| Vol. 1, No. 2 |
January 23, 2002
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Market Vibration
Vol. 1, No. 2, of The New W. D. Gann Technical Review, dated January 23, 2002, contained an article about 'Market Vibration' that was originally written and published by Billy Jones in the The W. D. Gann Technical Review in February 1982.
The vibration description that W. D. Gann wrote about in the first half of the 20th century, as defined by Billy Jones 20 years ago, works the same way in today's markets.
It confirms that Mr. Gann was right when he wrote:
Human nature never changes. That is the reason history repeats and markets act very much the same under certain conditions year after year and in the various cycles of time.
The first chart shown here is of 1998 May Wheat, which is the same commodity and contract month that Billy used in 1982. It begins with a high on August 29th, 1997 and continues with the 36 trading day counts on October 21st, December 11th, and February 4th, 1998.
The example Billy used was trading up 36 cents every 36 days. That was an example of a market trading to a 1 X 1 angle, moving at the rate of one cent per day. This current example is trading down 18 cents every 36 trading days. That would be described by a 1 X 2 angle moving down at the rate of ½ cent per day.
One interesting reason for this current less steep line is that markets move faster at higher levels than at low levels. That is the same principle as centrifugal force. The farther an object is from the center or '0', the faster it must move to maintain balance.
In the May Wheat example used, wheat is trading at a price level of $3.40 to $4.00 per bushel. In the example used by Billy Jones, it was trading at $4.50 to $5.75 per bushel.
In addition to trading very close to the vibration price average of ½ cent per day, this market gave a swing trader a swing top within one or two days of the 36 trading day count.
Chart No. 1
The second chart is of 2001 October Lean Hogs. The contract low was made early in the life of the contract on September 20, 2000. Adding 36 trading days gives November 9th, 2000, January 3rd, 2001, and February 26th, 2001.
The Gann angle on this chart is a 1 X 2 angle up from the bottom. The scale of the chart is 10 cents per pound. Therefore the 1 X 2 angle from the bottom moves up at the rate of 5 cents per pound.
The combination of the 1 X 2 angle and the 36-day trading count as marked by the vertical dotted lines defines, within three trading days, a significant swing bottom.
The horizontal dotted lines show that the lows on these 'vibration' days are significant because they are not taken out in subsequent market action. If a trader is following a long position with a stop that respects both the angle and the swing low on those days, significant profits can accrue.
Chart No. 2
W. D. Gann writes on page 11 of How to Make Profits in Commodities:
The most money is made by swing trading, or in long pull trades, that is following a definite trend as long as that trend is up or down.
These are classic examples of one technique that allows a trader to do just what Mr. Gann was talking about in the above passage. He also wrote extensively in other parts of the book about 'swing trading', describing several trading 'campaigns' during which he had made huge profits by following the market up or down with a stop.
ACKNOWLEDGEMENT:
The charts reproduced in this article were produced by Market Analyst II software.
DISCLAIMER:
Every effort has been made to ensure that the content and conclusions presented in The New W. D. Gann Technical Review are complete and accurate.
No part of The New W. D. Gann Technical Review contains trading advice - stated or implied, nor is an invitation to trade. The directors and associates of Lambert-Gann Educators, Inc. are NOT licensed trading or investment advisors. Lambert-Gann Educators, Inc. is an organization designed to assist traders and investors to become more knowledgeable and independent.
The giving of advice is therefore contrary to the very objectives of Lambert-Gann Educators, Inc.
Traders requiring trading or investment advice should contact a licensed advisor.
Stockbrokers and futures brokers are licensed advisors.
Neither Lambert-Gann Educators, Inc., nor anyone else involved in the production of The New W. D. Gann Technical Review, will be liable for any liability, loss or damage directly or indirectly caused, or believed to be caused, by The New W. D. Gann Technical Review.
Traders, to be successful, must take full responsibility for their own actions.
With respect to trading results, past performance is not necessarily an indication of future performance.
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