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.

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets

Continuing the series of summaries of investment strategy book's, here is the acclaimed book by Stan Weinstein on Secrets for Profiting in Bull and Bear Markets. It is presented in point forms so that it is quick and easy to read. 

The points includes when not to buy stock, how not to sell stocks, how to sell stocks profitably, when not to short sell stocks and when to short. In addition, Weinstein has identified the pattern on how stocks rise up and decline in FOUR stages.

Don't buy

- overall market is bearish

- stock in negative group

- stock below its 30 week MA

- its 30 week MA is decreasing

- stock has already advanced a lot

- if stock has poor volume characteristic on breakout

- stock has poor relative strength

- stock has nearby overhead resistance

- by guessing a bottom

Don't sell (stock you already have):

- sell based on tax considerations

- sell based on dividend yield

- sell based on PE or because PE is too high

- average losses by buying more stock that is going down.

- wait of the next rally to sell

- refuse to sell because market is trending up

- keep holding stock because it is high quality

Selling stocks

- use stop losses - based on MA and previous support level

- don't use stop loss based on percentages

- First stop loss should be based only on the previous support

- Other stop losses adjusted based on MA

- Increase the stop losses to higher bottoms

- use stop loss at number slightly less than a round number.

don't short

- because of high PE

- because  price has rise too much

- because everyone thinks it's going to crash

- stock trades thinly

- a stage 2 stock

- stock that is in a strong group

- without protecting with a buy stop loss

- a stock that is above its Rising 30 week M.A.

- a stock with positive relative strength

Do short

- negative market

- negative group - group chart broken below 30 week MA, and declining relative strength.

- its stage 2 increase  was very strong, clearly above 30week MA

- Volume confirmation not necessary for shorts, since prices on the way down don't need strong volume

- Short when the price break down below a certain level. Place buy stops at the previous peak.

STAGES

1. Base phase - trending in range

2. Advancing phase- moving strongly upwards. 30 week MA also  starts increasing after breakout. BUY

3. The Top Area - 30week MA starts to level off. Place sell stop below this range.

4. Declining phase - don't need strong volume to confirm this phase. SELL

RELATIVE Strength = Price of Stock / Price of Market Average

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.

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.