What Gann's Square-of-9 means for the Nasdaq 100

Does this portend a change of direction for the Nasdaq?

Gann often reiterated the importance of correct starting points. On pages 77-78 of The Tunnel Thru the Air he wrote: “It is just as easy to figure 100 or 1000 years in the future as one or two years ahead, if you have the correct starting point and know the cycle which is going to be repeated…In order to forecast future cycles, the most important thing is to begin right, for if we have the right beginning, we will get the right ending.”    

Correctly detected peaks and troughs map onto the Gann Square like the pieces of a puzzle. It takes little effort to identify the NASDAQ’s Oct.09, 1985 trough, which, as Figure 5 shows, coincided with the lowest price the Index had reached. However, the respective Sept. 1, 2000 peak and April 11, 2003 trough are less visible on charts. Neither one coincided with the extremities of price (Figure 8).


Figure 8 –The NASDAQ’s 2000 peak and 2003 trough (weekly chart)

Absolute peaks and troughs are determined by lesser-degree wavelets that form the final stages of impulse swings. Even though pricewise the Nasdaq peaked on March 27, 2000, timewise, it was a false top given the 57cd decline and 71cd advance that followed. The longer swing, irrespective of price, determines the trend (Figure 9).


Figure 9

Similarly, between Oct. 10, 2002 and April 11, 2003, the Index’s decline was longer in comparison to the upswing. Though, pricewise, the April 2003 low was considerably higher than the October 2002 bottom, the 53cd up and 161cd down intervals dictated that Sept. 1, 2000 was the true peak (Figure 10).



Figure 10

 Stephen Hawking and Leonard Mlodinov’s forecasting model “is good if it is elegant, contains few arbitrary or adjustable elements, agrees with or explains existing observations and makes detailed predictions about the future which can disprove or falsify it if they are not borne out.".

If there is one weakness to the Gann Square, it is the unknown number of 3600 rotations a market undergoes over the life of an eight-wave cycle. The S&P500 Index, for example, completed nine 3600 rotations over 1621cd (March 09, 2009 ─ Aug. 16, 2013) from the time Wave A ended on day 496cd of the run (Figure 11). How can we know that this 9th rotation was its last?


Figure 11- S&P 500’s 9 3600 rotations upon the eastern cardinal

  The Nasdaq 100 Index, on the other hand, completed only 5.75 rotations from the day Wave A’s 902cd run culminated on April, 11, 2003 (Figures 6 & 7). The bell, indeed, rings when the Square isolates an individual span and maps it onto its geometrical divisions, yet remains silent when a five-wave pattern terminates.


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About the Author

Pauline Novak-Reich is the former manager research-foreign exchange at the ANZ’s (Australian & New Zealand Banking Corp.) dealing room from 1980 -1993. Her duties involved analysis and forecast of currencies, interest rates, equities and commodity markets trends, as well as overseeing dealers’ intraday trading. In 2005 she authored The Bell Does Ring (John Wiley, Australia). This article is an except from her upcoming book, Mystifying Square, Divine Proportions -- Nature’s Black Box. You can reach her at https://www.facebook.com/pages/Demystifying-Ganns-Square-of-9/661551103858428

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