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Before we leave this section, I would like to say one thing which Gann spoke of, and have found to be true. TRUST YOUR OWN WORK. Once you have a firm grasp of the techniques and their uses, and have shown for your purposes that they work, do not give a great deal of heed to what others say. Most of all, other than to give yourself a general idea of conditions as a whole, pay no attention to the financial press.
In order to keep what the press reports in perspective, remember these quotes: "Real growth of 4% is likely, not just for the rest of the year, but through all of next year as well." "An easier money policy on the part of the Federal Reserve and the belief that the posture will persist is a major reason many economists no longer fear a recession next year. And on Wall Street this means better time for interest sensitive stocks." "This coincides with a stock market that doesnt show any signs of speculation. The public is still basically out of the market." The first qjuote was from the Assistant Secretary of the Treasury. The others were from NEWSWEEK and U.S. NEWS AND WORLD REPORT, dated November, 1972, September, 1973, and October, 1973- the onset of a severe bear market.
THE CYCLE OF THE YEARS
Today there is a considerable amount of work being done in the use Of cycles. W. D. Gann was the first analyst to use time as a factor in analysis. With the advent of trie computer, it is possible to do studies on price and time from low to low, or high to high, with consideration for major and minor cycles, and numerous permutations of data. What is produced is usually an average time period between past lows, and an assumption that the market will continue to follow these same cycles in the future. Muoh of this work is valuable, but it is often difficult for the individual to actually produce this information himself, or to put it to use in trading.
If the rftarket is trending up, then it should go up more time than it goes down. And if it is trending down, then price should go down more time than it goes up. When viewing cycles you should always keep this little bit of knowledge in mind. If you think the trend is down, then you have the start of a road map in time to the length of time to a rally (not more than the previous movement down).
It is widely known that Mr. Gann used a considerable amount of reference to planetary movement in his forecasts, and that his "cycles" were based upon these observable phenomenon. I have found very little of hie work would fall into the category of astrology. The basic calculations or vibrations are based upon geometry of which planetary movement and distances are one in the same. This is discussed in the chapter on planets.
A large number of things can be said for astrology, both positive and negative. It is not my purpose to give such a discussion, although, I am of the opinion that the classic form of astrology has little validity in trading the markets.
Looking quickly at the obvious relationships. The circle is divided into degrees, 360 of them, which encompasses a year of 365 days. The calendar for one year is divided into 12 months, the average month being 30 days, which is from the 28 day lunar period. The four seasons of the year, with the solstices and equinoxes, gives us the four quarter which are used in financial reports.
The year as a cycle is obvious- so obvious that it becomes almost moot in any discussion of cycles. It is apparent and has visible effects on our lives, and that cycle, of one revolution of the Earth in its orbit around the sun, was the basis of Ganns cyclical work. The idea of a wheel within a wheel from the biblical prophet Ezekiel is the second step of this cycle. The year, constitutes a complete cycle, and divisions of that year, looking inward give us smaller time cycles whioh are times to look for change. The larger cycles, or years outward, are also taken from this initial vibration. These cycles could be viewed as the hands of a clock. When the second, minute and hour hands are all
in geometric relationship to each other then things will change. If you took all of the major cycles and designed a wheel within a wheel, within a wheel, you would find that all these time cycles are a direct geometric proportion to each other. With that out of the way, I am not going to attempt to explain the why or wherefore of all of this, but will now continue to give you the tool, and its aspects. One idea that you could note, is that these cycles are not based on the time period between lows, or and price related phenomenon other than expected change. These cycles are time cycles only, based on the physical time periods of the solar system, and are used to determine dates that we can expect a change in the market direction.
SEASONALITY AND THE MARKET
W.D.Ga n did research related to seasonality, and its effect on the market. It is worth noting the dates he derived from this work. The following is A quote from Ganns research:
"The winter quarter begins on December 22nd and fifteen days from this date is January 5th tnrough which are always
important dates to watch at the beginning of each year, as stocks often make extreme highs or extreme lows around these dates and a change in trend takee place. When etocks make low in December just before or just after the 22nd, a January riee usually follows. This rally which often culminates around the 3rd to the 7th, however, in some years will advance until around the 20th to 21st."
"February 5th is 45 days from December 22nd and a minor change often takes place around this date and is sometimes very important as tops and bottoms are reached. M5cgh 2Jst is 90 days from December 22nd. This is the date when~"the eun crosses the equator and spring begins. The spring rally in the stock market often starts around this date or culminates if stocks have been advancing previous to this date."
"May 6th is 46 days from March 21st, or 135 days from December 22nd, "and equal to the 135 degree angle. Watch for important changes in trend around this date. June 22ndie 93 days from March 21et, equals 90 degrees and, of course is opposite December 22nd and is important for seasonal change as summer begins on this date."
"July 7tK is 15 days from June 22nd, and 6 months or 180 days from January 7th July begins as advances or declines often culminate around this date and an important change in trend takes place. It is the next important date to watch after June 22nd. August Sthis 47 days from June 22nd, but the sun has only moved 45 degrees, which equals the 45 degree angle, This is a very important date for a change in trend and you should watch stocks that make tops and bottoms around this date."
Ptembercd is 93 days from June 22nd, but the earth or sun has only traveled 90 degrees. The sun crosses the equator at this time and is 180 degrees or opposite the point where is crossed
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