“See the sky about to rain, broken clouds and rain
Locomotive, pull the train, whistle blowing through my brain
Signals curling on an open plain, rolling down the track again” – Neil Young, See the Sky About To Rain
“TIME is the most important factor in determining market movements and by studying the past records of the averages or individual stocks you will be able to prove for yourself that history does repeat and that by know the past you can tell the future.” – W.D. Gann
In December 1928, the legendary market seer W.D. Gann released his forecast for 1929, where he warned of panicky selling in the fall.
One of the factors that led him to make this prediction was that 60 years earlier in September 1869, there was a panic.
Gann called the 60 year cycle the Great Cycle, the Master Time Period.
It is interesting that the panic was caused by an attempt to corner the gold market and cause a short squeeze.
This year, short squeezes have roiled Wall Street.
One of the factors leading me to predict a bottom in March 2009 was that it was 60 years from the start of a secular bull market in June 1949.
December 7, 1941, Pearl Harbor was attacked.
60 years later was the 9/11 attack in New York.
These are the only two times the U.S. mainland has been attacked.
There was a 90 degrees angle of offset in the 60 years between December 7, 1941 and September 11, 2001.
Likewise, there was a 90 degree offset between the start of the great bull market in June 1949 and March 2009.
60 months is a fractal of the 60 Year Cycle and often an important turning point.
For example, from the major low in 1932 the market ran up 5 years to 1937 when another crash occurred.
It was 5 years from the major low in 1982 to the high in 1987 prior to a crash.
It was 5 years from early 1995 to the early 2000 Tech Top, which was followed by a huge two year crash in the NAZ.
This February is 60 months from the major low in February 2016.
Taken alone this would be enough to warrant caution, but the market is rife with froth and late stage behavior with SPAC’s, IPO’s and message board frenzy sending stocks up 50% and 100% in a session.
But, when there are a cluster of cycles gathering in unison, there is a strong likelihood of a change in trend.
Allow me to explain.
The Fibonacci Sequence is a number series:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
Following the 1929 debacle, the market bottomed in 1932. This was the start of a long cycle of debt build up.
If you take 2021 and subtract 89, you get 1932.
2021-55 = 1966. A secular bull market top.
2021-34 = 1987. The greatest crash since 1929.
2021-21 = 2000. The Tech Bubble Top.
2021-13 = 2008. The Great Financial Crisis.
2021-8 = 2013. This is the year that finally saw the SPX break above its double tops from the years 2000 and 2007.
2021-5 = 2016. This was the major low which launched the advance that is ongoing.
2021-3 = 2018. A major top in late January and a 4th quarter crash.
2021-2 = 2019. The start of a virtually uninterrupted 13 month advance.
2021-1 = 2020. 2020 was a year of extremes that saw a crash down and a crash up, a year where the economy and the market decoupled.
Sentiment is whistling like a locomotive hurtling down the tape.
The chart below shows the degree of call buying by small traders.
Notice the market peaks of 2000, 2007 and 2018.
Currently this measure of sentiment is literally off the charts, like a lightning bolt that strikes before a storm
Sentiment can get overbought and stay that way for some time.
As W.D. Gann wrote, “when time is up, trend turns.”
The aforesaid 5 year time factor coupled with the Fibonacci Sequence are signals that it’s about to rain.
Strategy. Yesterday the market gapped up and plunged, only to rebound and close in the green.
That may be a signal that the SPY has a date with destiny to 395 as 395 is 360 degrees or one full square up from the September 24 low.
The idealized time frame for this to occur would be late February/early March, which is 180 days/degrees straight across and opposite the September 2 high.
As it happens, this time frame is 144 Fibonacci months from the start of this bull market on March 6, 2009.
Cycles suggest the high for the year is near.