By: Jeff Cooper

Hit and Run Trading Morning Report - January 16, 2024

Editor's Note: Today there are two reports. Scroll down to read the bonus report.

How Did Gann Forecast the Market And What It Means For Next Decade

“The time factor and time periods are most important in determining a change in trend because time can over balance price, and when the time is up the volume of sales will increase and force prices higher or lower.”
-W.D. Gann

Gann was unwilling to reveal his time factor in his books, but he did leave strong clues, particularly in his novel, “The Tunnel Thru The Air”, written in 1927.

In the forward to the book, Gann wrote, “The Tunnel Thru The Air is mysterious and contains a valuable secret, clothed in veiled language…When you read it the third time a new light will dawn. You will be able to find the hidden secret…the future will become an open book.”

On page 69 of “Tunnel” Gann writes:

“I have read the Book of Jonah thru very carefully, and I believe that I understand what the Saviour meant when he said:

‘No sign shall be given, but the sign of the prophet Jonas.’

Gann continues:

“I believe there was a secret meaning in what he said; that the Son of man be three days and three nights in the heart of the earth. I believe that a man who understands the meaning of that has all the power under heaven and earth, as the Bible says he shall have. I BELIEVE THAT THAT IS THE KEY TO THE INTERPRETATION OF THE FUTURE. I am sure I have found it and know how to apply it.”

There are many ways in which Gann points to page 69 as is typical of his pattern of leaving clues.

The birthday of Robert Gordon, the protagonist in ‘Tunnel’ is June 9th…6/9.

On the Square of 9 Wheel the number 69 “points to” March 21st, Gann’s Zero Point, the Spring Equinox and the natural beginning of the year.

This is when the Sun is at Zero degrees Aries every year…the first sign of the Zodiac.

You have to understand that Gann was very religious and believed that the Bible was a book of cycles.

“And there will be signs in sun and moon and stars.”

Gann weighed and analyzed various cycles and time factors and their past, present and FUTURE impact on prices

“Every stock makes tops or bottoms on some exact mathematical point in proportion to some previous move”
-W.D. Gann

In order to find these tops or bottoms one needs to integrate Time with Price.

This is what Gann’s Square of 9 Wheel did.

Gann never had a physical Square of 9 per se, but after he passed away it was seen that many of his charts had pin holes where he was obviously overlaying templates to accomplish these square-outs where Time and Price converged.

I have produced a Square of 9 Wheel.

The illustration on the back cover of The Tunnel Thru The Air shows two sets of interlocking squares stretching to the horizon.

One set of squares is in the sky and one is on the earth.

The squares in the sky represent the vibrations from 90 degree aspects between planets.

The squares on earth symbolize the unfolding price action of time and price action in the financial markets.

Between the two sets is a pyramid.

My square of 9 Wheel is essentially a birds eye two dimensional view of the Great Pyramid.

It contains a spiral number grid with the days of the year circumscribing the pyramid.

Gann wrote that “We use the square of odd and even numbers to get not only proof of market movements, but the CAUSE.”

Gann is making a point that it is the synergy between the astrological squares in the heavens of 90 degree aspects between planets, the ‘natural’ squares, and the price squares in stocks and commodities that drive markets: Gann’s Law Of Vibration.

In the picture, Gann’s name is carved in the pyramid located between heaven and earth reflecting Gann’s view that he was a seer destined to forecast.

In his book 45 Years In Wall Street, Gann wrote, “My object is to give you some new and valuable rules on time periods which will help to guide you in determining high and low prices in the future.”

He went on to say that anniversary dates of extreme highs and lows should be watched each year for important changes in trend.

The first important time period to watch from an anniversary date is the third or fourth month (90 degrees and 120 degrees), then around the sixth or seventh month (180 degrees), where many important tops and bottoms are reached.

This is due to the solar return: the sun is unique amongst the planets in that it completes one revolution of the zodiac every year.

On any given day of the year, the sun is in exactly the same position (in the zodiac) as it was on that day one year earlier, ten years earlier or a century earlier.

Hence, the sun will aspect a particular point on the zodiac on the same day every year.

This is the cause of seasonal tendencies in markets.

Let’s take a look at a few examples.

GLD struck a major high in August 2011.

NINE years later it struck a major high in August 2020.

It has been carving out a high level consolidation for FOURTY months.

When it “comes out” it will be something to behold.

GLD exploded from a low made in AUGUST 2018.

The SPX struck a high in March 2000 at 1552 that would essentially last THIRTEEN years, until March 2013.

Yes there was a nominal new high in October 2007 when the SPX reached 1576.

But look what that false new high produced…a crash into MARCH 2009.

The market has reacted to this March anniversary many times this century---March 2023 being a stark example.

Look at October’s this century:

October 2007 peak

October 2011 low prior to 6 year advance

October 2022

October 2023

Let’s take a look at the natural, geometric 90 degree divisions of time from the important MARCH 2023 low.

From the March 13,2023 low ran up 90 days/degrees to June 15th.

An important high occurred on July 27th which is 90 days/degrees from the April 26 low.

90 days/degrees from the July 27th high was the October 27, 2023 low.

180 degrees from the July 27 high will be late January 2024.

It must be said that the SPX started down in 2024 on the anniversary of the 2022 peak.

While the SPX struck a nominal new high on Thursday and Friday above the December 28, 2023 high,

It has still not eclipsed the 4818 January 4, 2022 all-time high.

Following the October 2023 low we flagged the 4497 level as key.

This is because 4497 is 540 degree up from the October 13th 2023 low.

Regular readers are familiar with the fact that 540 degrees is important as it is a true square, a cube.

This is because a 3 dimensional square has 6 sides of 90 degree angles (90 X 6 = 540).

The SPX blew through 4497 on a gap on November 14th opening the door for a test of all time highs.

We’re there. The question is whether we get a further leg up.

In early December I suggested we get a basing period from December 20/21 into late January.

If upside momentum shows up from that point with the SPX sustaining breakage over 4818, it opens the door to 4920 to 5140.

This is because 349 (3490) the October 2022 low squares 492 and 514.

Be that as it may, notice how 349 vibrates off January 11th.

The SPX was rejected from the test of all-time highs on January 11th/12th.

Downside follow thru suggest we could correct into late January.

Importantly, 349 squares October 13 for a perfected Time/Price square-out at the October 13, 2022 Low.

Notice that January 11 aligns with 349.

This is in addition to being two cycles of 360 degrees from the early Jan 2022 all-time high.

A daily SPX shows micro support at 4680-90.

This ties to a test of the January 5th low.

From Friday’s 4802 high, a 90 degree pullback equates to 4733.

Thursday’s low was 4740.

Assuming last week’s high is pivotal, a 180 degree pullback targets 4664,

Theoretically that could carve out an A B C bullish correction.

A 270 degree decline from last weeks high is 4597 which ties to the rising 50 day line.

There’s some good symmetry there underpinning the idea of a drop to the 50 dma.

As well 465 (4650) aligns with February 13th which is 90 degrees from the mid-November impulse higher.

I have a major turning point in early April which may be a Panic Cycle.
If the market rallies sharply into mid-February and stalls out and rolls over. Caution is warranted.
This is because 55 days prior to a Panic Cycle often marks a high prior to a waterfall.

This was the pattern in both 1929 and 1987.

In sum, major cycles are set to exert their downside influence before the end of 2024.

(There is an outside shot of them running into 2025).

Whatever high is made in this window should last for a decade.

Pricewise, if we get an extension in time, as offered above, we could get to 5200 with an outside shot to 5500 SPX.

It shapes up like 500 points or so to the upside IF the market gets lucky versus 2000 points plus on the next big down leg.

Bonus Report: Gold Update

GDX, the index with the major miners, undercut a Bottoms Line from the important October low on Thursday; however, Friday it gapped up.

The surge faltered as GDX tested the a Bowtie of its 20/50 day moving averages.

As well it succumbed to a test of the prior Friday’s reversal.

Someone doesn’t want to see miners close strongly on the weekly basis?

That said, if GDX is able to convert this morning’s weakness and reclaim Friday’s high, it opens the door to a test of the 20/50 ma Bowtie at 30.50.

Breakage above 30.50 opens the door to new swing highs above 32.

Momentum above 32 opens the door to a run to the top rail of the trend channel in the 40 region.

Turning to GLD we see a breakout over a short term Tops Line, albeit GLD tailed off.

Friday’s breakout is in the context of a 3rd higher low.

Sharp, fast rallies often follow 3rd higher lows.

Short-term cycles indicate a low for early January as it is 90 days/degrees from the important early October low.

Failure to gain traction suggests it has more work to do.

That said, any weakness is an opportunity as the next impulse will see gold/GLD explode.

Few will want to chase.

This is the psychological handiwork that Mr. Gold has wrought.