the previous Time Cycles just happen too often with precision to be coincidence – Now when you know what is used to calculate these cycles ALL doubt is removed, all makes sense. We’ve covered the major turning points of the past, what about the future? Well here we go, here’s the future for you: Look at the dates AFTER Dec 2016 (Blue Line)

2017-2034 cycle dates

Remember if markets are falling into a Time Cycle the expected result is a bounce upwards out of it and vice versa if a market is rising into it – this does not always occur, but it does NOT mean the Time Cycles are invalid, it just means something else happened – the TC still worked just not as we thought. Take 1929 in the Dow – the TC still worked but rather than it being a high it turned into a low – the TC was due to top in 1933! perfectly fine when you understand the cause. I’ll no doubt comment more on specific dates are time draws us closer, in the meantime, now lets move down to the short-medium term cycles that are in play in the markets and see what can be done with those!!!!!!!!! This IS where you make the big money

I’ve left the previous cycle dates on for your reference (these were previous shown in an earlier blog post!)

The only thing now left to do is watch, wait and see what actually happens – It is absolutely critical that you see how the bigger cycles form and play their part in moving the markets, if you don’t you need to revisit it all until it makes BECAUSE, if you don’t understand the big easy cycles its unlikely you’ll understand the smaller cycles – these smaller cycles can be used to trade off and beat the market – massively!

Right now on to the smaller cycles that we can trade………coming soon

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.

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

 

Looking @ W.D. Gann – Part Six

I intend that this is going to be a brief look at time cycles, but when I’m writing the intro to this post I can’t see how I can make it short – apologies if it drags on.

In Gann’s courses and books he says “That TIME is the most important factor of all”.

Think about that for a minute, TIME…… If you knew when a high was due to top out or a bottom was due to make a low then you’d be able to accurately trade the markets in complete CONFIDENCE that you were going to be right – easy!  Yeah right.

This is what 1000’s of traders who’ve studied Gann are searching for they’re looking for the key in the market that tells them when a move is starting or finishing – to date I’ve yet to come across anyone who can with 100% accuracy do this.

Time Cycles

Everything in life moves in cycles, day, night, seasons, natural growth entities such as life, planets, business cycles, stock market cycles and so on

Gann in his courses mentions certain time cycles to apply to charts and consider. i.e. look back 1 year, 2 years, 3 years, 5 years, 10 years etc etc.  the reason Gann suggests this is that he is convinced markets repeat over time and the markets are just a repetitive structure/entity.  So if the markets were rising today in all the years analysed then expect todays market to rise etc.

It’s not quite that simple but that’s the message Gann was trying to get across to people, review historical data going back not just months and years but DECADES for clues as to market direction for that year based on past market action determined by his Time Cycles.

Click here to view Gann’s Financial Timetable – Notice he produced it in 1909, and has been very accurate for 100 years of not only stock market action but also social events – i.e. stirkes, wars etc!!!!!!!!!!!!! (This links into the socionomics theory by Elliott Wave International – Gann was obviously very well aware of stock market activity, Economic growth and decline & the social aspects/consequences of it all being inter-linked!

This is just one of the reasons that I state that he was a truly great investor and trader for his time as this sort of thing is hardly done in today’s markets!

*If I may add in here some analysts use “Static” Time Cycles that they discover, these cycles then suddenly disappear from view, this to me suggests that Time cycles are not therefore static as if they were we’d always be able to see them and apply.

History shows us that there was a 52 month market cycle in the 1950’s that existed for 20 odd years and in the 1970’s suddenly disappeared just as fast as it had appeared! In a static linear world this just can’t happen, so something else must drive these cycles.

Remember my Gann shortcut page @ £250 provides a fast and quick shortcut to obtaining Gann’s vital courses.

The Hovis Trader

Looking @ W.D. Gann – Part Five

Gann Swing Trading

Gann was probably one of the first ever Chartists who used charts to trade with and from – I’ve not conducted a thorough research of stock market history so I can’t be 100% sure either way, anyway the point is in the early 1900’s Gann used charts to trade from and with – fact!

(I can remember trying to research charting and technical analysis methods in the early 1990’s and in the UK I could find very very little! This was prior to the internet and finding the information was difficult – maybe I was looking in the wrong place?  Maybe but the experience put me off looking to hard for years)

The basics are that the Swing Chart shows you the direction of the trend and until a swing high/low is taken out then the trend is intact.  At first Gann used a 3 day swing chart to make up his swing charts, just before he died Gann changed his thinking to using a 2 day swing chart

For an authoritative view on this subject I’d refer you to:  http://www.marcrivalland.com/ who uses and trades Gann Swing Charts, Marc has also written a fantastic book covering the subject too of which I recommend.

I have also listened to Marc in a seminar and he makes around 15-25% per annum from trading the FTSE100 index using this method

I’m being really lazy here and not detailing a chart for you to visualise – google “gann swing trading” and take a look for yourself

Basically Gann Swing charts define the Higher Highs and Higher Lows of an uptrend in visual form and vice-versa for a downtrend.

Please note that where an Elliott Wave ABC correction occurs the Swing C of the ABC WILL trigger a FALSE buy or sell on the Gann Swing chart – I keep telling you nothings perfect and this is where Gann swing charts fall down when there is a clear ABC correction based on Elliott Wave Theory!.

Enjoy

The Hovis Trader

Looking @ W.D. Gann – Part Four

In this lesson let’s look at Gann Angles.

What are Gann Angles?

From Gann’s courses it is obvious that to him Angles played a direct part in his work and had trading rules based on what price did around and at these angles.

Gann used Geometrical angles of varying % to gauge a price move

Let’s have a look at Gann’s 1 x 1 main angle, this is a 45 degree angle – the actions of this line basically “square” time and price because if price follows this angle it is moving at a similar rate as time too!:

Let’s add Gann’s 2 x 1 angle now:

These are Gann’s main angles that he used:

The 1 x 2 Gann angle controls price action 12 months apart to the MONTH!

Gann projected these angles from tops (usually downwards) and from bottoms (usually upwards) he also projected the 1 x 1 from ZERO on the price axis but we’ll not complicate matters.

Please note that in Gann’s famous “Wheat 120” article, he used his Angles to predict that Wheat would hit the price of 120 by a certain date – it hit it to the tick in the last hour of trading for that contract!

From this I can deduce that Gann knew when a time cycle was due to expire and used his angles to predict price levels – the ultra hard part in this is knowing what time cycle to use!

Take a peek @ the S&P500 of late:

Price adhered to a key Gann Level (downward slope) from May 2011 to August 2011, it then followed the 2 x 1 Gann Angle from August 2011 until April 2012 (Blue line directly above the Red line)!  This meant that prices rose twice as fast as time passed by or the equivalent of 2 points for every trading day.

You can see from these and other examples just how price respects some of these angles and completely disregards others too!

I’ve kept these charts as clutter free as possible, in reality, you would project Gann Angles from all major swing highs and lows this has the effect of have many lines Cris crossing on the charts up and down and for the purposes of this lesson it would add nothing but confusion

Please note I am not teaching you everything there is to know on Gann and his various methods, that is for you to research and look into if you find the subject interesting and want to delve deeper.  My aim is to introduce you the subject area only, so that you understand that over 100 years ago Gann was on the ball with many methods still used today.  Gann Angles are a complex subject area of which I have only touched on in this post.

Now I have to add that just as placing any Trendline on your charts there is NO certain method to ascertain when a move’s over.  In plain English, they are more of a lagging indicator than a leading one in my opinion – however, a trading strategy could be constructed to use them I’m sure.

Gann Angles and Trendlines are not the same – they have differing purposes.

Best of luck

The Hovis Trader

Looking @ W.D. Gann – Part Three

We’ve looked and considered key quotes, statements and observations of W.D. Gann – he made many more and if you’re interested in his works then I cannot recommend enough his books and courses.

Gann also noted that between price swings (ranges) there are resistance and support levels, Gann broke these down into 3rds and eighths – Simply DIVIDING the range by 8 & 3 to obtain the respected % division i.e. 33.3%, 66.6%, 62.5% etc

Some of these are incredibly close to Fibonacci levels and one has to assume that Gann knew and understood about Fibonacci levels but choose to use his own system of determining price support and resistance levels.  Of it may be that Gann was oblivious to Fibonacci and applying it in the markets of which I very much doubt as he must of come into contact with R.N. Elliott (of Elliott Wave Theory) during both their times commenting on financial markets.

Let’s take a look at all these levels:

Ganns Eighths

Eighths & Thirds

Fibonacci Levels – for comparison purposes to Gann Levels

As you can see from this brief look at Gann and Fibonacci levels they are sometimes hit to the tick and others price is halted just short or after the appropriate level – there is no way to pinpoint this.

This means that it is also impossible to accurately predict which level will hold, the important part is realising that price OFTEN corrects at these levels

Now Gann also applied these levels to TIME, but that is another matter and probably a post I’ll not get involved in as it is highly subjective, but, essentially let’s pretend that we are monitoring a 52 month TIME cycle – Gann would divide this into 3rds and eighths etc to look for possible reaction points in Time

Gann said that TIME was the most important factor to consider, yet he died with no exact mention [I know he indirectly mentions it in his courses] of the exact perameters that he used, they are not in his courses – we know that Gann made mistakes because his Financial Forecast that he created is slightly out by a few years for his predictions on the markets in the 2000’s – although I salute him for being able to predict them that far in advance in the first place.

Now I’ve studied both Gann and Fibonacci levels so far I’ve not been able to accurately predict which level price will reach but more often than not the 50% level is reached for retracements and the 100% extension/projection level.  It’s a case of see what happens when price gets there, HOWEVER, if you employ the tactics of Robert Miner other Fibonacci projections falling around key support/resistance levels make for  a high probability zone – but still we never know for certain!

Gann liked the 50% level, here he wrote “Always remember that the 50% reaction or halfway point of the range of fluctuation or of the extreme highest point of any particular move is the most important point for support on the downside or for meeting selling and resistance on the way up.  this is the balancing pont because it divides the range of fluctuation into 2 equal parts or divides the highest selling point into 2 equal parts”

Gann’s courses (which are 1000’s of pages deep) contain more detail and examples – remember these courses that he sold in the 1930’s sold for thousands of US$!

Anyway we can see that Gann considered and used support/resistance levels of 8ths and 3rds

Bonus entry:

In Gann’s courses he makes the following statement, along with many others[edited]:

“Mathematics is the only exact science.  emerson said ‘god does indeed geometrise’.  another wise man said ‘ there is nothing in the universe but mathematical points’ and Pythagoras, one of the greatest mathematicians that ever lived, after experimenting with numbers and finding the proofs of all natural laws, said ‘Before god was numbers’.  We use 3 figures in geometry – the circle, the square and the triangle.  We get the square and triangle points of a circle to determine points of time, price ans space resistance.  We use the circle of 360 degrees to measure Time and Price”

Gann often used criptic phrases within his works (such as the one directly above) which has caused thousands of traders/investors try to work out his exact meaning.

Hope you enjoy

The Hovis Trader

Looking @ W.D. Gann – Part Two

Previous posts:  Introduction and Gann’s 24 Rules + Part One = Business Cycle / the end of Boom and Bust!

In Part Two, I’d like to focus on a few of Gann’s observations and Quotes – still highly valid and applicable 100 years later!

“Every man must get his stock market education and must remember that one never graduates from the Wall Street school.  You must take post-graduate courses every year to keep up with the times; in fact, keep ahead of the times, in order to make a success in Wall Street”

The Wise Fool:    “The cock-sure trader who thinks he knows it all, follows tips and inside information.  He condemns what he does not understand and never makes progress because he thinks he knows it all.  Such a man calls a follower of science and charts, a fool, but the follower of charts is a wise fool.  The natural or average man considers science as applied to the stock market foolishness and condemns charts because he does not know how to read them.  He has not had years of experience and has not been trained to properly read or accurately determine the future course of stocks.  The successful trader is the man who knows that he does not know it all and who is always trying to learn more.  When once a man decides he knows it all about the stock market, he is doomed to failure.  When activity decreases, stagnation sets in and when a man no longer continues to learn he goes backward, not forward.  A successful man must have a plan and rules and follow them.”

“Markets usually move in 3 or 4 sections”

“When a market begins declining or an individual stock starts down, it usually makes 2,3 and 4 movements before it reaches final bottom,  If the trend is going to reverse, it will only make the 1st and 2nd decline and then turn up again.  But after a prolonged decline and a 4th move down, you should watch for the bottom and change in trend”

“There are several sections to a major movement or swing”

“It makes no difference how high or low a stock goes during market hours; the price at which it closes shows whether it has made a gain or loss over the previous day”

“After it gets out of the sideways movement, which is always accumulation or distribution, and breaks into new high or low territory, then you can trade in it with some certainty of having determined the correct trend”

“The big money in many stocks is made by taking a long pull position, but there are times when it does not pay to hold stocks for the long pull, depending upon the cycle which the market is in and how near the market is to the distributing stage.”

“Never buck the trend, go with the trend always and you’ll make money”

“MORE PROFIT IN SWINGS: If you will go over any active stock over a period of 5, 10 or 20 years and note all the moves of 10 points or more, you will see that there is more profit trading for these swings than there is trading for dividends or holding for big increase in capital”

We can see from these quotes Gann made that he was truly on the ball and understood the markets in the early part of the 1900’s – I truly believe that today’s traders need to learn, understand and apply these concepts to be successful.

For Instance, Gann’s “More Profit in Swings” – I discovered this concept by simply looking at charts and seeing that markets often had decent swings and by being part of those swings I’d grow my capital faster than buying and holding, this then led onto investigating how to join the swings.  Years later when reading Gann’s courses its nice to see my original thinking & observations justified.

It’s interesting that Gann as R.N. Elliott (Elliott Wave Principle) noticed that markets move in swings of 3-4 sections – this is essentially the basic explanation for the impulse wave, but Gann obviously refrained from labelling swing points.  Gann was also using resistance levels (another posting) and R.N. Elliott used the Fibonacci process to identify support/resistance levels.

Keep an eye out for more on Gann in the weeks to come + charts

All the best

The Hovis Trader