TRADING A DECADE

It would dramatically improve anyones trading if you could know in advance that a particular year would be a bull year or a bear year, the end of a campaign, or a reversal in trend. It would be great to know within the 12 month period which months had the best possiblity to produce the end of a movement, or the start of a fast movement. With this knowledge, you could buy with confidence on sell offs and short rallies, or stay with positions and not be frightened out by short term moves which were contrary to the trend.

One of the discoveries Gann made was to be able to qualify whether there would be a bull or bear year the following year. Part of that forecasting ability came from long term charts, and the application of the cycles of years.

In making a forecast for the rest of a decade, you should check back, 10 , 20 , 30 years, and see if the markets had experienced similar prioe movements. You, also, would look at 50 and 60 years for similarity, and look at the 5 and 10 year cycles from tops and bottoms. You should circle the 60 and 120 month counta on your charts, as these can be considered to be reasonably precise timing points to look for change. You can, also, take a ruler or legal sized paper and mark the distance of 60 and 120 months, so that you can view these cycles from all tops and bottoms on the charts.

W.D.Gann laid cut a decade long plan which he used for forecasting and basing trading plans. In that plan he said, and I will paraphrased here, that the firet year of a decade, year one, is the year to look for a bear campaign to end and a bull market to begin. The second year, ia a year of a minor bull market or a bear market rally. Year three is the start of a bear year, but the rally from the second year may run into March or April, or if the second year is a deoline, the decline from the second year may run down and make bottom in February or March of the third year. Year four is to be a bear year, but it ends the bear cycles, and lays the foundation for a bull year. Year five is the bull year, the year of ascension. Year six is a bull year in which the bull campaign whioh started in the fourth year usually ends in the fall. Year seven is a bear year (but note that 1927 was at the end of a 60 year cycle and that there was no decline). Year eight is a bull year. Prices start advancing in the seventh year and reach the 90th month of the decade in the eight year. This is very positive and a good advance usually takes place in this year. The ninth year of the decade is the strongest of all bull years for bull markets. The final bull campaign culminates in this year after an extreme advance, and prices start to decline. The bear market usually starts in September to November. Year ten is a bear year. A rally often runs until March or April, then a severe decline takes place until November or December, when a new cycle begins and another rally starts.

This was what Gann used as a basic road map in his forecasts. The 10 year cycle repeats over and over. It is a little easier to see when looking at individual stocks, primarily due to the time period a broad market takes for consolidation, which consists of a number of stocks rotating up to top and then starting to trend down.

THE ROAD MAP APPLIED

The purpose of this exercise is to look at the five and ten year cycles, and to see the value of this road map, as it relates to individual years. Since 1910, there have been 76 years to view, and 49 were excellent forecasts, 17 were failures, and 10 were questionable depending upon how strict an interpretation was applied. The fifth and eighth years have been exceptional. This road map of forecasts is dramatically improved when viewed in the context of the five and ten year cycles, as well as, looking for similarities in the movements from 10, 20, 30 years back. You may notice that if one year failed to follow the forecast, that there was a high probability of the next year doing the same, and that the third year moved back on track with the road map.

Lets start with the year 1911. To get a proper perspective of this year, the first in the decade, we look back one year, and eleven years to see if the road map we are following held true during those years. Price in the year 1900 found bottom in September, and ten years from that date ie September of 1910. So, as we entered the year 1911, we have the start of a new 10 year cycle in 1911, and a bullish year. Ten years back from 1911, we see that 1901 waa a year of a fast move up in the first six months, and then a reversal. So looking at 10 years, we have a July top in 1901, and 20 years baok, a bottom in July. Twenty years would place the turning point m the July or Auguet time 1911.

Since we expect a bull year in 1911, we could look to buy two or three month corrections because that is the normal movement against a trend. During January, 1911, we have a five year cycle coming in from January of 1906, and running from the 1910 bottom, we would count out calendar day counts and watch for change on 30, 45, 60, 90, 120, 180 (six months), 270, 315, 330, and the important anniversary date.

As price moves into 1911, we see that a bottom was found in the 59th month (from the five year cycle), but this was not a clear setup. You would start another daily count from the December, 1910 bottom, or on the monthly charts, note that June, 1911 is a possible turning point, becauee it is 6 months from the December low. Twelve months from the 1910 bottom points to July, 1911. This is also 180 monthe, or 15 years from 1896. As price moved into July, 1911, there is an obvious loss of momentum since 1910. Three months up from December, 1910, a 90 calendar day count, has brought a correction, and now in July, the momentum of the expected move up is in doubt. Again, these are 10 and 20 year cycles coming

in this month] and because of the evidence you would either be relinquishing long positions, or using very tight protective stops. You could look to establish short positions on the 180 day count, or six months from the December, 1910 bottom, or again on the 12 month cycle from the July, 1910 bottom, with the expectation of a 90 calendar day corrective move, maximum, or a minimum correction of three weeks.

August presents a fast move down, and price closed on the low of the month which is an indication that the move will continue in September. In September, support is shown at the old 1910 bottom and you ask yourself at this time what the chart would look like if price WBS to move up from here, on a 270 calendar day count from the December, 1910 low, and 90 days from the June high. You could assume that if price moved up from September, a double bottom would be formed after a full three month move down. If you had taken short positions, you would be running tight stops, or looking to take them out if price confirmed the possible double bottom. Since the broad road map indicated that the year is to be a bull year, you might be looking to establish long positions again.

Year two on our road map says look for minor bull market or a bear market rally. Look back ten years, we see consolidation, a nonconfirmation of that base road map, and 20 years back, shows a rally ending in April. The significant high from ten years back was also April, eo we know to look at this month. We have a six month count in March and 12 month count ending in September, as well as, a five year cycle from the 1907 low in November. Looking back fifty years gives us a bull move, and sixty years back was also a bull move, with both of the bull moves ending at the end of the year. The conclusion from this is that in 1912 we have no clear trend established from past history, but, lets leave the road map in effect and use it cautiously.

Assuming that price has bottomed in September of 1911, and looking forward to a possible bull year, or a bear market rally, you would not be short, and you may be long. The three month move up from September shows a loss of momentum in December, 1911, and you would be moving to a consolidation trading strategy if you chose to trade at all. At a minimum, you would be tightening your protective stops on long positions.

In January of 1912, price gives an inside month, closing on the low. From the road map, we assume that the trend is up, although you are using it cautiously because of the nonconfirmation of previous decades. February shows support without breaking the January lows- added confidence. You are looking for a change at six months from the September low, and when it comes in March, price gives a strong move up, exceeding the previous years high. April is the month, or the ten year and twenty year cycles, and this ends the strong up move. Because of the cycles coming in April, you would again be tightening stops in long positions, and possiDly looking to go short, although this is not indicated from the road map and as you know, top takes time to form, so if this is to be a top in the market, it will take time for distribution to