Using Gannalyst and Yahoo historical data I created a couple charts of the DOW (INDU) going back to 1942. It may be interesting to go back further but Yahoo only provides data to 1928 which misses the low before the 1929 bubble. The data file I used is here for those who want do your own analysis with Gannalyst.
Using the high in 1965 to place the 1:1 Gann Angle of a Gann Fan, we can see that price stayed between the 1:1 and 1:2 angles for the most part. It is also interesting that price based at the 1:1 in 1986 before the blowoff top into October 1987. Price then returned to the 1:1 to end the “crash”. The 2:1 angle was resistance during 1994. The 4:1 angle bisected the high and low around the financial problems of Long Term Capital Management in 1998.
Using the start of the 1987 blowoff top (1982), which is considered the start of the recent long bull market, some other interesting geometries appear. The 2000-2002 bear market ended right at the 1:2 Gann Angle. This is typical of a normal market in moving twice or half of the previous move. I don’t know everything Gann figured out, but to me this is the most important concept that can be known. If you find a cycle that consistently hits halves and doubles of either price or time, then you have everything you need to make guesses about future market movements.
When I duplicate the fan off the 1982 bottom and copy it to the 2002 bottom, we see price moved up the 2:1 angle and recently bounced at the 1:1 angle. Keep in mind that the equation for a move remains constant and when you find the correct 1:1 slope you can move that slope to other highs and lows do analysis.
The chart from 1982 to the top in 2000 shows a closer view of the second Gann Fan on the previous chart. I also added a new fan from the 1987 low.
An update to this post is here.
Post Modified: October 8th, 2008 at 7:55 pm
Tags: About · Dow Jones Industrial Average · Gann Angle Fan · SlopeNo Comments
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