Technical Analysis - Dow and All Ords with Gann Angles

It's more than half a year since the last Gann Analysis. Things have certainly taken a turn for the worse. The doomsayers say that the bottom is still far away. The optimist are trying to find any shred of evidence to the contrary. So what does the Gann Angles tell us? Below are the weekly Dow and All Ords with their updated angles.

The Dow is very interesting in that it had stuck to the line of Gann +10 for about a year and showed signs of coming off this March. Now it has definitely broken off the Gann +10 angle. Question is how far will it drop. According to Gann, it would tend to drop to the next support angle. However the Gann +5 angle is still quite far from reach. If this is simply projected, the Dow may fall to 8000 by March 2012.

The All Ords has clearly broken the Gann 1x1 drawn from the low of 2003. The Gann 1x1 is the strongest or most stable angle. The other closest angle is the Gann +2.5 (Pink) from the low of 1991. This angle is significant in that it was the support for the 2009 low from which the market made a strong recovery. Will the same angle provide a resistance for the current trend? If yes, then the bottom of the current market will be about 3750-3800 in mid October 2011. Looks like we are almost there! If it does not support, then it will fall a long way more.

Interestingly, if Oct 2011 is to be the bottom, this would break the trend that the market crashes in October. In addition the Dow Graph would be resting on the Gann +7.5 angle (not drawn, but imagine between the +5 and +10 angles) in Oct 2011 at about 10,100-10,200.

Technical Analysis - Dow Up but All Ords Crawling

There has been a lot of talk of a two speed economy in Australia but perhaps there is a bigger two speed economy when we look at the world as a whole. The developed world which has slumped during the GFC is showing signs of recovery, slowly but surely. The high-flying GFC defying developing economies led by China and dragging a resource economy like Australia (it's more relevant here to classify Australia as a resource economy than a developed economy for our current argument), are showing signs of braking due to overheating. Let's look at our usual comparison of Gann angle charts for Dow and All Ords to compare.

Looking at the Dow first, today's news announced the Dow has doubled its GFC low, meaning it's now over 12000 while the GFC low was 6000. This has much less importance though than the half way point between the Peak and Trough of the GFC. Roughly, the Peak-Trough is 14000-6600 = 7400. Half of this is 3700, but clearly, the DOW is way above 6600 + 3700 = 10,300. So the half way point is clearly broken and not relevant now.

What is interesting from the Gann angles is that the current rise in the Dow sits very nicely at the Gann +10 line and has been doing so since mid 2010. The mid 2010 point, from our previous analysis, was where it looked like it was a double top. Since then the Dow has powered ahead. There are no visible signs of breaking any angles.

Going on to the All Ords, our previous review stated that a triple top has been confirmed. This was the right call but since then it has reversed quickly. The result for the All Ords is however a bit lack lustre. Since the reversion from the triple top, the All Ords has climbed but only very slowly. At the moment it is at the level similar to the peak of the triple tops between Oct 2009 and mid 2010. In fact the current All Ords is hugging the top of the Bollinger Band and there is no evidence of violating any Gann angles soon.

So what do we make of all this? Though the All Ords is moving very slowly, both All Ords and Dow are still on a very firm positive trend. Unless there is any reason to doubt, we can play the market with the continuing trend but keep your fingers on the button since it can turn absolutely at any moment.

All Ord Triple Top Re-Confirmed, and Dow Jones does not resist

Source: http://ozstock.blogspot.com

Usually the charts are done at the end of the week to get the full weekly picture but since the dramatic drop over the last few days, the last point on these weekly charts end in the middle of the week.

In the last post, the All Ords were on the verge of confirming a triple top but the Dow did not show any similar patterns. For over the last month, the All Ords had been fighting the Triple Top and showed signs of successfully resisting a Triple Top plunge as it climbed up from the 4300 level. However, things changed in the last week and as of today, it seemed the market is plunging back down. In fact the closing of today has broken the previous month's low of 4325. The chart also shows that it has broken through an important Gann angle. At this point the signs are now quite strong for further downtrend.

In terms of the Dow Jones where previously, it was not near any support or resistance, the lastest chart shown here indicates that it is touching the Gann (brown) angle. The minor recovery over the last month followed by the subsequent downtrend provides strength to break this Gann angle. When a Gann angle is broken, the trend will continue in that direction until the next angle is found. The fundamentals of the world economy and sentiment also provide strength to the downside.

Whereas before the Dow and All Ords seem not to coincide with each other, the current downtrend is supported by both indices and may be a confirmation of strength in the current direction.

All Ord Triple Top Confirmed, but Dow Jones Hold the Key

Source: http://ozstock.blogspot.com

At the end of this incredible week which saw both the Dow and the All Ords (as well as many others) plunged, the Triple Top of the All Ords has been confirmed. However, caution is in order as this is still a newly confirmed Triple Top and may turn around suddenly. Nevertheless, W.D. Gann and David Bowden recognised that Triple Top is one of the safest signals for beginners to trade, even more so than a Double Top, because when these signals are met, they are most likely to continue on as expected.

To avoid being caught out, decide on a suitable Stop Loss if your are going short. The level of stop loss depends on your own risk-reward apetite. Some people place stop loss at a certain percentage of their expected loss, for example you can put the stop loss at a price where you would lose 3%, 5%, 10%, etc. Others place their stop loss based on special points on the charts. For example with the Triple Top, we may choose the previous Low point as the stop loss which is in the week of 1st Feb 2010 at 4532 points.

In addition to the All Ords Triple Top, we also see the chart breaking the all important Gann 1:1 (brown line) or 45 degree angle. This is the angle of great strength where support or resistance will be tested. Again, it has only just broken this angle, so cautious trading with Stop Loss is prudent.

The Dow Jones on the other hand, does show a correction after coming down strongly from the yearly high. However, it has not formed any significant Double Top or broken any Gann angles. It is however approaching another the Gann +10 angle where it may find support or it can breakthrough.

The Dow tells a cautious story. As the All Ords seem to show signs of an emerging bear market, perhaps we have to look towards the Dow as a final confirmation as to whether both markets will go down or pull up from here on.

Technical Analysis - Dow and All Ords

For those following the Dow Jones and the All Ords index closely, you would have noticed the week before last that as the Dow powered on upwards, the All Ords retreated slightly for a few days before following the Dow again. But be mindful that those are daily trends. So let's look at what the weekly trend show us, in particular concerning the small pullback we had a few days ago.

Alert: Gann date 20 Nov!

Indeed there has been a minor dip or change in trend leading up to this date. Is this a trigger for a major reversal?

The weekly chart of the Dow Jones below is quite interesting. See how it has just reached and touching the Gann-5 line. Gann analysis does not claim that it will bounce back down or break through. What it does show us is to get us prepared, if it breaks this line strongly, then go long. On the other hand if it tumbles from this line, it may be a shorting opportunity. The breaking of the Gann-10 angle in May 2009, shows an example of how it can break the Gann angle.

Errata: The weekly charts of the All Ords for previous posts has an error where the 20max envelope was shifted. The new graph here has been corrected.

Turning back towards the All Ords, if you look at a recent daily chart (not shown here), you will notice the formation of head - shoulder pattern with the peaks at early Oct, early Nov and during the last week where the last shoulder might be forming. Looking at the weekly chart, over the last few weeks, the trend has come off the Gann+50 angle. Not only that, but the 20max envelope has also tapered off its rise. This pattern has occurred once before in the bull trend started at March 09, and that happened in early July 09. If it does follow the July 09 pattern, it will power on ahead. On the other hand the recent movement may be a good setup for a strong decline.