How I Create an SPX Projection Using Moving Averages, Retracements, the Principle of Squares and Time


I heard too many times on Thursday and Friday that this was a garden variety pullback.

Only if your garden is full of man-eating Venus Fly-Traps.

I heard too many times last week that you only lose money if you sell.

No. You only make money if you sell.

There always has to be some excuse for a big move. There has to be a rational, any reason is more alleviating than none.

Friday's is no exception.

The blame for Friday's decline is being laid at the doorstep of rising interest rates.

THEY have to spin a reason…to come up with something.

The simple truth is time.

Wall Street firms and their strategist will ascribe a variety of fundamentals to a move because they have to say something.

They can't say its geo-cosmic forces.

They can't just say time was up.

The simple truth as W.D. Gann stated is that “Time Turns Trend.”

So let's take a peek at time.

Last August I speculated that a natural cycle of 360 months/30 years from the August 25th 1087 top was running and should see a high and reaction of some kind.

There was a pullback into August 21, 2017, but it was minor. However it set a major swing low.

In December I realized that a natural 365 months (365 days in a year) from August 25, 1987 is January 25, 2018.

The SPX topped on January 26.

Price is a reflection of time. When time and price frequencies are in balance or square out change takes place.

For example from the August 2017, 2417 SPX low to the January 26 high of 2872 is a range of 455 points.

455 weeks is roughly 8 years 10 months.

From March 2008 to January 2018 is 8 years 10 months.

A change in at least the short term trend was due.

At the same time, the bear market from 2007 to 2009 was 910 SPX points which is exactly 2 X 455.

Underpinning the significance of this time/price harmonic is that on the so-called Square of 9 Wheel, 455 aligns with/is opposite March 6, the low day in 2009.

Click to enlarge

So where do we go from here?

Let's take a look at how I combine the Principle of Squares which is simply a way to measure moves on a logarithmic basis as opposed to a linear, moving averages, retracements and Time to create projections, inflection points.

For  example if you take the high of 2782, the square root is 53.59.

Subtracting 2 and re-squaring gives you a 360 degree decline.

51.59 squared is 2662.

This is a full cycle down in price.

To find a 180 degree decline, you subtract 1 from the square root of the high and resquare which gives 2766.

On Friday the SPX closed at 2762, below 2766.

While this gives valuable price levels, it does not marry time and price which the physical Square of 9 Wheel does.

A 270 degree decline is 2714 which ties to a test of the 50 day moving average.

A 50% retrace of the January rally ties to 2773.

A 50% retrace of the August/January rally ties to 2645 which aligns with a full price cycle of 360 degrees down from high.

180 degrees/days from the August 21 low gives mid-February.

If we are down one of the above squares such as 360 degrees or around 2662… 180 degrees in time from the last major swing low in August, we will have a possible time/price square-out on the table.

Black Monday in 1987 occurred 7 to 8 weeks off the high in keeping with the Gann Panic Cycle.

Friday/today is just a week off the high.

The odds are this is a short over the bow, a reaction, and not a spiral like 1987.

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