[The following is a reprint of an article in The W. D. Gann Technical Review, written by Billy Jones in December 1983.]

  Monthly And Quarterly Charts And Their Usefulness

Those of our subscribers that have visited the Lambert-Gann offices have witnessed the reams upon reams of charts of both stocks and commodities. Most of us are interested in one thing or another but keeping charts was an obsession with Gann.

Ninety percent of this collection is made up of monthly, quarterly and other long-term media. Actually there were very few daily charts in comparison to the long-term records. Some of these amazing longer-term charts were started in the early 1900's when W. D. Gann's career was getting started and kept up religiously by this man until his death. In fact, several were kept up by Mr. Gann right up until two weeks before his death.

If there is a message in all this, it is the fact that monthly and quarterly charts are very important in analyzing the markets. When we look at monthly charts of any commodity or stock, we see a much clearer picture of what is going on and what has actually gone on for a longer period of time. If we care to look at a commodity or stock over a yet longer period, we, of course, go to the quarterly charts for this.

Gann states over and over again that the monthly, quarterly and, of course, weekly charts are of most importance to technical analysis.

One way to realize the benefits of longer-term charts is, after a streak of bad trading, to go to the monthly and quarterly price charts for about 10 or 20 years back. Study these in conjunction with the weekly charts, then determine both the direction of the trend and the position the market is in reference to previous tops and bottoms. When the time to go into the market is right, enter it and place stops according to previous swings, weekly or previous weeks highs or lows or other weekly or monthly chart points.

You will find, if you haven't already, that this method of analysis "according to Gann", is the only way to actually determine the position and direction of the market. Many of the markets are presently at a point that either changes in trend should materialize very soon or long-term downside support many be broken and the markets initiate another stage of a bear market. Gold and Wheat are two such commodities. The S&P is another that must find support or will break down. These are featured this month in the TR.

We will look at some of these charts on this long-term basis and will see that they are of great importance in basing predictive conclusions. Monthly and quarterly charts are quite easy to keep up once they are started and are a logical tool in combination with weekly charts. These longer-term charts are the icing on the cake.

A lot of traders get into a rut by keeping only daily records of price movements. Once they see the benefits of the weekly, monthly and quarterly chart, they become aware of their importance. In fact, many will be surprised how much it will help with decisions.

The monthly chart of JUNE IMM GOLD is the first chart shown here. You will note that I have drawn some of the more important angles as well as the simple trend lines that demand our attention. Please realize that this chart is based on an eight dollar per ounce price scale, therefore all angles mentioned in the text of the information would be multiplied by 8 to arrive at a true angle. When a 1X1 angle is mentioned it is, in reality, a 1X8 in the true sense. One of the most important angles to be watched on the JUNE GOLD chart is the 3X1 line drawn along the bottom that is initiated at the August 1976 low.

This 3X1 angle is relatively similar to the simple trend line which connects the bottoms. These lines will prove to be important support for JUNE GOLD when it drops to these levels. A 3X4 angle drawn across the tops, which usually is not of much importance, resembles a simple trend line connecting the tops. This develops into a triangle that JUNE GOLD will be forced out of within the next few months. (Our first possible turning point will be mid-January as noted in last month's letter.)

 

In 1982, the chart shows a similar breakout on the upside when Gold was placed in a situation such as the present one. The quarterly chart of JUNE IMM GOLD shows basically the same thing as the monthly except that the angles are naturally much steeper because of the time involved. (The quarterly chart uses 4 spaces on the chart per year while the monthly takes 12 spaces.)

One of the more important points on the quarterly Gold chart is the lows of the last three quarters is basically the same, showing strong support at that level. By the same token, if they are broken, the move will be quite substantial. (This, along with other notations, is labeled on the chart.)

NOTE: As this is being written, Gold has dropped within four dollars of this level of 384 basis the June contract.

 

Wheat is beginning to develop an interesting chart pattern. First a look at the monthly MAY WHEAT chart going back to 1970. You will note the 3X1 angle drawn along the monthly lows shows support for the May Wheat contract at about 330 for the month of December. This will, as in other commodities at this time, be a level that had better hold. Trading under this long-term trend line will be quite bearish for Wheat.

As I have mentioned before, we get into a rut of watching the shorter term charts that show only a couple of years of history instead of watching the longer term charts that present us with a better look at what has happened in the past and what is likely to happen in the future. If the old saying is true that "a picture is worth a thousand words", then a monthly or quarterly picture is worth a million.

Look at the monthly and quarterly charts in this issue and compare them with your daily charts of the same commodity.

A more spectacular chart of May Wheat at this time is the quarterly chart.

This chart shows that May Wheat is trading within the apex of a triangle that developed its boundaries ten years ago. Using May Wheat's last bottom which was made in late 1971 and its all time high made in early 1974, we can see that we are presently trading at the lower boundary of the apex. The angles that prove to be trend lines on this chart are 45-degree angles. (The scale of the chart is 4 cents.)

Wheat must gain support at this lower angle. Breaking below this line would prove to be quite bearish.

A Commodity that hasn't traded very long but has been a popular one since its birth (on the Futures Market) in 1982 has been the S&P Stock Index.

The S&P's began a bull move in 1982, making its first top in June-July 1983 and a second top in November of 1983. Lately the S&P's, like Gold and Wheat, began trading in somewhat of a triangle with the exception of the fact that the S&P's have broken their lower angles and trend lines and should they take out their previous swing bottom, they will be quite bearish.

I have printed the weekly June S&P because of the short span of time involved since their inception into the Futures Markets.

Note that both the 1X2 and the dashed trend line across the bottoms have been broken. The last support lift, shown on the chart as a horizontal line drawn out in time from the swing bottom at approximately 160.50, will prove to be either a trend change or a breakout to the downside. What makes this so important is the fact that several commodities are in the same place on their charts, either they find support at these junctures or they break down and head much lower.

 

The ability to be able to go back several years and study various long-term charts adds much to the analysis of the markets. A trader armed with a good selection of weekly charts to trade with and the monthly and quarterly charts to back up his decisions will be far ahead of the trader that uses only a daily or other short-term media in his decisions.