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Gann‘s Annual Forecasts: Part II By Chuck Carpino

Gann’s 1919 forecast was sketchy and only one page long. Each year his forecast was expanded. By 1922 it totaled six pages and by 1929 it was up to ten. As his experience grew so did his confidence in sharing his views with his clients. At the beginning of his annual forecasts, he summarized the year’s major swings before  discussing the minute moves within each month.

These important swings represent the indications of his stock curve as calculated from his “Time Factor.” Examples of predictions not based on his time factor are when he stated in his 1919 forecast, “Around the 20th to the 25th of January a very depressing influence is indicated for stocks.” He further stated, “A depressing influence is indicated from September second to the eighth.” I wanted to make this distinction so that Gann students would recognize that he combined various cyclic methods to make up his forecasts.

Read: Gann’s Annual Forecasts: Part l

In 1919, the Dow opened at 80.00 and soared to 119.62 by November. Gann’s general trend called for a bull year in stocks to last until the fall. This was an excellent forecast for the year and long term investors did nicely following his advice. Early in the year Gann predicted, “An accumulation of stocks between January 20th and February 14th. Stocks bought during this period will show handsome profits on the advance in April and May.” February eighth was the yearly low at 79.15 and the Dow rallied for several months without reactions to 105. That was a great forecast for the low and the ensuing trend.

Serious Gann students have probably wondered why he had such a wide range (25 days) for the low in this forecast. After all, most of his predicted highs or lows covered only three days to a week before the turn occurred. Why is this one covering 25 days? It is as simple as you might suspect. The reason the dates were so far apart was because the time factor he used was forming lows that stretched from late January to the middle of February and he knew the low point could have occurred anywhere in this time frame. The real beauty of his stock curve is when you get indications of a top or low within a very “tight range of a few days. The move will come out of the blue and quickly reverse the trend. His August forecast occurred in this manner. A more recent example would be a top indicated for November 10 to the 12 in 1986, and a low indicated for November 19 to the 21 in 1986. Unfortunately these types of indications don’t occur every month and may only happen a few times a year.

For the month of June, Gann said, “From June 22nd to July 10th a depressing influence is shown and there is likely to be some marked depreciation in stocks.” This was incorrect. The market’s last top was on the ninth of June at 107.35, and a sharp decline occurred until June 16th at 99.56. From this price, the Dow recovered and made anew high on July l4, at 112.23. The curve I use, which has been matching his very closely (on the time factor predictions only), indicated tops on June 10 to June 12 and lows from July 10 to July 15. I too, had incorrect indications of a down market lasting until the middle of July. His July low had become a July high and this will automatically throw off the next trend projection. At this point, he probably would have advised in a monthly supplement that stocks would not be rising the latter part of July as he originally suggested.

Let’s move on to August to see Gann’s “tight fit” curve indications for this month. His forecast was, “Many stocks will reach the top of the boom between the 12th and the 15th, and have a quick decline until around August 23rd.” The market rose from a low in early August to the 12 at 105.10 and then dropped to 98.46 on August 20 before reversing upward. That’s a nice 6.6 percent drop right in the time period specified back in the fall of 1918.

Gann’s fall forecast was bullish until around September 23. He advised selling here if stocks were strong into this time period. September was flat, so it’s hard to say if he would have advised selling out here. He had October as being a down month, but it was very strong. The market peaked on November third at 119.62.

As I mentioned earlier, he was less willing to put in writing his indications of 1919. For some reason, he began to write longer forecasts in 1920. He completely left out the strong indication for a low in December of 1919 between the 18 and the 22. There was a mid-month low here at 103.55.

The curve was only one application of his time factor. Another application that I have used since November, 1986 is far more reliable. In fact, its reliability factor so far is about what Gann states in his marketing material -around 80 percent.

This technique provides only the cycle dates each month for a change in trend. Because it is difficult to consistently determine if the cycle will be a high or low, it is best to just consider the cycle dates as a change in trend. As long as the trend is into the expected date, one reverses one’s position. These dates can be obtained a year in advance. I know because I have worked up real time cycle turns for each month for two years now.

When I mention this to people, there are usual signs of disbelief. To prove to you their accuracy, I’d like to share with you the predicted cycle dates in six letters I wrote to the leading Elliott theorist in the United States. All but the last letters were written anonymously for personal reasons. These letters span from May 1987 to February 1988 and were randomly written one to four weeks in advance. For the sake of brevity, I’ll just give you the gist of the letters. The first letter in May of 1987 stated, ‘The upsurge you have been calling for should occur on May 19 or 20, if not by May 21, it probably won’t occur. A short term top one day either side of the May 30 weekend is indicated.”

On August 13 1 wrote, “I show August 24th as a top with the best drop since the spring occurring until September 9th or 10th.” On October 12 I said. “If the market is still dropping going into October 20 through the 23, it should reverse here. Within one day of October 30 there should be a top and November ninth or tenth will show a reversal date.” November 19 was given as a trend change date as late as November 16 because I missed it originally. In fact, I missed many dates my first year doing this because I was not aware of all the proper cycles and how they worked. The fifth letter was written on November, 24 and is my favorite. It is here that I gave him, “Another turn will occur either side of December fifth and it probably will be a low. The market should move up until mid-month and cycles indicate selling at years end where we want to be long on December 31, 1987 for a sharp move up commencing on January 4, 1988.”

January 21 Low at 1845 + 180 Degrees is 2025

August 23 Low at 1978 + 45 Degrees is 2023

There certainly was plenty of price resistance at 2025

My final letter was written on February 17, 1988. In it I gave him an important date in 1989 as well as,” A sharp drop is indicated between March 22 and March 25.” On March second (weeks before the occurrence), I received a letter from J.B.P., an assistant, who thanked me and said he noted the dates on his calendar. I doubt that they have any idea of how accurate the timing was I had sent them. They turned out to be eleven out of eleven correct within one day of the actual turns. I could continue with examples from experiences I had this past spring with a Midwest money management firm, but I think you get the picture.

Having these dates does not assure success. One still has to be able to “pull the trigger” and then time his entry properly on the cycle date. Whatever short term signals one uses, it is here where they are most useful. For price timing on cycle dates, I like to use geometric, live and dead angles when I can find them and in that order. An example of what I call a dead angle would be from the year’s major highs or lows in price to add or subtract the degrees of the circle until a confluence occurs such as what happened on the November 16 low at 2026.67. The geometric one-half point per-day angle came in at 2025 from the August 23 low. The live angle was at 2025, being 45 degrees from the “live” position at 2070. Third in importance were the dead angles at 2025 (see box above).

In this article I have tried to show that Gann used several cyclic techniques to work up his annual forecasts. The one I am most acquainted with is the time factor. There are at least four applications of it that I use and there are probably more, the rise to be halted by the cycle date of the 26. Two applications I have discussed include the Stock Curve for occasional monthly trends, high and low indications and the cycle dates for inter-month trend changes. The latter has proven to be around 80 percent accurate and can be provided a year in advance. They are almost always the exact high or low, rarely are they the acceleration point. In the last two years there have been over 30 per-year. In my opinion, they are the crux of all trading decisions. All other indicators are secondary, including price. As I am sure the reader recognizes that there are no guarantees in the market, I would like to offer some future time factor cycle dates which should reverse the existing direction of the averages, at least for the short term. I would expect some kind of a reversal to occur either side of the weekend of January 14 through the 15.January 26, the weekend of February fourth and fifth and February 23 and 24.

My trend road map for these projected turns is provided by the Stock Curve application of the time factor. Its indications are to expect the 14th and 15th to be some type of relative low, consolidation area from whatever tops are reached in early January. It is unknown if a base will be built for a week or if prices will begin to move up immediately. In 1988, bases tended to be built whereas in 1987, the cycle turns were almost always a spike low or high on the cycle dates. If the market moves up from this projected low. I would expect the rise to be halted by the cycle date of the 26th.

The curve also indicates relative lows between February fifth through the ninth, which further supports the 26th as a possible relative top. The theoretical date for the February low is February fourth or fifth, a weekend, so I am expecting the low to occur early should the market make some sort of top on the 26th. Regardless of whether the tops, bows, or trends invert or come out as forecasted, these dates are first and foremost, reversal dates of the existing trend at the time and that is the most appropriate way to use them in trading.

  • Gann‘s Annual Forecasts – Part II By Chuck Carpino
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