|
Will the market hit a top today? If you had asked the question regarding the SPI200 each day over the last week or so the answer would have been yes. But only for a day. I wonder how many of you have thrown the rules out the window, let emotions take over, and been caught shorting this market. The temptation is strong. I admit I was guilty on one occasion of stretching the rules and having a go. When you put a forecast out a year in advance and it looks like it’s coming in on the money, who wouldn’t be tempted?
Late last year I postulated in these pages that we would see a top in the Australian market in late September 2007 and a reading of around 6550 for the futures contract. It’s now a matter of history. On 25 September 2007, for the first time on record, the SPI200 futures contract traded at 6550. That’s all well and good. However for the second time in my forecasting career the market has failed to stop on the forecasted price.
The futures call demonstrates the power of Gann’s Time and Price analysis techniques and the validity of natural symmetry and repetition of the past. Forecasting the top or bottom of a market a year in advance is no mean feat. Well done David Bowden and W.D. Gann! As for the question of price … Noel, you have only failed if you give up!
In Chart 1 below there’s a small circle in the top right corner – that’s when I first made the call. Chart 2 shows the current market action
Chart 1 – SPI200 Daily Bar Chart in September 2006
click chart for more detail
Chart 2 – SPI Daily Bar Chart in October 2007
click chart for more detail
The market did not look likely to agree with my call back in late July and early August. But it pulled off a Rocky Balboa recovery in the final round and headed back up. Didn’t Rocky hear the bell at the end of September? Obviously not.
Chart 3 is a close-up of the current action on the bar chart with a ‘Swing Overlay’ that uses Gann’s trend-line indicator rules. As you can see there has been no indication from the swing chart to go short. The only signal was to stay long.
Chart 3 – SPI200 Daily Bar Chart Current Market
click chart for more detail
You will need to study the bar chart action in Chart 3 closely. At no time has a strong signal been given for a top. Can you see an occasion in the past seven days where the market closed lower than it opened on the same day and below the close of the previous day? The answer is no. This is called ‘reading the temperature’ of the bar chart.
Opinions on the market are a dime a dozen and each day they are offered from a wide variety of sources. So here’s mine. Looking at the chart of the Dow and bearing in mind how strong my time frames were for late September I’m keeping the door open for a top any time soon. I take this view with the understanding, of course, that I could be wrong. On the other hand we must have an opinion on the market – ideally a well-informed one – or we have nothing. Nevertheless, our opinions are secondary to good trading rules, some of the most important of which are good entry rules. We should only enter the market on a genuine signal that our opinion bears a close relationship to the facts and figures.
Until next time…
Noel Campbell
|