(the last day) the option was selling below $1.08
and it looked as though his prediction would not be fulfilled. Mr Gann
said, ‘If it does not touch $1.20 by the close of the market it will
prove that there is something wrong with my whole method of
calculation. I do not care what the price is now, it must go there’. It
is common history that September wheat surprised the whole
country by selling at $1.20 and no higher in the very last hour of the
trading, closing at that figure” (Ticker interview).
1) Gann identified the start of the uptrend in the September 1909
wheat futures contract as a price of 94 cents on January 26 1909.
2) Gann identified the predominant astrological influences driving
this uptrend.
3) Gann identified the long-term rate of vibration of this uptrend,
which was 0.1053 cents per day (or 1 cent per 9.5 days).
4) Gann forecast that the predominant astrological influences driving
this uptrend would remain in force until at least the end of this
futures contract (i.e. until at least September 30 1909).
5) Gann forecast that at the end of the futures contract the price
would be $1.20. This was based on the starting point of the
uptrend (point 1 above), the long-term rate of vibration (point 3
above) and the contract’s expiry date of September 30 1909.
6) In monitoring his forecast, Gann observed that since the
beginning of the uptrend on January 26 1909 short-term
astrological influences had temporarily driven prices above and
below the long-term trend or rate of vibration. Gann also
observed that between July 21 and August 26 1909 stronger
short-term negative (or malefic) astrological influences had
driven prices down well below the long-term rate of vibration.
Moreover Gann observed that commencing August 26 1909 (i.e.
the low point of 96¾ cents) these strongly negative short-term
influences started to expire and he forecast that they would fully
expire over the next month, when prices would revert to their
earlier long-term rate of vibration.
Importantly, Gann received corroboration of the low point in
August from the fact that a price of 96¾ cents on August 26 1909
equates to a rate of vibration of 0.0132 cents per day (based on
the starting point of 94 cents on January 26 1909). This rate of
vibration is one eighth of the long-term rate of vibration of 0.1053
cents per day. Another perspective is that on August 26 1909 the
long-term rate of vibration of this wheat futures contract had
halved three times. Thus from August 26 1909 Gann forecast and
observed the simultaneous expiration of the short-term negative
astrological influences and the doubling three times of the rate of
vibration, as the long-term rate of vibration was regained on
September 30 1909.
2) United States Steel Stock Price (please see chart).
“He (i.e Mr Gann) came to me when United States Steel was selling
around 50 and said, ‘This Steel will run up to 58 but it will not sell at
59. From there it should break 16¾ points’. We sold it short around
58 3/8 with a stop at 59. The highest it went was 58¾. From there it
declined to 41¼; -17½ points” (Ticker article).
1) Gann identified the start of the uptrend in U.S. Steel as a price of
21 7/8 cents on October 23 1907.
2) Gann identified the predominant astrological influences driving
this uptrend.
3) Gann identified the long-term rate of vibration of this uptrend,
which was 0.0950 cents per day (or 1 cent per 10.5 days).
4) Gann forecast that the predominant astrological influences driving
this uptrend would remain in force until October 1909 and hence
in November 1908 he was only forecasting a short-term
correction. More specifically, Gann made his forecast “When
United States Steel was selling around 50", which was in early
November 1908. Gann then forecast that due to short-term
negative astrological influences a correction would start on
November 14 1908 (i.e. within two weeks).
5) Based on the starting point of the uptrend (point 1 above) and the
long-term rate of vibration (point 3 above) and the starting date
of the correction (point 4 above), Gann was able to forecast that
“Steel will run up to 58 but it will not sell at 59”. In fact the price
of U.S. Steel peaked at 58¾ on November 14 1908.
6) Gann then forecast that the short-term negative astrological
influences that he had identified would remain in force until
February 23 1909.
7) Gann then had to forecast what the rate of vibration would fall to
on February 23 1909 (i.e which Gann angle would provide support
before the long-term uptrend was resumed). Importantly, in
making this forecast Gann sub-divided the rate of vibration. More
specifically, and as the price chart of U.S. Steel shows, Gann
forecast that the price of U.S. Steel would fall to the bottom of its
current vibratory band and then finally fall three quarters of the
band below. Thus Gann firstly forecast that the short-term
correction would last until February 23 1909 and secondly that
the rate of vibration of U.S. Steel would fall on that day from its
long-term rate of 0.0950 cents per day to (1/1.5) X (1.25/2) X
0.0950 = 0.0396 cents per day. This is in fact exactly what
happened. More specifically, on February 23 1909 U.S. Steel made
a low price of 41¼ cents (which based on the starting point of 21
7/8 cents on October 23 1907 equates to a rate of vibration of
0.0396 cents per day). From that point the long-term uptrend of
U.S. Steel was resumed.
An important point from this example is that Gann did not merely
use his so-called Gann angles as a crude measure of the rate of
vibration of stocks and commodities. More specifically, he did not use
them simply to measure the doubling and halving of the rate of
vibration. Rather, he also discovered and employed sub-shells within
a principal energy level. This is analogous to modern quantum
theory. Therefore we have discovered another important principle of
Gann’s Law Of Vibration; namely the rate of vibration of stocks and
commodities, as measured by so-called Gann angles, conforms to a
series of principal energy levels and sub-shells. As we have seen, an
important implication (and practical application) of this is that rates
of vibration, as measured by these principal energy levels and subshells,
constitute support and resistance levels. This therefore
clarifies the statement made by Gann: “By knowing the exact
vibration of each individual stock I am able to determine at what
point each will receive support and at what point the greatest
resistance is to be met” (Ticker interview).
Moreover, this principle in turn sheds light upon a somewhat obscure
concept that Gann briefly introduced in both his stock market course
and his commodities’ course, namely the concept of lost motion:
“As there is lost motion in every kind of machinery, so there is
lost motion in the stock market due to momentum, which drives
a stock slightly above or below a resistance level. The average
lost motion is 1 7/8 points.
When a stock is very active and advances or declines fast on
heavy volume, it will often go from 1 to 1 7/8 points above a
halfway point or other strong resistance level and not go 3
points. The same rule applies on a decline. It will often pass an
important resistance point by 1 7/8 points but not go 3 full
points beyond it. That is why I advise using a stop-loss order 3
points above a top or 3 points below a bottom” (W. D. Gann
Stock Market Course, chapter 10).
In summary therefore, from examining examples of the practical
application of Gann’s Law Of Vibration, we have identified three
further principles of the Law Of Vibration:
13) The rate of vibration of stocks and commodities conforms
to a series of principal energy levels and sub-shells. More
specifically, the principal energy levels equate to a doubling
and halving of the rate of vibration and the sub-shells equate
to a fourfold division of a principal energy level.
14) These principal energy levels and sub-shells constitute
important support and resistance points.
15) When a stock or commodity is very active, momentum will
often drive the price very slightly above or below the precise
support or resistance point, which is determined by the rate
of vibration (in conjunction with astrological influences).
GANN’S ANNUAL FORECASTS
As the above examples from the Ticker interview show, around 1909
Gann was employing his Law Of Vibration to precisely forecast stock
and commodity prices up to several months forward. However,
starting around 1915 Gann produced and sold annual forecasts of
the stock and commodity markets. Although Gann produced these
annual forecasts up to his death in 1955, relatively few survive.
Nevertheless, from the surviving annual forecasts, it appears that
Gann produced them in exactly the same way as he had produced his
earlier shorter-term forecasts; namely based on the Law Of
Vibration.
One particularly accurate annual forecast was Gann’s 1929 stock
market forecast (which Gann reproduced in the appendix of his book
“Wall Street Stock Selector” that he wrote in 1930). In summary,
Gann’s 1929 annual stock market forecast was completed and
distributed on November 23 1928 and included the following
elements:
1) A narrative which stated “General Outlook For 1929. This year
occurs in a cycle that shows the ending of the bull market and the
beginning of a prolonged bear campaign…. The fact that it has run
longer and prices have advanced to such abnormal heights means
that when the decline sets in it must be in proportion to the
advance. The year 1929 will witness some sharp, severe panicky
declines in many high-priced stocks”.
2) A projected graph or chart of the Dow Jones Industrial Average
which forecast this index would peak on August 7 1929 and then
start a major downtrend for the rest of the year.
3) A projected graph or chart of the Dow Jones Railroad Average
which forecast this index would peak on August 8 or 9 1929 and
then start a major downtrend for the rest of the year.
Although it should be noted that the Dow Jones Industrial Average
and the Dow Jones Railroad Average both peaked on September 3
1929 (rather than in early August), overall Gann’s annual stock
market forecast for 1929 was highly accurate.
Moreover, from a careful examination of Gann’s 1929 stock market
forecast it is possible to discern further principles of the Law Of
Vibration. These principles are as follows.
16) Although the Law Of Vibration comprises a number of
elements, the time factor is the most important. More
specifically, throughout his career Gann used the term “time
factor” as a substitute or synonym for astrological influences.
Therefore astrological influences are the most important
element in the Law Of Vibration.
“The time given for tops and bottoms is the most important
factor for you to know and watch. It makes no difference about
the price a stock is selling at. So long as you know when it will
reach low or high levels you can buy or sell and make money….
Remember you must buy and sell at the right time regardless of
prices. No matter how high stocks are, if they are going higher,
you should buy. It makes no difference how low they are; if the
trend is down and they are going lower, you must sell short and
go with the trend” (1929 Annual Stock Market Forecast).
17) In applying the Law Of Vibration to the stock market, it is
important not only to assess the astrological influences (i.e.
external vibrations) but also the internal vibrations of a
stock. For example, assume that during a general stock
market uptrend there is a short-term correction (due to
negative astrological influences) and most stocks fall in price.
If during that period of time a particular stock merely moves
sideways, rather than falls, it indicates that the internal
vibrations of that stock are especially strong and therefore it
will subsequently perform strongly when the overall uptrend
(i.e. positive astrological influence) is resumed.
“The Dow Jones 30 Industrial stocks are representative of the
active industrials and most of them will follow the Industrial
Curve (i.e. Gann’s forecast) very closely. But some of the
individual stocks that are in strong or weak position will vary
from this Curve and make tops and bottoms at different times.
These special stocks and their position will be covered in the
supplements each month” (1929 Annual Stock Market Forecast).
18) Stocks and commodities typically do not switch from an
uptrend to a downtrend until their rate of vibration has
slowed down. This reduction in the rate of vibration can of
course be observed as prices move sideways (or down) over
time to lower (and slower) Gann angles.
“The ones (i.e. the stocks) that make top in the early part of the
year and fail to reach higher levels in July or August will be the
ones to lead the decline, because they will have had longer time
for distribution. Guard against selling short the late movers until
they have had time to complete distribution” (1929 Annual Stock
Market Forecast).
It is important to note that although for many years Gann produced
and sold annual forecasts of the stock and commodity markets he did
not intend his subscribers to rely on these alone. Indeed, Gann
recognised the importance of his subsequent monitoring of these
markets and his regular updates. Consequently Gann issued
supplements, or updates, three times each week by means of his
“Supply And Demand Letter”, which he described as follows:
“People often write for my opinion on Baldwin, U.S. Steel,
General Asphalt or some special stock. I judge the stock by the
position of time and volume as it is today. If in a few days I see a
large amount of volume, up or down, I change my position, so it
is not always what I think of a stock today, but what I am going
to think of it later that counts. That is why I issue a tri-weekly
letter because the market changes and I can advise my
subscribers to change their position and protect themselves
against losses. If the market never reversed its trend, there
would be no need of a tri-weekly letter” (“Wall Street Stock
Selector”, 1930, appendix).
Thus, in the practical application of the Law Of Vibration the time
factor, or astrological influences, are the most important element.
Consequently, in preparing his annual forecasts, Gann was required
to assess numerous astrological influences over the subsequent
year. Assessing months in advance how strong astrological
influences (both positive and negative) will be and how long they
will remain in force is a complex task and prone to error on occasion.
Therefore Gann found it necessary to issue regular letters to his
subscribers in order to clarify and correct his annual forecasts when
necessary, as well as to identify particular stocks and commodities
that were especially strong or weak. Therefore, at a fundamental
level, Gann was constantly forecasting and monitoring external
vibrations (in the form of astrological influences) and internal
vibrations (in the form of assessing the particular strength or
weakness of individual stocks and commodities).
CONCLUSION
This paper has identified, or rediscovered, many of the elements of
Gann’s Law Of Vibration. However, the most important and most
difficult element is to identify and assess the past, present and
future astrological influences on a stock or commodity.
Consequently over the next year, as we approach the centenary on
August 8 2008 of Gann’s discovery of the Law Of Vibration, this
should be the principal focus of Gann researchers world wide.
Indeed, correctly identifying the true principles of astrology and the
precise astrological influences impacting a particular financial
market should perhaps be the focus of technical analysts in general
who truly wish to extend the frontiers of technical analysis in the
early twenty-first century.
Finally, the centenary of Gann’s discovery of the Law Of Vibration,
August 8 2008, is also the start of the next Olympic Games, which
will take place in Beijing, China. However, the ancient Greeks not
only provided the world with the Olympic Games but also an early
example of financial forecasting through correctly assessing
astrological influences. More specifically, the Greek philosopher and
mathematician Thales of Miletus (who lived from 625 to 547 B.C)
provides this example:
“There is an anecdote of Thales the Milesian and his financial
device, which involves a principle of universal application, but is
attributed to him on account of his reputation for wisdom. He
was reproached for his poverty, which was supposed to show
that philosophy was of no use. According to the story, he knew
by his skill in the stars while it was yet winter that there would
be a great harvest of olives in the coming year. So, having a little
money, he gave deposits for the use of all the olive presses in
Chios and Miletus, which he hired at a low price because no one
bid against him. When the harvest time came, and many wanted
them all at once and of a sudden, he let them out at any rate
which he pleased, and made a quantity of money. Thus he
showed the world that philosophers can easily be rich if they
like” (Aristotle’s “Politics”, book one, chapter eleven).
It therefore appears that the investment paradigm and methodology
that Gann discovered approximately 100 years ago had in fact
already been discovered and was in use some 2,500 years earlier.
Biographical note:
James Smithson (smithsonjames@hotmail.com) is an investor,
trader and student of Gann based in London, England.
