Time in Days and Degrees - Timing Market Turns
In the last edition of Your Trading Edge, I examined W. D. Gann’s forecasting method titled ‘Seasonal Time’. In that article I quoted Mr. Gann 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…
(From Gann, W. D., W. D. Gann Stock Market Course, Lambert-Gann Publishing Company, Pomeroy, W. A.)
Mr. 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).
It is important to remember that this is but one of the many techniques that Mr. Gann used but is most certainly NOT his most powerful technique. Seasonal time applies to all liquid, freely traded markets. It does not take into account the cycles present in each individual 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”.
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 – time in degrees.
Time in Days and Degrees
Clearly, seasonal time forecasts the same dates for market turns for all markets. This is its weakness.
A more effective forecasting technique, one that uses the principles of seasonal time, is what Mr. Gann called ‘monthly changes of trend’. He describes it as follows:
Stocks make important changes of trend every 30, 60, , 120, 150, , 210, 240, , 330 and 360 days or degrees from any important top or bottom. These seasonal changes or monthly changes based on the beginning of any seasonal changes are important to watch for tops and bottoms.
(Gann, W. D., W. D. Gann Stockmarket Course, Lambert-Gann Publishing Company, Pomeroy, WA.)
The above quotation from the W. D. Gann Stockmarket Course is a very powerful statement indeed. In a few brief lines W. D. Gann outlines the basis of time measured in days and degrees, and its link to seasonal time. It has even greater significance if one studies the numbers he omitted (inserted in square brackets above) and relates them to the Gann symbol of a circle containing a square and a triangle.
Please note that in the quotation above, Mr. Gann stated:
Stocks make important changes of trend every 30, 60, , 120, 150, , 210, 240, , 330 and 360 days or degrees from any important top or bottom. (My emphasis.)
Note that he said days OR degrees. The use of the word “or” suggests that either days, or degrees, will forecast reversals in markets. It is therefore important to use both, however you will find that for many markets, degrees will produce better results.
It is sad to see many Gann students assume that days and degrees are the same thing, and as a consequence use one, or the other, but not both!
Time in Days
Days and degrees are two entirely different methods of measuring time. One day is one revolution of the earth on its axis. This is approximately 1/365th of a calendar year, ignoring leap years.
Traders also talk in terms of trading days. For this method, we use calendar days. This means that we do not omit weekends and public holidays when the market being analysed did not trade.
Time in Degrees
Time in degrees is a special case of seasonal time, where the starting point becomes a major high or low in the market, rather than the dates of the solstices or the equinoxes. This means that different turning points will be forecasted for different markets, as the dates of their major highs and lows will vary.
One solar degree is the time it takes for the earth to travel 1/360th of its elliptical orbit around the sun. As there are 365.24 days on one year and 360 degrees in one year, one day does not equal one degree. The four 90-degree quarters do not have equal numbers of days due to the elliptical shape of the earth’s orbit.
Let us now examine some charts that illustrate time in days or degrees. A range of markets and different years has been used to illustrate that this technique works well on most liquid, freely traded markets.
Australian All Ordinaries Share Price Index
This chart shows a year, 1994, when time in degrees was very effective in forecasting turning points on the Australian All Ordinaries Share Price Index.
The cyclic high of 3 February, 1994 was taken as out starting point, and 30-degree time in degree increments were calculated from there. Most of the turning points forecast were significant changes of direction.
The following charts illustrate the concept of markets moving in 180-degree or 180-day moves. Remember, 180 degrees is an important resistance point on the Gann symbol, and one that we would expect to be one of the strongest for forecasting a reversal in a market:
Australian All Ordinaries SPI 200 - 178 days, low to low.
S&P 500 - 178 degrees (183 days) low to low.
Swiss Franc - 179 degrees (183 days)
Although W. D. Gann has been dead for almost 50 years, his forecasting techniques work as well on today’s markets as they did when he was trading. Times in days, and time in degrees, are two effective methods of forecasting turning points of significance in liquid, freely traded markets.
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