Technical Analysis - 21 Nov 2011 - Dow and All Ords with Gann Angles

Since the last update to the Gann charts of the Australian All Ordinaries (XAO) and the Dow Jones Index (DJI), Greek has changed Prime Minister, Italy took over the bad news, Italy changed Prime Minister, Germany failed to sell all its bonds and France is in risk of a ratings downgrade. On either side of Europe, the US SuperCommittee failed to agree on debt reduction plans while the growth in China is in serious doubt.

All these news within two months and it looks like the world finance system is beyond hope. So what do the charts tell us?

The charts below are weekly charts so within the last 2 months there is about 9 new points on the graph. Both the All Ords and Dow Jones show a similar characteristic. Both when sharply up and then both went sharply down. Both have not even reach the resistance level talked about in the previous blog post.

The summary is that, sure the trend is sharply down. But it has broken no major Gann resistance angles yet and have a slight way to go. So although the news sound hopelessly indicating a financial meltdown, the charts say Not Yet.

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.

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 Jones and All Ords Bull Continues?

Source: http://ozstock.blogspot.com

Here's an update of the weekly Gann charts for both the Dow Jones and the All Ordinaries Indices. There are no new angles on both graphs, rather just the continuation of previous graphs. Over the last two months there was a significant change in behaviour in that since late January world markets have dived but has since recovered and is now almost at the January highs.

Looking at the All Ords, since late last year until today, it appears to be trading within a range. However, as the All Ords is approaching the previous two recent tops, there is a potential for a triple top soon. With the recent highs, it is also approaching the top envelope of the 20 day high. It's something to watch if it will cross the barrier.

The Dow Jones on the other hand does not appear to be range trading in such an obvious way. It has been climbing up to the January high, made a steep drop and is now about the same as the January high point. This is also something to watch if it will pass this high point or create a double top. Note that the current position is well clear of most of the Gann angles shown in the chart.

From a technical analysis overall assessment, the general trend is up. But from a fundamental assessment, there are worries about sovereign debts of several western nations and the strength of the recovery. As both types of analysis are opposing each other, it's time to wait and see.

Technical Analysis (Gann Charts) - Dow and All Ords Nervous

It's been some time since I last put up the monthly graphs and I just thought it was time to revisit both monthly and weekly graphs.




Things to note from the All Ords monthly graph:
i) x=80 is March 1991 and x=280 is Nov 2007
ii) The two gradients Gann +7.5 and Gann+10 has acted as an envelope for most of the 1990s decade.
iii) The period of early 2000s saw the irrational exuberance indicated by the large peak breakout of the envelope.
iv) The GFC made a low but supported by the Gann+7.5 line. The bull run from March 2009 until now saw it rising steeply from the Gann+7.5 and is now just over the Gann+10.
v) Big question is will the Gann+10 act as a resistance or will it break through? The key is to wait for a definite signal.

It is interesting to note that the Gann angles not only act as "Barriers" (ie resistance or support lines) but also as a "Tracker" where the graph actually fluctuates along it.



On the Weekly All Ords graph - If you have been following my blog, about two article ago, I wrote on the "Squaring of Time and Price of the Global Financial Crisis GFC" (Sep 2009). In that article I found that a factor of 52 was key to revealing the square relationship between time and price. So for this Weekly graph, you will notice that I changed the Gann-32 line into a Gann-50 line (tracking the GFC down) and added a Gann+50 line (tracking the post March 2009 recovery). I used 50 because I did some recalculation and the results were better than 52, not to mention 50 is a nice round number.

The result of these changes (compare with previous blogs) is that the new Gann+/-50 track the graph even better. We can use this graph to confirm a change in trend if the current bull run is to end.



On the weekly Dow Jones, we see the graph approaching the Gann-5 and there's no reason why it should not at least touch that line before any pullback. The intersection between Gann-5 and Gann+10 would be interesting to watch.

The recent bull run has gone on for almost 8 months. The bears have become bulls while the bulls have become a little nervous. Many are expecting a pullback of some degree. However, the weekly graphs based on the Gann angles shown here do not indicate any strong resistance soon, with the exception that the monthly All Ords just broke through and important resistance. The market has dropped in the last few days but the key is to wait for confirmation of trend if we are to jump in the opposite direction.

Squaring of Time and Price of the Global Financial Crisis GFC

Source: http://ozstock.blogspot.com

Here is some quick calculations I tried after reading about Gann's technique of squaring Time and Price. It is quite amazing to see how the numbers fall into place. For both the Dow Jones and the All Ordinaries Indices, the calculations are below:

Market Peak at: 8 Oct 2007
Market Bottom at: 2 Mar 2009
Time Difference = 73 weeks

All Ordinaries
High: 6760.1
Low: 3111.7
Difference = 3648.4
Difference divide by 52 = 70.16

Dow Jones
High: 14093.08
Low: 6626.94
Difference = 7466.14
Difference divide by 52, then divide by 2 = 71.8

The Time difference between high and low is 73 weeks. The Price difference for the All Ords is 70.16 (weeks) and Dow Jones is 71.8 (weeks). Both indices are so close to 73 weeks. For those new to Gann analysis, 52 is one of those magic numbers. In Gann's Master Calculator, he often use the square of 52. The number 52 comes from the fact that there are 52 weeks in a year and the data are based on weekly data.

Essentially, the Price is being rescaled by a logical factor which is 52, or a multiple of 52 as in the case of the Dow Jones. I am quite surprised that the numbers turn out so close.

The above analysis was possible because we looked at the past and identified the high and low point. For the future, we cannot really see the next high which started from the low of 2 March 2009. However, we can use the same scaling and perhaps suggest where the current rally may turn down.

Technical Analysis (Gann Charts) - All Ords headed for June fall?

Source: http://ozstock.blogspot.com

After one of the strongest rally in recent times, are we headed for a June Fall? What do the Gann angles tell us?
Below are the weekly graphs for the Dow Jones Industrial and the All Ordinaries indices, with some Gann angles superimposed.

The story so far is that since the March bottom, stock indices all over the world has been rising until May. The "sell in May and go away" adage did not exactly come through. So what do the Gann charts tell about this?



Looking first at the Dow, the Gann-10 (brown) ascending angle, and the Gann-10 (pink) descending angle is projected to meet sometime in mid August. Since the all time high of 2007, the Gann-10 (pink) has acted as a resistance angle. The last 2 weeks saw the Dow break this resistance angle, but have not reached a significant amount yet. The current week starting 15 June 2009, has begun with a significant drop. One scenario, if you believe it, is that the Dow will retrace downwards along the Gann-10 (pink) and meet the intersection point almost creating a double bottom before starting the next bull run. Two angles from opposite direction intersecting like the Gann-10 pink and brown here, is an important point to watch for.




The All Ords seem to be telling a different story but not that much. One of the important Gann angles Gann-2.3 has acted as a support and the All Ords bounced quite definitively from this. It is now approaching the Gann-1/2 angle which may possibly act as a resistance. Note the Gann-1/2 is drawn from a recent low of 2003 whereas the Gann-2.3 originates from a low point farther back. This prediction may be far off but, if the All Ords finds resistance at the Gann-1/2 as the recent falls in the market continue, it may hit the Gann-2.3 support again. If this is the case, it may set-up for a double bottom to bounce back as the next long term bull rally - which in fact may coincide with the Dow.


Outlook: Brace for a sustained and signicant fall, then recovery from early to mid August.


Aside: Jun 21 is one of the 11 important Gann seasonal dates in the year that trend may change - Lookout!

Technical Analysis - Update Dow and All Ords Weekly Gann Charts

It is about 2 months since the last post on the analysis on the Dow Jones index and the Aussie All Ords index. In that time, the market has climbed significantly on renewed confidence. The consecutive weekly gains left such an impression on some that there is talk that we have reached the bottom of the GFC (Global Financial Crisis). Instead of random speculation, let's turn to our weekly charts.

In the previous post,
http://ozstock.blogspot.com/2009/03/technical-analysis-update-dow-and-all.html
the DOW seem to be right in between a set of Gann bear angles and bull angles. The All Ords at that time was testing an important angle for support.







In the current situation, the All Ords seemed to have not only found the support but has bounced up from it. The Dow stopped in the middle of the 2 angle supports and also bounced upwards strongly.

So are there any indications of support or resistance in the near future? Looking at the Dow first, it is almost at the point of touching the (pink) angle from the top of the 2007 boom, which is a potential resistance. For the All Ords, although it has crossed over the support angle emphatically, it is approaching the top of the 20 day maximum envelope, almost like being sandwiched between the support angle and the envelope.

Two other historical pattern to note are: i) the "Sell in May" adage; ii) the Gann seasonal date of May 5, both of which is acting against the current trend.

Technical Analysis - Update Dow and All Ords Weekly Gann Charts

As an update to the charts published near the start of December, we again look at the weekly charts for both the Dow Industrial Averages (DJIA) and the Australian All Ordinaries (XAO). The DJIA has broken through the important angle and is heading steeply downwards to the next bear angle. If it continues at the current rate, it may reach 5800 later in March or early April.

The XAO so far does not seem to follow the steep decline although it too has recently broken a support angle and downward movement is likely. The next support line (Yellow) is some way off. At this time, it is harder to make a call for the XAO - it depends on how deep the DJIA falls and how much influence it has on the XAO.