Technical Analysis - Gann Angles on the current Dow Jones Industrial Index DJI

This is an interesting week. Not only is the American market set to respond to a major stimulus package, but the Gann angles show that we may be at the cross roads. Before analysing the current DJI graph, please note the following technical details:

- The chart below is a weekly chart. Daily chart are too volatile, monthly is good for a longer term view.
- Gann love the 45 degree angle. But that was possible only because the weekly time scale is comparable to the price time scale of certain stocks in Gann's time. Eg. it is reasonable for a stock to move one unit over one week.
- My adopted Gann angle will be a gradient of 10 for the DJI. i.e. 10x1 gradient correspond to Gann's 45 degree. In fact, I will be using gradient terminology rather than degrees.
- The purple line starts from the Origin or Zero, at a particular significant time, eg on the date of the highest point.
- Unlike other charting techniques which simply "connect the dot" from peak to peak or trough to trough, Gann's methods are based on fixed angles or gradients. Gann's lines DO NOT aim to the fit graph, rather the graphs can be predicted by Gann's lines.

(The technical notes above should also be applied to my previous article on Gann)





So the BIG question, "ARE WE THERE YET"? Have we reached the bottom?

1. Usually a bear market has about 3 or 4 drops. But note the 1929-32 had a first big drop followed by 6 other drops for over 2.5 years. In the Credit Crunch of 2007-08 (hopefully not -09 as well) there have been 3 significant drop followed by a huge drop in late September 2008 (the fourth one). The bear may be over ???

2. It certainly crossed the major -10x1 gradient but not really near the -20x1 gradient to find support. So it can drop to that level next.

3. The 20x1 gradient starting from a value of 0 at the date when DJI was highest ever, is acting as a support from the bottom. More interestingly, it looks like it is squeezed upwards by the -10x1 line. It may bull towards 9500 on 27 Jan 2009. Or if it breaks below 8500 this week, it may crash further.

4. Looking purely with time, it is 60 weeks since the major high. To square the time and price, anticipate the DJI to move down 6000 points from 14200, which is about 8200 within this week.


So the final answer is All of the Above; ie. monitor the signals mentioned above. To put it simply, if it does not follow the purple line up, then it will drop further.
It is very interesting that it rests so nicely on the 20x1 line from "O".

Technical Analysis - Gann analysis on the Dow Jones Industrial on 1929 Market Crash

Source: http://ozstock.blogspot.com



How does the current Credit Crunch directed Stock Market crash compare with he 1929 one which brought the Great Depression? Have a look at not only the chart I made below, but also W.D. Gann's own analysis using his angles and time vs price method.


---- Excerpt from Gann's "The Basis of my forecasting method" -----

The 45 degree angle drawn from the extreme high point of a stock is most important and when it is crossed, a major move may be expected. For example:

On the weekly chart for the Dow-Jones Industrial Averages, note the 45 angle moving down from 386, the high of Sept 3, 1929. January 12, 1935 was 279 weeks from the top. Taking 279 from 386, we get 107, the price at which the angle of 45 would cross. These averages advanced to 106.5 in the week ending Jan 12, 1935 -- then reacted to 100 in the week ending Feb 9. This was the first time that they had held within one-half point of this angle and the first time that they had ever reached it since the top was made.

During the week ending Feb 16, 1935, the Averages crossed the 45 angle at 103 for the first time, and during the week ending Feb 23, 1935 advanced to 108, where they hit the angle of 45 moving up from the low of 85.5 in Sept 1934, and also hit the angle of 2x1 coming up from the low of July 8, 1932. This was a strong resistance point and the Averages reacted to 96 in the week ending March 18, 1935, where they rested on the 45 angle from the 1929 top and also where the 3x1 angle (a gain of 1/3 point per week) from Sept 1929 coming up from "O" crossed the angle of 45 coming down from the 1929 top. This was a strong support point for a change in trend. The advance started and the Averages moved up to new high levels. This proves the importance of angles, especially the 45 angle drawn from any extreme top, and the point at which any other angle crosses the 45 angle.

Watch the 45 angle from 1929 top when it reaches "o" or when it is 386 weeks down from the top. This will be in the latter part of January, 1937. Note what happens at that time.

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