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Noel Campbell There are certain times each year, according to the lessons of W.D. Gann, where we need to be on the lookout for changes in trend. That is the power of time, knowing ‘when' to watch out for changes in the trend. You can always check the ‘where' (price) as the market approaches the ‘when'. That's the start for many in the way they combine time and price. Gann's lessons on seasonal times can start to push some to the edge if they are prepared to place their faith in Gann's teachings. David has always talked about Astrology as the black hole of technical analysis.
Taking a leaf out of Sinan's book…imagine the following. A technical trader who uses astrology in his trading, speaking with a fundamentalist about where they think the market is going to head next. Would the fundamentalist hear a single word the ‘astrological' trader even said? If he did it is doubtful that he could recall a thing after just a couple of hours. Understanding Gann's seasonal time is not quite delving the depths of trading astrology; however it is a big paradigm shift for many. I was speaking on a panel at a wealth creation club just recently and mentioned the Equinox and Solstice (perhaps a mistake), when one of the fundamental analysis peers on the panel made a crack about watching full moons. Little does he know, this is always the first thought. What does it matter about another opinion when you know something works and is worth watching? By that I don't mean trading off the moon!
Let's explain what I'm referring to when I say ‘Seasonal Time'. There are four key dates, each on the seasonal calendar. We have the equinox twice a year and a solstice twice a year. The equinox is when there is a direct perpendicular line to the sun from the equator at midday. This makes day and night exactly 12 hours each. If we say the equinoxes are a point of balance, then the solstices are points of extreme. The summer solstice is the longest day of the year; the winter solstice is the shortest day of the year – clearly points of extreme. I sometimes relate these four key times each year to being as important as the four key points on a compass – North, South, East and West. The diagram below highlights the approximate dates of these key times each year.
While the four dates marked on the circle (cycle) above are the key seasonal times, the mid points between each are well worth watching and give us early August, November, February and May as times to watch for a change in trend as well. Chart 1 is the daily bar chart for the Sugar Futures contract ( SB-SpotV ) over the past 9 months or so. You can see I have highlighted ‘turns' on the contract around the key seasonal times.
Chart 1
click chart for more detail
The last ‘apparent' significant turn on the Sugar market is the recent top in early August. While the market low before this top was in April, the market started to run most strongly out of the date in early May. We have seen a decent low and high respectively in December 2004 and March 2005, both just before the seasonal date that month. With the top in August on Sugar and prices coming off, but the long term cyclic view being up, up, up, it's time to focus on a September low and then a big run out of there. The market can catch you sitting and waiting and the turn comes early. But as David Bowden said, its better being out of the market, wishing you were in, than being in the market wishing you were out! We can just mark time for now and understand that patience in the market is part of what equals profit.
Until next week......
Noel Campbell
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