Analysis - Friday, Jan 2 Gann Yearly Chart Which way ?
One way or the other, today was probably as pivotal a day as we could possibly imagine for this time frame. That is due to the upturn today in our Gann Yearly Chart. As discussed in our November and December 2003 newsletters, upturns in this Yearly Chart have been followed by significantly higher prices in over 80% of all cases for the last 107 years. By significant we mean a further rise of at least 4.7% intraday on the Dow over the following weeks, months and sometimes years. For instance, the upturn on 5/28/33 lead to a further rise of 217% in the next 3 years and 10 months. The upturn on 1/4/43 was followed by a rise of 76% in 3 years and 4 months. The upturn on 1/5/50 was followed by a further rise of 46% in 3 years. Now most certainly not all upturns, or downturns, in the long-term Gann Yearly chart have been followed by significantly higher or lower prices over the coming weeks or months. However, we cannot ignore a longer-term signal which has proven correct in over 80% of all cases in over 100 years. If the Dow were to reach the minimum of 4.7% for a successful signal from the Yearly Chart, it would advance to 10,987 intraday over the coming weeks and/or months.
Our dilemma here is that our Gann Yearly Chart suggests that higher prices are coming this year, while our Lindsay indicators still strongly suggest that we are near what should be a very important high in this time frame. The Lindsay 3-Peaks and Domed House pattern still suggests the Dow should fall to at least the 7500 area at some point this year, and probably sooner rather than later. The Lindsay Standard Time Spans and the long-term Lindsay Long Sequence forecast also suggest the market should be near some sort of very important top in this time frame. Quite frankly, if we had to choose between the Lindsay indicators for this time frame and the signal from the Gann Yearly Chart today, we would be more inclined to go with the Lindsay indicators. Still, for now the main trend is still upward, and we are not near any sort of valid sell signal for longer-term investors just yet.
Our bottom line is that we must now choose between the bullish signal from the Gann Yearly Chart and the bearish signals for this year from the Lindsay indicators. If we are forced to choose which will ultimately prove correct for this time frame, we quite frankly would go with the Lindsay indicators. Nevertheless, we will not go short on this hotline until we see clear evidence that a top has been seen, because of the upturn in our Gann Yearly Chart. Despite the fact that 80% of all signals from the Gann Yearly Chart in over the last 107 years have proven successful, this does not in itself prove today's signal will not fall within that 20% area when the signals from the Yearly Chart proved to be failures.
We accept the fact it is our responsibility to tell you whether we believe the upturn in the Gann Yearly Chart today will ultimately prove successful. As we stated on Wednesday's update, we have no particular commitment at this time frame to a move in one direction or the other. If the Yearly Chart signal today proves accurate, that is, if the trend remains upward over the next few months or longer, we will be long. If the trend turns downward from here we will be on the short side. For now however, we believe that it is a bit too early to make a decision one way or the other
The first sign of potential trouble next week will be any decline below 10,320 on a print basis and 10,270 intraday on the Dow. That would not confirm that a true top has been seen, but it would suggest that a still-stronger correction is coming, at least over the short term.
One thing that does concern us tonight is whether or not the Dow completed a "key reversal day" today. A key reversal day occurs when the Dow rises to a new high for a particular movement, but then reverses and falls below the intraday low of the prior day, and then also closes down for the day. This is normally a signal that at least some sort of short-term high has been seen, if not a far more important intermediate-term high. Still, we are not entirely comfortable with the actual intraday highs and lows reported from the NYSE for this week, so we want to verify those numbers for this week in Barron's before we make any conclusions for this week.
For now we want you to stand aside a little longer, and we will give you new instructions next week.
Source: Jerry Favors
AI
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