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Too many traders begin their analysis without an informed view of where the markets are likely to go. If such traders took the time to look at some of the historical data available to them, they would be amazed at how useful (and profitable) the information can be. Gann placed great emphasis on the cyclical movement of markets. And it’s no accident that David Bowden’s forecasts were based on the premise that history repeats.
In order to predict the future direction of prices in a given market, Safety in the Market traders look for a pattern in that market’s price history. The pattern becomes a “roadmap” that points to the likely future direction of prices.
It’s not a difficult concept – and it’s not that difficult to practically apply if you’re ready to do some homework.
Experience has shown that cyclical patterns can be more easily identified in the commodities market. Why? Because of its inherently cyclical nature. Price movement in commodities is largely controlled by the economics of supply and demand and the seasons of the year. There are no earnings announcements, no dividend payments, no takeovers or mergers, no news of a CEO stepping down – all of which affect the price movement of stocks.
The split screen (chart 1) of the Sugar futures market below (ProfitSource symbol SB-SpotV) illustrates my point. The top screen is the recent run for Sugar, going back to the price top in February 2006. The bottom screen shows the price movement between the years 1990 and 1993. Can you see a similarity in the price movement? This is not to say that Sugar’s future movements will be an identical replication of the 1990-1993 move. However, it does present us with a “Roadmap” of where Sugar is likely to go. The roadmap tells us that Sugar will likely move higher in the next few months.
Chart 1 – Sugar weekly bar chart
click chart to enlarge
click chart to enlarge
Safety in the Market’s Platinum Traders may have read my article on Sugar in the Platinum monthly newsletter published earlier this year. It provided a more detailed analysis of where I see the market potentially going. Whilst the content of that article is reserved for Platinum Traders, I am happy to share some of the general analysis with you.
Chart 2 shows a bigger picture perspective on Sugar. I have used the Rectangle drawing tool in ProfitSource to measure the time frames between each of the cycles in different time periods going back as far as 1983. If you were to measure the width of each of the rectangles you would find a striking similarity in the time measurements. I have just put forward my Roadmap for Sugar! I am using the previous cycles to project the possible move from the February 2006 top.
I have also used the Triangle drawing tool in ProfitSource to give me another Roadmap based on a previous run up. The focus here is the width of both the rectangle and triangle. It is a cluster in time. My Roadmap suggests we could see a potential turning point around January 2009. The height of the triangle may also give you an indication of a potential price at which the turn may occur.
Chart 2
click chart to enlarge
The above analysis is primarily time-based. Time was Gann’s and David Bowden’s most profitable tool. It’s a critical skill in coming to terms with today’s many profit opportunities in the commodities market.
Because these markets are so active at the moment – and seem certain to remain so indefinitely – Safety in the Market has designed a special 2-day session, the 30-31 August Hot Commodities Summit in Sydney. The objective is to quickly get Safety in the Market traders up to speed with the opportunities at hand. You may be aware of this one-off event and have already registered. If not, I recommend that you do so as soon as possible. Among many other additions to your trading skills and knowledge, the Hot Commodities Summit will allow the presenters (yours truly included) to fully explain how they use time analysis to trade the commodities markets.
Gann and David Bowden primarily traded the commodities market – as do the Hot Commodities Summit presenters. You should really be there on 30-31 August and find out why.
Rick Akdagcik
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