Hi TJ,
a bit of GANN on the long term SPX chart as well as ruminations on the potential stealth bear market that we probably experienced back in 2015 to 2016 ... as it was a rotating bear market event it may have extended into much later in 2016 and started earlier for some market segments and "Hot Stocks"
Here is an SPX Long term chart that starts with the October 4th 1974 Liquidation Bear market in stocks... there was a retest in Dec.. 1974 and the 2 year Decline took the SPX and DJIA over 50% with many over-owned and over priced momentum stocks such as the "Nifty 50" stocks like Xerox, Polaroid, Avon etc.
bottoms such as the 1974 low and the July 6th 1932 low in the DJIA which fell from 381 on Sept 3rd of 1929 to 41.56 on 7/6/1932 are excellent points to start Fractal growth methods as well as GANN and Fibonacci methods.
The Nifty-Fifty Re-Revisited
A fundamental investment maxim is that, "A great company is not necessarily a great stock." No matter how good or bad a company’s management, no matter how large or small a company’s profits, no matter how bright or bleak a company’s prospects, the attractiveness of a company’s stock depends on its price. At some price, a great company’s stock is expensive; at some price, a lousy company’s stock is cheap.
To illustrate this fundamental principle, people often recall the early 1970s when institutional investors were infatuated by the Nifty Fifty—a small group of “one-decision” stocks, companies so appealing that their stocks should always be bought and never sold, regardless of price. Among these select few were Avon, Disney, McDonald’s, Polaroid, and Xerox. Each was a leader in its field with a strong balance sheet, high profit rates, and double-digit growth rates.
But is such a company’s stock worth any price, no matter how high? In late 1972, Xerox traded for 49 times earnings, Avon for 65 times earnings, Polaroid for 91 times earnings. When the stock market crashed in 1973, the Nifty Fifty defied gravity for a while, held up by institutional enthusiasm that created a two-tiered market of the richly priced Nifty Fifty and the depressed rest. Then, in the memorable words of a Forbes columnist, the Nifty Fifty were taken out and shot one by one. From their 1972–1973 highs to their 1974 lows, Xerox fell 71%, Avon 86%, and Polaroid 91%.
economics-files.pomona.edu
Here is a Long term SPX chart that illustrates both time and price elements and the power of the GANN angles the GANN box from the Oct 1974 low to the March 2000 high
The 1 x 3 = 71.25 degrees gave support to the Oct 1998 sell off that was the last substantial correction in which stocks such as DELL (one of the FANG equivalents of the time) went below there 200 dma
The 2 x 1 = 26.25 degrees angle provided support and proved to be the bottom of the Oct 19, 1987 stock market crash.
The 1 x 2 = 63.75 degrees angle was almost touched on 3 occasions in the 2002-03 bear market lows.
Observe how the .382 distance from the 60.96 10/4/73 low to the 03/24/2000 high at 1553.11 occurred
in early 1985 at which point the SPX and DJIA accelerated their advance to their ultimate top of 2722 on Aug 26th of 1987.
The Key 50% time level of the same 10/74 low to 03/2000 high was the high in 1987.
the .618 time point was the bottom of the first Gulf war bear market in 1991
the 3/4 or .75 time turning point was provided the high in early 1994 were stocks declined in a mild fashion and the bond asset class sustained a very bruising bear market.
the 1 x 4 = 75 degrees Angle provided the topping area on May 20 2015 at 2134.72 for the bull market that began on 03/09/2009 and yielded the stealth bear market that took the SPX down to 1810.11 on 02/11/2016. 02/11/2016 is when WTIC crude made it's bear market low of $26.05.
The argument can be made that we experienced a stealth bear market in stocks from Mid 2015 into the early 2016 and other parts of this rotating bear market did not end until the Central Banks reversed course on their dire experiment with Negative interest rates in Japan, the Eurozone, Sweden, the Netherlands and
the USA, which only save negative interest rates in places such as New York Trust Bank demanding payments for institutional accounts that wanted to deposit more than $50 Million in accounts with them.
the US did experience multiple rounds of Quantitative Easing and Fed Balance sheet expansion and the Fed Funds rate and 3 month Libor hovered near zero for years after the Great Financial Crisis of 2008-2009.
The stealth bear market saw many stocks go down a much larger percentage and the RUT fell from 1296 on 06/23/2015 all the way down to 943.10 on 02/11/2016.
The NYSE fell from 11,254.87 on 05/21/2015 all the way to 8937.99 on 01/20/2016... many "nifty 50" stocks of the early teens of the 21st century experienced a much more severe mark down in price in this rotating 2 year bear market, obviously the energy sector stocks were decimated with huge percentage declines and a number of bankruptcies.
Here are a chart of the SPX from May of 1974 to May of 1975 which shows Oct 4th 1974 low
here is a chart of the NYSE stealth bear market from mid 2015 to Feb 2016
and the RUT from the same time period
The 2 sectors that exemplify the extent of the bear market declines and Market capitalization destruction are the IBB biotech index and the OSX oil service sectors
the IBB from 2015 to 2017... you can see the extreme bull market that the biotech index experienced and then the sustained decline
The OSX oil service sector index was a real blood bath with price decline over 60%
The coal subsector of the energy sector suffered the near equivalent of the bombing of Dresden in WWII.... or possible the dropping of the bomb on Hiroshima may even be a more appropriate equivalent of the total collapse of the coal sector.
Here is an update SPX chart with the Fibonacci fractal projections
notice how the 1 day wonder decline in the SPX last week recieved supper support from the 100% price level of the fractal advance from the Nov 4th 2016 low at 2083.79 when the SPX hit it's 200 DMA and then advanced without a pullback into the 2277.53 price high on 12/13/16.
The SPX also received support on last weeks low from the 50% Fib Fan line from the very important 11/4/16 low at 2083.79
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Here is the my Proprietary SPX JJP ATR cross of the Eur/JPY :$WTIC correlation chart. The methodology reinforces the case that we experienced a bear market and has a very good track record. I explained how the chart works in a post on 3/36/17 which I have reposted below the update chart, which has become even more bullish
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Message 31045395
this is my proprietary model that uses the EUR/JPY crossrate and then correlates it to WTIC.... so you have 4 of the deepest largest markets in the world..... the Eur/JPY "RIsk On Risk Off" then as a ratio of the single most important global commodity input crude.
I have shown this 2 or 3 times this past 15 months............ but it's just esoteric enough that it does not get traction in the layman and even the professional traders mind.
and it has had a very good record..... when the 13 week Average true range goes below the long term 200 week average true range with is calculated on the EUR/JPY Crossrate and then divided as a ratio of $WTIC.... what that calculation in KISS (KEEP it SIMPLE STUPID) is doing is showing when the relative volatility of 3 of the worlds biggest pricing components stabilizes.... it creates the necessary price stability in corporate planning models and in Global Macro Institutional Investor Models to expand risk exposure...that is long US equity exposure.
To Clarify the signals are generated when the Blue 14 period ATR goes below the long term 200 period Moving average.... and that generates a buy a the Average True Range of the EUR/JPY cross / by WTIC is coming down.. what is nice about this model is that you can have signals that are in effect for 2 years or so at a time.
JJP
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Gann addendum:
Gann Angles: Time and Price Analysis
Gann Angles: Basic Explanation
W.D. Gann (1878-1955) developed the use of what he called "Geometric Angles", now commonly referred to as Gann Angles, used to determine trend direction and strength, support and resistance, as well as probabilities of price reversal.
Gann was fascinated by the relation of time (T) and price (P). Gann drew his angles from all significant price pivot point highs and lows. He used just one pivot point to draw an angle that rose (or fell) at predetermined and fixed rates of speed, as follows:
T x P = n degrees
1 x 8 = 82.5 degrees
1 x 4 = 75 degrees
1 x 3 = 71.25 degrees
1 x 2 = 63.75 degrees
1 x 1 = 45 degrees
2 x 1 = 26.25 degrees
3 x 1 = 18.75 degrees
4 x 1 = 15 degrees
8 x 1 = 7.5 degrees
where
T is the number of units of time, graphically plotted on the horizontal x-axis.
P is the number of units of price, graphically plotted on the vertical y-axis.
x is read as "by".
n degrees specifies the slope of the Gann angle, measured in degrees.
Translating time by price into degrees assumes a square grid, where one unit of time on the x-axis takes up the same amount of horizontal space as the one unit of price on the y-axis takes up vertical space. For example, 1/16 of an inch might be set to one week of time on the horizontal x-axis, and 1/16 of an inch might be set to one dollar of price on the vertical y-axis. On such a proportionally scaled chart, the 1 x 1 geometric angle, which for every one unit of time rises one point in price, is a 45 degree angle.
Without this equality of time and price scaling, however, Gann angles stated in degrees do not work out correctly. That would not prevent correct Gann angles from being drawn on oddly proportioned grids; it would only prevent the translation of time by price angles into correctly-displayed degrees. But that would not affect the interpretation of the Gann angles if we avoid thinking in terms of degrees. Rather than thinking in terms of degrees, it is simpler to express Gann angles in terms of units of time by price.
For practical purposes, weekly Gann angles, drawn on a weekly bar chart, appear to offer the most useful perspective. Gann often said that the weekly chart was more important than the daily chart. Nevertheless, Gann angles are flexible and can be used on any time-scale, so long as the time by price proportions are correctly calculated.
Gann angles offer indications of support and resistance that may not be evident based on any other method. For example, during an up-trend, the 1 x 1 angle tends to provide major support. A major reversal is signaled when prices fall below the 1 x 1 angle. According to Gann, prices should then be expected to fall to the next angle below, the 2 x 1 angle. In other words, as one angle is penetrated, expect prices to move to and consolidate at the next angle, which is less steep.
Gann placed special emphasis on the 1 x 1 angle. On a perfectly proportioned time by price grid, in an uptrend, the 1 x 1 angle extends "northeast" at a precise 45 degree angle. This 1 x 1 angle is the most significant angle: it represents a sustainable, perfectly balanced trend, not too fast and not too slow, but just right. In a bullish uptrend, the 1 x 1 angle tends to provide major support. When this 1 x 1 angle is broken, a significant price trend reversal is signaled. The price should then drop down to test the 2 x 1 angle, below.
In a downtrend, the 1 x 1 angle extends "southeast" at a precise 45 degree angle. Eventually, after a downtrend, when price moves above and stays above the 1 x 1 angle (which is sloping down and to the right at 45 degrees), price should then make its way up to test the next, less-steep Gann angle, the declining 2 x 1 angle. An angle that provided resistance, once decisively broken, should provide support.
Furthermore, when a 1 x 1 angle crosses a horizontal line extending forward in time from a significant past pivot point price (an obvious high or low), then time and price are square relative to that past pivot point, and that is a likely time for a change in trend or an acceleration of the existing trend. Also, when a geometric angle crosses zero or another geometric angle, a trend change is likely.
Identification of the most important Gann angle is dependent of the price level of the instrument analyzed: very high and very low priced instruments will follow steeper and shallower Gann angles, respectively. In other words, the best functioning Gann angle for support and resistance depends on the price level of the instrument being analyzed.
For example, for the S&P 500 Composite Stock Price Index, a relevant support and resistance price channel was well defined by 2 x 1 weekly Gann angles from the 8/9/82 price low at 102.20 until 1995. After the 12/9/94 low at 442.88, the S&P price level quickly rose so high that the bull market trend was better defined by the rising 1 x 4 weekly Gann angles. A glance at the chart should make obvious the value of these Gann angles, which can be drawn before the fact, as soon as the user can identify a pivot point high or low. (See Robert W. Colby's book, page 285, for this chart.)
Gann also divided significant price and time ranges and previous highs and lows into eighths, and looked for support and resistance there. For example, dividing the low to high price range after a substantial upswing, the most important divisions would be 8/8 (or the high), ½ (the midpoint) and 0/8 (the low). Next most important would be 3/8 and 5/8. Expressed in decimals, 3/8 is 0.375 and 5/8 is 0.625, which are only .007 away from the Fibonacci ratios of 0.382 and 0.618.
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