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David Pearson wrote:
>
> This post was originally sent on Tuesday night, but it never made it. Eddie
> Kwong informed me there is a problem with posts from MSN users. He fixed the
> problem and forwarded this post on Wednesday. I have resent it for those of
> you who did not get it.
>
> ----------
> Sent: Tuesday, August 26, 1997 9:03 PM
> To: 'Realtraders'
> Subject: MKT: WD Gann Forecast - Major decline ahead
>
> ****(Please enlarge the document window to full screen for better viewing)****
>
> For this discussion I am going to assume that you know who W.D. Gann was and
> his contribution to the science of technical analysis of stocks and
> commodities. If you do not know who he was, you owe it to yourself to find
> out. He wrote many books, courses and letters on technical analysis over a
> trading career of 40+ years.
>
> This discussion is going to focus on the element of TIME. Gann felt TIME was
> far more important than price when forecasting the future price action of a
> stock, commodity or the general market.
>
> In the winter of 1921 Gann wrote a letter entitled "Method for Forecasting the
> Stock Market". In this five page letter he outlined his method of forecasting
> and 12 time rules to follow when forecasting. I would like to quote a few
> paragraphs of the letter that I find very relevant to the next 3-4 months.
>
> Gann wrote:
> "Every movement in the market is the result of a natural law and of a cause
> which exists long before the Effect takes place and can be determined years in
> advance. The future is but a repetition of the past, as the Bible plainly
> states: "The thing that hath been, it is that which shall be; and that which
> is done is that which shall be done, and there is no new thing under the sun."
> -Eccl. 1:9.
>
> Everything has a major and a minor, and in order to be accurate in forecasting
> the future, you must know the major cycle, as the most money is made when
> extreme fluctuations occur.
>
> The major cycle of stocks occurs every 49 to 50 years. A period of "jubilee"
> years of extreme high or low prices, lasting from 5 to 7 years occur at the
> end of the 50-year cycle.
>
> "7" is a fatal number referred to many times in the Bible and it is ruled by
> the planet Saturn, which brings about contractions, depression, and panics.
> Seven times "7" equals 49, which is shown as the fatal evil year, causing
> extreme fluctuations."
>
> My commentary:
> The third and fourth paragraphs are the most important to understand. The
> period of "jubilee" has just occured. The last major correction in the stock
> market ended on October 11, 1990 at 2344.31 on the Dow. It is now 7 years
> later and the Dow made a high on August 7, 1997 at 8298.79. That is a rally
> of 354%. Not only has the stock market rallied virtually straight up for 7
> years, but it went parabolic right into the summer of the "7" year. This is
> extremely signicficant. I will explain later.
>
> In November 1935 Gann wrote a letter entitled "Forecasting". This twenty one
> page letter goes into great detail on how he used time cycles to forecast the
> stock market. The most important cycle Gann used was the 60 year cycle. He
> called it the "Great Cycle". Other cycles include: 50 years, 30 years, 20
> years, 10 years, 7 years, 5 years, 3 years and 2 years.
>
> Now we get to the good stuff. Let's put Gann and his forecasting claims to
> the test. Let's see what happened in the major cycle years Gann said were
> important. I can tell you the results are very interesting. I am going to
> focus on the present time frame of the next 3-4 months. The question is:
> What actually occured in the Dow Jones Industrial Average from the summer
> months to the autumn months in those cycle years?
> Dow Dow Dow
> Cycle Year High Low Decline Rally
> 2 1995 Sept 15 4815.18 Oct 10 4659.74 3.29%
> 3 1994 Sept 15 3953.88 Nov 23 3638.63 7.97%
> 5 1992 June 3 3422.02 Oct 5 3097.41 9.48%
> 7 1990 July 17 3010.40 Oct 11 2344.31 22.12%
> 10 1987 Aug 25 2746 Oct 19 1738 36.7%
> 20 1977 June 24 933.77 Oct 25 792.79 15.10%
> 30 1967 Sept 29 951.57 Nov 9 846.28 11.06%
> 40 (20x2) 1957 July 16 523.11 Oct 22 416.15 20.04%
> 50 1947 July 25 187.66 Sept 9 174.02 7.27%
> **60** 1937 Aug 14 190.38 Nov 23 112.54 *40.89%*
> 80 (20x4) 1917 June 9 99.08 Dec 19 65.95 33.44%
> 90 (30x3) 1907 May 3 85.02 Nov 15 53.00 37.66%
> 100 (50x2) 1897 Sept 10 55.82 Nov 8 45.65 18.22%
> 120 (60x2) 1877 Jan July 40 %
>
> Data Sources:
> The Dow Jones Averages Centennial Edition 1885 - 1985. Published by Dow Jones
> Irwin.
> The Foundation for the Study of Cycles.
> Recent data - Worden Brothers, Inc.
>
> My commentary:
> What is obvious about the results is that there were no rallys from the summer
> to the autimn in any of the important cycles. Cycles 2 - 60 are the most
> important. I added a few more just for fun. The Dow declined 100% of the
> time from the summer to the autumn. The most important cycle to key off of is
> the 60 year cycle. That cycle produced a decline of over 40% only to the
> November 23 low. The Dow went even lower into 1938. I hand made a chart that
> displays these cycles clearly going back to 1821. This chart has enabled me
> to forecast every major stock market move for the last 15 years. I have not
> misforecast one major stock market move in the last 15 years. I have been long
> all the way up and caught many small corrections along the way. The chart
> even called every major move during the 60's and 70's, but I was too young to
> trade then. I feel very lucky to have had the chart to help me. If it wasn't
> for Gann and alot of hard work on my part I would not have known any of the
> information I have shard with you today. Gann was right when he said, "Every
> movement in the market is the result of a natural law and of a cause which
> exists long before the Effect takes place and can be determined years in
> advance." We are in the "7" fatal evil year that causes extreme fluctuations.
> You have been forwarned.
>
> Here is my unbridled forecast:
>
> THE STOCK MARKET IS GOING DOWN HARD IN THE NEXT 3-4 MONTHS. THIS IS THE
> HIGHEST PROBABILITY SITUATION THAT EXISTS. HISTORY SUGGESTS IT IS A 100%
> PROBABILITY. GET OUT OF YOUR LONGS AND GO SHORT IF YOU HAVE NOT ALREADY DONE
> SO. IF YOU DON'T WANT TO GET OUT OF THE MARKET, AT LEAST RAISE YOUR STOPS UP
> TIGHT. IF YOU ARE AGGRESSIVE, THEN PYRAMID THIS DECLINE FOR ALL IT IS WORTH.
> THIS HIGH PROBABILITY SITUATION WILL NOT VISIT US AGAIN FOR 20 YEARS.
>
> Humbly,
> dhpearson@xxxxxxx
David,
Thank you for the interesting analysis. I have printed your posting
for future reference.
Given that Gann was first and foremost an Astrologer, what are the
Astrological reasons or forces supporting you current forecast?
Supportingly,
Norman
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