crude

Following on from the square of 9 comments on the Amazon posting we can see on the crude oil chart how support and resistance are indicated by 2 natural squares,49 and 81.The range came out at 170 trading days and 169 is 13 squared.

Amazon

Description of Amazon as "the river of no return" in the excellent Daily Reckoning have proved wide of the mark as Amazon looks to be one of the success stories from the dotcom era.Nevertheless after stellar performance in 2009 the stock has reached significant resistance,with time cycles aligning with price targets on the square of nine chart.This is one of Gann's more esoteric tools.Square of nine levels can be derived from a table or calculated.The low of 36 and the high of 144 are both significant Gann numbers,36 is the square of 6 and 144 is the square of 12.Effectively the square of 9 is a calculator that relates numbers to each other by taking their square root,incrementing by 1,2,3,4 etc and re-squaring.Some traders use increments of 0.5,0.618,1.618 etc.When price targets align with cycles such as 3 months (90 degrees in time ) 4 months,6 months ,1 year (360 degrees) and other natural divisions of the year,resistance is indicated.

Squares are significant resistance (or support)in their own right - witness the recent high in gold at 1225,which is the square of 35. This can be applied to time as well eg 25 weeks,144 weeks etc.

Nasdaq

Unsurprisingly given the critical levels of Apple,Microsoft and other constituents,the Nasdaq index is also poised at a big resistance level

Microsoft

This is an interesting chart from a Gann perspective.There are 3 reasons to expect resistance at 30 - doubling the low of 15,50% off the high of 60 and the 50% retracement of these levels all coincide at 30,making it a very strong level to expect resistance and possibly a change in trend.The simple trendline reinforces the case for caution.Microsoft could be traded using the same principles as in the Apple video,using the $30 level as would apply to $ 200 for Apple. From a time perspective we are at a a 10 year cycle from the all-time high,making this a compelling situation.

Coffee has not been one of the more exciting commodities yet a glance at the yearly chart shows there has not been a lower yearly low since 2001 which is very positive.I 2009 looks like being a bullish yearly engulfing candle suggesting that 2010 may be an exciting year like 1994 or 1997.

A lesson from Japan ?

Japan's bubble burst 20 years ago.At the time Nomura was regarded as a core holding for international portfolios and Japanese management techniques were being studied globally.As we approach the 20 year cycle from the all time high (an important Gann cycle) Japan is still in deflation and the Nomura chart still looks vulnerable !

Gann cycles called the recent high on the Euro.Rising wedge pattern was a bearish indication.

Euro

Longer term the dollar is toast,if we are to believe Jim Rogers.However even he believes bearishness toward the dollar had become too extreme,and now we have the inevitable rally.Speculators had been borrowing dollars because of the low rates and buying risky assets.Now they are having to close these trades.Looks like more pain to come.

Gold

Gold

The 3 day swing chart shows how significant the 1000 level was.Talk of gold being in a bubble is wide of the mark in my opinion !

FTSE100

The FTSE completed a Gann squaring of price and time when it rallied 1800 points in 180 days.Such relationships often signal at least a temporary high or low.Friday was a weak day and the market looks poised to break the rising 10 point per day Gann angle from the lows .The FTSE250 (not shown) looks even more vulnerable.Smaller cap stocks are likely to suffer a flight to quality if markets correct.

Dax

The Dax is attempting to break through its recent highs but is unlikely to succeed if the US market corrects.The weaker Euro will help German exporters,which may explain the relative strength in this market.However problems with sovereign debt with regard to Greece,Ireland and other European economies are likely to keep Germany in the eye of the storm.
Price resistance is heavy in the 5900 area,as shown on the charts.In addition the Dax has peaked around the end of the year in both 2007 and 2008.

S&P

The S&P has been unable to break through the 50% retracement and has not advanced further following the 180 trading day cycle.There is now a triple top on the daily bar chart indicating a correction could have started.The trigger for this is most likely the sharp rally in the dollar

This chart shows equality in the price and time ranges for the most recent rally and the one that preceded the previous top,so there is time resistance as well as price resistance.Also the time factor is a "natural" cycle,one year.Two attempts to break 200 have failed.Using Gann's rule we can short Apple if it fails on the 3rd attempt,or buy it if it breaks out.
The U-tube video points out that after a breakout a stock should not retreat more than 3 points below the breakout level,yielding a natural stop loss level eg 4 points away.
I believe Apple is more likely to fall from here in which case the stop could be 4 points above the last high.Weekly MACD (not shown) is rolling over.

Apple

There is an interesting video on U-tube showing how Gann principles were used to trade Apple when it broke through 100.It subsequently shot up to 210.Will Apple break through 200 and have another spectacular run,or could we see a sharp selloff ?

http://www.youtube.com/watch?v=N6P9O7nq3cM&feature=related

Dow Jones

The weekly Dow Jones also shows a Doji pattern and is poised below resistance from the 50% retracement level and the level where the second upleg equals the first.

The weekly swing chart shows the uptrend from the March lows to be still intact

Following the Dubai setback which hit markets on Thursday,the US weakened on re-opening for a shortened session on Friday.The weekly candlestick chart shows another doji formation,with a possible tweezer top pattern,warning of a correction.

On the daily chart we can see that it has broken the 2.5 point per day Gann angle
(the rise from the March low was supported on the 5 points per day line ie momentum had halved )
next support is the 1.25 point per day line

can also see declining momentum on the RSI and in the lack of spacing in the last 3 rallies ie corrections came back below the previous peak,which should not happen in a strong impulsive move

the rally fell just short of the 50% retracement of the entire bear market and topped on the 180 trading day count off the March low and approx 90 days off the July low,both important Gann cycles,being one quarter and one half of the major 360 cycle.Price was approx 1.25 x 360 ie a 450 point rally

normally we would expect seasonal strength into year end but the market looks vulnerable to a decline toward the 200 dma and 38% retracement level at around 940 unless it can regain the recent highs........???

if we were to bottom after 225 days,halving the 450 price range,we could get a low in early January
Interestingly the equivalent range on the Dax was 2299 points,which throws up 229 days as a possible cycle

Here is the S&P still probably the most important equity market even if the mask is slipping
This is a weekly candlestick chart with a simple trendline from the highs and the all important 50% retracement,of which Gann reputedly said you could make a fortune following this one indicator alone
...so the market is poised at very important level and we should take serious note of any early signs of reversal....so far we have a Doji candlestichk formation and the rolling over of the weekly MACD indicator but no actual reversal on the weekly chart



My first blog........never thought I'd do this,am no Stephen Fry but thought it might be a good vehicle to post and hopefully share chart ideas and musings on the markets.
Am definitely a closet Austrian as far as economics goes ...what goes around comes around ...no such thing as a free lunch etc....great fan of Gann and fibonacci ...time is the underappreciated element,everything is a circle and it goes around and round ....but its easy to get seduced by the exotica and we should never forget to KISS (keep it simple stupid) and to remember Livermore's advice that there is only one side of the market to be and that is the right side...lose your opinions or lose your money ! (easier said than done)