Sunday, October 3, 2010

Why is October 4-8th So Important?

S&P 500: Time Price Harmony
The S&P 500 has oscillated around the 1141 harmonic level since the Sept 21-24th Energy Dates. Although it appears to have broken free of this area on several occasions the market has been pulled back to this price harmonic repeatedly. During this period the bullish camp--which includes the invariably bullish financial media-- has become increasing confident while the bearish camp's conviction has waned. Why has the market vibrated aimlessly during this 2 week period? A possible explanation for this activity is that price was not balanced with time. Squaring time and price using several different approaches suggests that this tug-o-war may end this week.
  • The first part of the table below shows time cycles derived from squaring significant dates by the natural sequence of numbers. The date is established then the square of progressive numbers is added to that date. For example the date January 1 2000 is increased by the square of 2 (4) which produces the date January 5th. Then the square of 3 (9) is added producing January 10th and so on. Using significant dates such as the March 25, 2000 high and adding the square of 62 (3844) produces October 3 2010. Using the main highs and lows since 2000 and adding squares to those dates creates a cluster the week of October 3-9th
  • Squaring the prices on the dates to obtain harmonic levels to these highs and lows produces a price cluster between 1135-1143. Three of this levels are derived from perfect 360 degree harmonics ( 1080 & 1440) while one date is 60 degrees off the perfect square. 1080 (360*3) is the 3rd octave of 360 while 1440 (360*4) is the 4th octave. The S&P is hovering just above these levels.
  • Using the natural squares in a Gann Square of Nine of recent highs and lows also form clusters near the present price level. In addition to the 1138-1150 area, the important 1105-1110 area and the 1172-1177 area are clustered as well.
  • If prices break below the 1135 level, a decline to the 1107 level is likely. If support does not hold at the 1107 area, much lower prices can be expected. Conversely, if prices break to the upside, the market will attack the 1175 area quickly--likely reaching 1175 on or before October 12th.
click to enlarge
Squaring of Range
Potential pivots can also be determined using the range of market swings.
  • For example, the range of the August 9th high and July 1st low is 119.15. (1129.24-1010.90). Converting price to time from the low of July 1st projects July 1 + 119.15 = August 29. ( 2 days off the latest low pivot. Projecting the 119.15 time-price square from the August 9th high projects Aug 9 + 119.15 = October 7th.
  • Another example is if price is projected forward 180 degrees (208.90/2 = 104.45) from the high of the April 26-July 1 range of 208.90 (1219.80-1010.90) April 26 + 104.45 = August 8, 2010--one day before the August 9th high. August 8th fell on a Sunday. Projecting 180 degrees from the low date of July 1st a projection of October 13th is derived which is close to the squares of price to time shown below.

The current chart of the Cash S&P strongly suggests that the market is getting weary-- momentum is waning while the internal structure of the recent advance is deteriorating. W.D. Gann equated price and time in several ways in order to pinpoint price levels at important turning points. One method that is quite effective is the squaring of price to time in order to ascertain a potential turning point date. The table at the bottom of the chart below details the cluster of Price squares the week of October 3-8th--particularly October 4th and 5th.
  • If the April 26th high of 1219.80 is converted to time using a 10:1 scale (10 S&P points = 1 day), a 360 degree progression (1219.80/10 = 121.98) hits the August 25th low. (April 26 + 121.98 days) Progressing price another 120 degrees to 480 degrees results in October 5th being a potential turning point.
  • Progressing the August 9th high 180 degrees ( (1129.24/10)/2) equals October 4th
  • Progressing the August 27th low 135 degrees (90+45) results in October 4th being a potential turning point from recent low.
  • A very interesting harmonic occurs if the May 6th low of 1065.79 is used. Progressing the price by 510 degrees (360+150) results in October 3rd being a potential time-price harmonic. If you add 150 days to May 6th you get October 3rd as well. Price and time are exactly one octave apart. Anyone who studies musical theory can appreciate the harmonic implications of this.
  • The June 21st and July 1st pivots produce a cluster on October 10-12th. If the market was to rally to 1175 it could meet 'time resistance' at this point. The October 10-11 date is a static pivot for the stock market much like the July 16-21st time frame and the December 2-8th. Many important turns in the stock market have occurred in this time widow. (the 2002 low, the 2007 high as well as many others over the years.)

Gold has reached the anticipated 1318-1320 resistance area. Prices should encounter resistance here and turn down testing support levels below current prices.

U.S. Dollar
The US Dollar is becoming drastically oversold and there seems to be no one that has any confidence that the US$ will appreciate in value--A PERFECT ENVIRONMENT FOR A MASSIVE RALLY. Stay tuned for bullish technical developments in this market. A time price analysis will be done on the UDSX over the next few days.

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