Noel
Campbell 		The SPI200 has experienced a seemingly unstoppable rally over the past 5 months and public interest in the markets is once again on the rise. Where might the market pull up for a top? This is a question to which many would like an answer. This week I want to step you through a relevant price forecast on the SPI200 to show how to go about putting together a price call. Always bear in mind when forecasting, that the only certainty is that the market is always right. You must trade the market, not the forecast. If the two become one, then you have potential gold.

W.D Gann and David Bowden have both proven the uncanny ability to forecast price levels for future tops and bottoms in the markets. There is a multitude of ways at arriving at forecasts in price and therein lies the challenge to successfully construct a forecast using Gann’s techniques. One key word that I learned by studying the lessons of David Bowden is ‘harmony’. When you take several of the methods available to derive a price pressure point in the market and find a region in price where a number of pressure points ‘cluster’ you have the type of harmony David describes.

In Chart 1, I have applied a Ranges Resistance Card to the two of the most recent major ranges on the SPI200. The first covers the range from the September 2001 low, 2882 to the top in March 2002, 3500. We find that the 50% level for this range calculates out to be 3191. The second range covered is the 3500 top down to the March 2003 low, 2679 (in green). This resistance card reveals 3192 to be a 62.5% retracement and clusters neatly with the 50% from the first resistance card.

Chart 1

click chart for more detail

We can add to the mix the fact that the market has an old top on 23 August 2002, 3200. This old top clearly shows this region of price to be a proven resistance level. The final point to contribute comes from a Lows Resistance Card, using percentages of the all-time low for the SPI, 458. Using the Lows Resistance card we find that 700% of 458 calculates out to be 3206. You would be able to find more pressure points than I have highlighted here, but I will stop here for now. Across the four points we have pressure points of 3191, 3192, 3200 and 3206. The average of the four is 3197. The band of prices to watch would be from 3190 to around 3210 for strong resistance according to these calculations.

Recently the market has proven that those who focus on trading with the trend rather than searching for changes in the trend, more often than not, make the most money. That being said, there is no doubt about how much money David made by trading the changes in trend by getting set early in a run and also knowing where to take a profit. In this combination of numbers I saw a good opportunity to share some insights with you. Always remember, trade the market and not the forecast!

Successful trading to all…

Noel Campbell