The building blocks of technical

trading

W. D. Gann and R. N. Elliotts early work on graphs provided the building

blocks of technical trading that are still in use today.

By Pauline Novak-Reich

December 23, 2016 Reprints

When W. D. Gann set out to investigate the behavior of markets at

the end of the 19th century, the New York Stock Exchange records
contained no more than 15 years of data. It was not until 1883, when
Charles Dow and a fellow reporter, Edward Jones, introduced the first
Dow Jones Industrial Average records in the Customers Afternoon
Letter that American traders were able to track daily stock
movements for the first time.

The quest to find out whether the future was indeed unpredictable
brought Gann to the British Museum where he came across the
uninterrupted series of the Nile records. Going back to 622 AD, it was
the worlds longest data collection at the time. It gave birth to the
Square-of-9, the Time-Factor and Law of Vibration.

The practice of measuring river tides during the annual flood

originated in Babylon and Egypt where year in and year out the
behavior of the Euphrates, Tigris and the Nile Rivers dictated the
peoples fate.

Data collection coincides with the introduction of the Nilometer in

Babylon and Egypt during the second Millennium BCE. Gann
reasoned that the only way early civilizations were able to analyze
records was by presenting them graphically. Furthermore, he realized
that the ancients obsession with measuring time-sequences and
patterns had inadvertently solved the mystery of nowadays markets
ups-and-downs.
In tapping the secrets to time-based chart-analysis, Gann, in addition
to reviving lost 3000 BCE cutting-edge analytical methods, ushered in
charting to the 20th century.

Fifty years on, Ralph Nelson Elliott demonstrated that the ups and
downs of equity prices, along the graphs coordinate Y, unfold
according to a repetitive eight-wave pattern governed by the
golden-mean spiral and Fibonacci ratios (see Graphing, below).
Prices regularly encounter resistance and/or support at the 38.2%,
50% and 61.8% retracement level of the preceding advance/decline.
The unknown known about Elliotts findings is that in addition to
focusing on price ups-and-downs, Elliott paid attention to
time-intervals. In his 1946 book, Natures Law, he stated, Wave
intensity or impulses bear a consistent relation to one another and to
the passage of time.
This series of articles will provide an illustrated account of the
differences between time and price peaks/troughs, the inherent
relationship of the graphs coordinates X and Y to Ganns
Square-of-9, and how to employ all this in forecasting the future
moves of the S&P 500 Index.

The x & y coordinates of graphs

Coordinate X is a symmetrical
Archimedean-spiral featuring a constant separation distance at
turns.
It unfolds from right to left (counter-clockwise) in line with the spin of
the solar system and all other naturally occurring spirals, including
that of the Golden-Mean. The lack of a back-and-forth motion on this
axis made it Ganns principal source of information. It told him
everything he needed to know about timing.

Coordinate Y, on the other hand, is an asymmetrical

logarithmic-spiral expanding at a 61.8% ratio throughout (refer to
Graphing again). It is a form, rather than a measuring instrument.

Given that coordinate X is a function of Y, and coordinate Y is a

function of X, their plots are related. The dotted line they manifest on
the graph has the capacity to project the price and time of any
future turnaround. Yet, Ys inability to generate a timeframe within
which a market would turn makes it less informative than X. In order
to geometrically map onto the Square-of-9, the Y coordinate requires
a separate analysis from X.

Even though Gann often called the price at which a market would turn,
his two signature laws, the Time-Factor and Law of Vibration are
based on coordinate X.
As the saying goes, When the time is right the price is right,
however, when the price is right, time may not yet be!

Peaks, troughs & trend reversals

Another unknown known is that major trend reversals manifest two

successive peaks and troughs. It takes two peaks to terminate an
uptrend and two troughs to terminate a decline. The first
(peak/trough) records the price, and the second, which is usually
belated by a few days (or weeks), records the date of the
time-peak/trough.

The peaks/ troughs of time and price rarely coincide. The

price-peak/trough marks the highest/lowest price on the chart,
whereas the time-peak/trough rubber-stamps the trends termination,
mostly at a lower price-peak or a higher-price trough.

Time factor (below) captures the S&P 500s price and time peaks
that terminated the 2007 bull market showing a 22 calendar-day gap
between the price-peak of Oct. 9 and the time-peak of Oct. 31.
Given that the Oct. 19 to Oct. 31, 2007 interval was two days longer
than the Oct. 9 to Oct. 19, 2007 interval, the longer interval
terminated the trend. The Time-Factor indicated that it was the
time-peak of Oct. 31 that terminated the bull market.

Furthermore, the Time-Factor stipulates that new trends begin with a

longer than, or equal to, interval than that which terminated the
previous trend. This demonstrates that following the Oct. 31 peak,
the S&P 500s first wave of decline exceeded the

Oct. 18 to 31 rally. The October 2007 peak terminated a 150-year

(1857 to 2007) bull market. The 1929 market crash marked the first
waves peak, 2000 marked the peak of the third and the peak of 2007
terminated the fifth.

For a trend change to occur, the second interval of a wave pair in

which the first is going up and second coming down or vice versa,
must be timewise longer than the first.

A key rule of thumb is that rising markets, irrespective of scale order,

manifest longer rallies than retreats; and falling markets, irrespective
of scale-order, manifest longer retreats than rallies. The interval
leading to the time-peak/trough is always followed by a longer or
equal span.

Time-peaks and troughs are exceptionally fine-tuned. It is where one

day, hour and often as little as one minute, can separate a bull phase
from a bear phase. This is why the universes cosmic clock is subject
to the Time Factor the superintendent of cyclic components and
trends.

Even traders with a scant knowledge of decoding charts can benefit

from this law. No market will ever change trend without emitting an
early-warning signal first (see Golden bottom, below).
In the next two installments of this series we will talk about the law of
vibration, symmetry and asymmetry and the Elliott Wave Principle.

About the Author

Pauline Novak-Reich is the former manager research-foreign exchange at

the ANZs (Australian & New Zealand Banking Corp.) dealing room from
1980 -1993. Her duties involved analysis and forecast of currencies, interest
rates, equities and commodity markets trends, as well as overseeing
dealers intraday trading. In 2005 she authored The Bell Does Ring (John
Wiley, Australia). This article is an except from her upcoming
book, Mystifying Square, Divine Proportions -- Natures Black Box. You can
reach her
at https://www.facebook.com/pages/Demystifying-Ganns-Square-of-
9/661551103858428
The law of vibration & the
archimedean spiral

Previously we discussed how W.D. Gann used sophisticated data collection

tools to discover the Square-of-9 Principle. The discussion continues on the

relationships between price and time.

By Pauline Novak-Reich

January 25, 2017 Reprints

In the first instalment of this series on technical building blocks we

introduced the basic principles of W.D. Gann and Elliott Wave theory,
and we broke down the X and Y graph coordinates and discussed how
to define market peaks, troughs and trend reversals. Here we dig a
little deeper and discuss the Law of Vibration and The Symmetry of
Coordinate X vs. the Asymmetry of Y.

The tool introduced by Gann was his Square-of-9 spiral that ties
together the movements of price and time.

The key feature of the squares spiral is the identical shape and size
of its blocks.

It assigns one block to one unit of time making no distinction between

one minute, hour, day, week or month. Intervals however cannot be
mixed; apples must be compared to apples.
 Whereas the time factor
takes no notice of wave magnitudes, the Law of Vibration does. It
ensures that all throughout the cycle same scale-order waves land
upon the same cardinals and diagonals of the square. An interval-pair
measured from a time-peak to a time-trough, and from a time-trough
to the time-peak, maps onto the square at a 360 or 180 angle,
depending upon its location within the Elliott cycle (more about it
later).

Intervals terminating at a 360 angle manifest a co-axial alignment

upon one of the squares cardinals or diagonals. Intervals terminating
at a 180 angle form an opposition upon two of the squares
cardinals or diagonals.

Swing-pairs failing to map at 180 or 360 angles are either

incorrectly measured, incomplete or belong to a greater/lesser
scale-order phase of the cycle.

The Law of Vibration is subject to Time Dilation a time discrepancy

between real time travel in space and travel on Earth (time passes
more slowly for bodies moving quickly relative to bodies that are
within the gravity well where the Earths physical speed and time
slow down).

It often becomes necessary to adjust the waves day-count to the

nearest cardinal or diagonal on the square (see Crude intervals,
below).
 Complete Intervals:

Feb. 9, 1999 Jul. 15, 2008 = 3440cd NC (Not displayed)

July 15, 2008 Feb.18, 2009 = 218cd NC = 360
June 28, 2012 Jun. 16, 2014 = 716cd (718 NC) = 360
June 16,2014 Feb. 19, 2016 = 613cd NC = 360

Lesser scale-order Intervals:

Apr. 29, 2011 Jun. 28, 2012 = 426cd (421 NE)

Feb.19, 2016 Jun. 8, 2016 = 110cd (111 NE) = 360
June 8, 2016 Aug. 2, 2016 = 55cd (57 SW) = 180

The Feb. 19, 2016 interval represented a simultaneous termination of

crude oils time and price-troughs.
The Symmetry of Coordinate X vs. the Asymmetry of Y

Each ring of the Archimedean spiral expands twice during one 360
rotation. The first expansion takes place upon the squares northwest
diagonal and the second, 180 opposite, in the southeast. The
Archimedean spiral does not permit fractions. It allocates one whole
block to one unit of time. The perimeter of each ring expands by two
whole blocks (two whole number integers) during one 360rotation.

Coordinate Y lacks the symmetry of coordinate X. As it adheres to the

logarithmic spiral, the number 1 at the center (from where the first
ring begins to radiate) is the only whole-number-integer point on the
spiral. The rings end value is + 61.8% (equivalent to the Fibonacci
ratio) a fractional number incompatible with the squares blocks.
The asymmetry of the logarithmic spiral makes projecting coordinate
Ys values difficult (see Picture this, below).

Gann, however, found a way to forecast the values of coordinate Ys

peaks and troughs without resorting to the Golden Mean or the Dow
Theory (the Wave Principle did not emerge until the 1950s). The Law
of Vibration showed him the way.

Knowing that all the resonances in the universe are encoded onto the
squares cardinal and diagonal lines and that none can bypass this
law, Gann reasoned that the vibration of price, like any other, ought
to correspond to the Squares matrix.
He wrote: By knowing the exact vibration of each individual stock, I
am able to determine at what point each will receive support and
what point the greatest resistance is to be After years of patient
study I have proven to my entire satisfaction as well as demonstrated
to others that vibration explains every possible phase and condition
of the market After much researcher of the known sciences, I
discovered that the Law of Vibration enabled me to accurately
determine the exact points to which stocks or commodities should
rise and fall within a given time. The working out of this law
determines the cause and predicts the effect long before the Street is
aware either.

It importnat to note that the square of 9 is essential to building on the

works of Gann and Elliott. By applying the Law of Vibration and
understanding the distinction between coordinates X and Y, you can
begin to understand the work of the masters. Our next and final
feature in this series will examine how Elliott applied the square of 9
in creating the Elliott Wave Principle.

About the Author

Pauline Novak-Reich is the former manager research-foreign exchange at

the ANZs (Australian & New Zealand Banking Corp.) dealing room from
1980 -1993. Her duties involved analysis and forecast of currencies, interest
rates, equities and commodity markets trends, as well as overseeing
dealers intraday trading. In 2005 she authored The Bell Does Ring (John
Wiley, Australia). This article is an except from her upcoming
book, Mystifying Square, Divine Proportions -- Natures Black Box. You can
reach her
at https://www.facebook.com/pages/Demystifying-Ganns-Square-of-
9/661551103858428
The Elliott Wave Principle
By Pauline Novak-Reich

February 28, 2017 Reprints

In our first two articles on the building blocks of technical trading we

examined the basics of W.D. Ganns Square-of-9 Principle, how it can
be used to define market peaks and ways to see it more clearly
through understanding its coordinates and the Law of Vibration. Here
we delve deeper into Elloitts Wave Principle.

The Square-of-9 and the Wave Principle are intimately related. A

basic Elliott cycle constitutes five advancing (bull market) and three
declining (bear market) waves that subdivide into lesser-degree
cycles. The reduction process of the largest eight-wave cycle breaks
down into 144 lesser scale-order wavelets (see Charting waves,
below).
The most credible method of establishing a swings termination is to
compare the day-count of two adjacent intervals by mapping them
onto the Square-of-9. A complete interval-pair forms a 180 or a 360
angle.

Market ups and downs, (below) illustrates a typical Elliott

eight-wave cycle. Irrespective of numerical order or magnitude,
peripheral waves C & 1, C & 5, 5 & A, 5 & 1, 5 & C, A & C and C & C
map onto the Square-of-9 at a 360 angle.
Likewise, irrespective of numerical order or magnitude, inner waves 1
& 2, 2 & 3, 3 & 4, 4 & 5, A & B, and B & C map onto the square at a
180 angle.

The bull-market side of the Elliott cycle constitutes five waves:

impulse waves 1, 3 and 5 and corrective waves 2 and 4. The
bear-market side of the cycle constitutes a three-wave A-B-C
correction made up of impulse waves A and C and countertrend wave
B.

The eight-wave cycle is akin to Russian Dolls. Waves 1 and 2 of the

first pair of the cycle subdivide into an eight-wave lesser-magnitude
cycle that mirrors the original. Likewise, impulse waves 3, 5, A and C
subdivide into five lesser-degree waves each, and corrective waves 2,
4 and B subdivide into three waves forming a lesser-magnitude
a-b-c correction in which waves a and c are longer than b.

An irregular Wave-B on the S&P 500 is still underway. The recent Nov.
9 rally altered the wave-count and labelling of the 2009 to 2017
advance. What appeared to be a three-wave pattern turned into a
five-wave advance showing major Wave-B as the longest swing.
Turning points, page shows two possible wave counts, each
showing that Wave-b of B was, in fact, shorter than Waves a and c
of B.

Turning points (below) also illustrates the distribution of different

scale-order waves to their designated cardinals and diagonals on the
Square showing major peaks and troughs alternating between the
east and west cardinals.

Oct. 31, 2007 Mar. 9, 2009, Wave-a of A, 496cd, EC

The failure of Wave-a of A to map at 360 with Wave-V (496 & 1702cd =
180) signalled a temporary pause in the direction of the main trend.
Mar. 9, 2009 Apr. 29, 2011, Wave-b of A, 781cd (785 SE)
Apr. 29, 2011 Nov. 25, 2011, Wave-c of A, 211cd NE, Total = 1483cd,
SE
The 360 angle between the short and long spans signalled Major
Wave-As termination.
Nov. 25, 2011 May 21, 2015, Wave-a of Major B, 1273cd (1279 SC) =
longest span
(Alternative Count) Nov. 25, 2011 Dec. 1, 2015, Wave-a of Major B
1467cd = longest span
 May 21, 2015 Feb. 11, 2016, Wave-b of B, 267cd (265 EC) = shortest
span
(Alternative Count) Dec. 1, 2015 Feb. 11, 2016, Wave-b of B, 72cd (73
NE) = shortest span
Wave-a of B = 1273 or 1467cd (depending on the count). Wave-b of B =
265cd (the shortest), and Wave-c of B currently heading for the Square
easts 411 will peak on March 28, 2017.
Feb. 11, 2016 Mar. 28, 2017, Wave-c of Major B = 411cd EC, Total =
1950cd (1959 EC) = Wave Bs termination
A 360 angle between the short (411cd) and long (1950cd) spans, both
c-waves, will mark Wave-Bs termination.
Waves V and B (1695cd, WC, Oct. 31, 2007) and (1950cd, EC, Mar. 28,
2017) must terminate at a 180 angle.
Given that a 360 angle between the overall span and the final interval
indicates wave termination, the above forecast skips the east cardinals
number 334 the next inline following 265cd recorded on Feb. 11, 2016.
A 334cd-interval, due on January 10, 2016, will make Wave-B 1873cd
long, 79cd short of a 360 mapping.

360 mapping of price

Price and time peaks/troughs distribution to their designated axes on

the square is controlled by the Law of Vibration.

As Logging Reversals, below, shows on a S&P 500 weekly chart,

closing prices correspond to the numbers running along the Squares
cardinal and diagonal lines. They seem to appear in clusters, each
possibly characterizing a different cyclic wave, yet the absence of
input from coordinate-X shows no orderly swing distribution. The
Indexs major waves gravitate towards the squares diagonals, the
intermediate ones alternate between east and west, while others, of
a similar scale-order, adhere to the square north and south.
The S&P weekly chart shown in Logging reversals could stay,
however delete the arrow pointing to August 2016, including the AUG.
16, 2016 on the top right and replace with Mar. 28, 2017 instead as
shown below.

Forecasting the highest or lowest price a swing will reach relies on

time. The Law of Vibration makes it possible to discern the axis upon
which the peak/trough value will show close to the swings maturity
date.

Having grown out of the Babylonian zodiac, the Square-of-9 is the

worlds second measuring instrument. It is also a cosmic clock of
space-time embodying every vibration in the solar system (see
Origins out of this world, below).
When pulled from the number 1 at the center, it morphs into a
pyramid revealing tiers laid out in an Archimedean spiral. Yet, as the
pyramid rises from the base up, it does so logarithmically. The
pyramids of Egypt, like all others around the world, are two-way
spirals embodying the Time Factor and Law of Vibration. It seems that
no matter how ancient civilizations with no contact with one another
built pyramids, it enshrines the X and Y coordinates into them.

Elliott and Gann have been able to understand these basic principles
and apply them to the world of markets. The best quote related to
modelling price and time comes from Stephen Hawking and Leonard
Mlodinovs The Grand Design (2010). They wrote: A model is good
if it: Is elegant, contains few arbitrary or adjustable elements, agrees
with and explains all existing observations and makes detail
predictions about future observations that can disprove or falsify the
model if they are not borne out.

The Great Pyramid of Egypt, like all others around the world, is a
two-way spiral based on the Law of Vibration and Time-Factor. It
embodies the cosmic clock of space-time the mechanism
controlling vibrations in the universe. As the pyramid rises from the
base up, it follows a logarithmic spiral, however, the shape of its tiers
follows an Archimedean spiral.

It appears that ancient civilizations, believed to have had no contact

with one another, built pyramids all over the world in order to
enshrine the X and Y coordinates onto them.

Readers interested in an Excel Spreadsheets of the Square-of-9 (3000

& 10000) are welcome to contact the author here:
https://www.facebook.com/pages/Demystifying-Ganns-Square-of-9

About the Author

Pauline Novak-Reich is the former manager research-foreign exchange at

the ANZs (Australian & New Zealand Banking Corp.) dealing room from
1980 -1993. Her duties involved analysis and forecast of currencies, interest
rates, equities and commodity markets trends, as well as overseeing
dealers intraday trading. In 2005 she authored The Bell Does Ring (John
Wiley, Australia). This article is an except from her upcoming
book, Mystifying Square, Divine Proportions -- Natures Black Box. You can
reach her
at https://www.facebook.com/pages/Demystifying-Ganns-Square-of-
9/661551103858428