Timing Market Turns
- W.D. Gann's Seasonal Time

W. D. Gann was arguably the world's great market analyst and trader. In the first half of the 20th Century he produced some amazing forecasts.

Gann was reputed to have made some US$50 million trading the stock and commodity markets. We may never know precisely how much money Gann made, however few dispute his enormous contribution to market analysis.

Many people have made a significant contribution to the analysis of price and volume, including Mr. Gann, however Gann's most impressive discoveries were in the area of predicting the dates, and even the times, of market turns. Gann used a number of techniques to generate dates when a market may make a top or a bottom. He would look for dates where several techniques clustered, that is, they pointed to the one date for a market turn. One such technique was what he called 'seasonal time'.

What is Seasonal Time?

Mr. Gann discussed seasonal time in his excellent W. D. Gann Stock Market Course. He described it as follows:

SEASONAL CHANGES IN STOCKS

The average of stocks and many of the individual stocks make important bottoms and tops according to the Seasonal Changes, which are as follows:

The winter quarter begins December 22nd, and 15 days from this date is January 5th and 6th, which are always important dates to watch at the beginning of each year, as stocks often make extreme high or extreme low around these dates and a change of trend takes place…

Gann followed this pattern to list February 5th, March 21st, May 6th, June 22, July 7th, August 8th, September 23rd and November 8th as seasonal times for a change in trend.

What Gann was doing was relating the natural cycle of the seasons to market tops and bottoms (or turning points). The cycle of the seasons each year has an impact on not only agricultural markets (crops are harvested after the 'growing season', which creates an over supply and thus lower prices), but also in other markets (for example, heating oil prices rise in winter when heating oil is in great demand).

The dates in bold are the solstice and equinox dates, which are of greater importance.

Let us examine three charts and the extent to which they turned on seasonal times:

Chart 1 - Nikkei 225 Futures Seasonal Times 2000

Chart 2 - Australian All Ordinaries Share Price Index Futures Seasonal Times 2000

Chart 3 - Nasdaq 100 Futures Seasonal Times 2001

It is important to remember that this is but one of the many techniques Gann used, but not his most powerful. Seasonal time applies to all liquid, freely traded markets. It does not take into account the cycles present in each market. Mr. Gann did not rely on any one technique. In fact, he told his students to "… use all of the rules all of the time".

As Mr. Gann suggested, seasonal time yields some important turning points in liquid markets each year, but should not be used as a stand-alone trading system. Gann would not consider trading such a date without confirmation from other proven timing techniques. Given such confirmation, he would then consider price and range resistance points, and the position of the market itself, in the context of his master time factor forecast.

Remember, trading such dates is a form of top and bottom picking. There is a Wall Street saying that "top and bottom pickers go broke", and there is strong evidence to suggest that the saying is correct for the vast majority of traders.

Ken Gerber, a Gann expert respected across the world, owns two caps. One has the word 'Trader' on it in large letters. The other has the word 'Forecaster' on it in equally large letters. Ken teaches his students that they should never wear both hats at once, and that they should always know what hat they should be wearing at any one time in the analysis and trading process. His point is well taken by astute traders!

Seasonal time is not the Holy Grail, however it is an important concept for students of the works of W. D. Gann to be familiar with. They need to understand it as it is a means of forecasting market turning points. It is also the basis of another powerful Gann forecasting tool - solar degrees.

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