Gann Global Financial

I view the overall trade in the stock market that we’ve experienced as ideal in that it has conformed so closely to what the historic precedents would suggest would take place. In looking at the cash S&P 500 and the Goldman Sachs Commodity Index – an overall index of commodities – there are some profound observations that I want to make with respect to the internal dynamics of these two markets, and especially as it relates to these markets trading in tandem with one another.

We experienced a huge bear market in the stock market (the S&P 500), the second greatest since 1886. The overall decline into the March 6th low was 58%.

The Goldman Sachs index experienced the greatest bust cycle in commodity prices in history (our historic database of commodity prices goes back to the early 1800s). The overall commodity market declined 66% in five months and 15 days.

When you have this type of wealth destruction, this implosion, or deflationary decline in commodity and stock prices, obviously we see these two markets very much joined at the hip as investors and speculators, and those in the economy are basically faced with taking evasive maneuvers.What we knew from history is that when we experienced bust cycles on this order, for example, like 1920, 1932, 1948, 1974, the lows in both stocks and commodities coincide very closely to one another. The S&P 500 bottomed on March 6th, and the cash Goldman Sachs we bottomed on February 18th, so within about three-and-a-half weeks of one another this deflationary implosion, this panic, this capitulation of longs was occurring across the board both in commodities, tangible assets, natural resources, stock market, really, across the board. That carries through with real estate, commercial real estate and so on.

Stock Market and Commodity Culmination Lows In Place

The S&P 500 has experienced a meteoric rise of 39% in two months and two days, from January 6th to March 8th (a runaway advance to the upside).

The  Goldman Sachs index experienced some basing, but the overall advance off the February 18th low has been 39% so both of the stock market and overall commodities have advanced 39%.That is still a far cry from where we’ve come from in the markets, but I don’t have to tell you that a 39% advance in any market, historically, is a very significant advance.These advances place us in the very elite category of first legs up in projected overall bull markets.

Trade Action and Investment Possibilities if our Market Forecasts are Confirmed

In the S&P 500, we experienced a historic bear market on the basis of all our projections this was a final low; and this is a first leg up in a bull market (see charts in video). The seven closest historic precedents that we’ve been able to isolate, in other words, markets that experienced the type of decline on the order of what we’ve seen in the stock market, this advance very much rhymes with what one would expect once a final capitulation low is in place and a violent short covering a first leg up in a bull market takes place in the aftermath of that capitulation low.

We are very much following the personality of first legs up. We have seven historic precedents that fall into the category of our market, the bear market that preceded it, and first legs to the upside.

What we do is we show those seven precedents. You can see we have 1974, 1908, 1987, 1904, 1938, & 2003. What this does is show the corrections which took place after the first legs up in these bull markets. This shows the percentage retracements of the first leg up which took place.

“At the completion of these corrections historic bull markets were resumed. The implication is straightforward. Once a correction on the order of these corrections has been confirmed, we need to prepare ourselves for a potential all-out buying opportunity as both investors and speculators for a second leg up in an overall bull market. This is the lowest risk point for investors to take action.

One of the things that the legendary trader W.D. Gann said, is that once a final low is in place, and sometimes it’s difficult to project a final low or to get in at the low for a bear market, but what invariably takes place is you have a first leg up off a final low, and this confirms that a final low is in place. In other words, all the dynamics, the geometry of that advance, confirms that a low is in place.  Once that first leg is complete then you get a secondary correction. This would be the first correction in an overall bull market.

Keep in mind that we already have confirmation that a final low is in place, so this correction sets the stage for the lowest risk opportunity to actually enter long positions do so on weakness, which is always ideal – buy on weakness sell on strength – so buy on weakness in advance of what would be a second leg to the upside. If we can experience a correction in the S&P 500, and it’s certainly possible that correction could occur off the 930.17 high, no guarantees there but it certainly can, and if we see a correction on the order of what we have seen historically – and we’re going to be monitoring this – then the stage is being set for a major stock market buying opportunity for a protracted bull market.

I believe buying the corrections is the lowest risk place in a long positions with very significant upside. You can see on three occasions, 1974, 1987, & 2003, almost the entire first leg up was corrected during that first correction in a bull market with lesser corrections occurring during ’08, ’04, & ’38.

Technical Analysis of the Stock Market

In looking at the technical condition of this market, the shorter term view, we’ve experienced three minor corrections of 6.4%, 5.6%, and 5.6% during this runaway leg up. The first minor indication a projected swing high will be in place will begin on an overbalancing of these minor corrections. A decline to 858.78 will confirm this. If the S&P 500 declines to 858.78 we will have exceeded by 20% all of the minor corrections (6.4%, 5.6%, 5.6%), that would tell us that the selling is better than the buying for the first time since March 6th, and that’s a minor indication that the correction can be more complex.

We are very close to possibly seeing  a breakdown beneath the recent minor lows 878.94 and we closed in the cash about about 885 on Friday. So if we break this 878.94 and continue lower, then this is going to be starting to define itself as “correction.”

Keep in mind that this is a projection that we have. If we do see a severe correction, obviously the bears will come out of the woodwork again; the news will turn very negative, the forthcoming news talking about how terrible the economy is and everything, that’s what we want to see happen because it’s going to coincide. Bad news invariably coincides with this corrective low, this projected corrective low.

Once these lows were in place what did the second legs up look like?

We are apprising subscribers with respect to what kind of opportunity are we looking at. If it’s a long term bull market then the probabilities are very high that it’s not going to be just a second leg up but there will be another correction and then another leg up.We really are looking at this through the lens of anticipating an unfolding of a long term bull market.

Commodities Markets History and Analysis

In looking at the Goldman Sachs index things get very interesting as well. Keep in mind that these markets (the stock market and commodities) have been moving in tandem. The expectation is that they are going to continue to do so, so they’re playing to the same beat essentially.

I guess you could equate somewhat in the short term this government stimulus  to crack cocaine in getting a temporary high which is what is taking place, I believe, in the markets, but then we are going to see a retracement.

Ideally we are going to see a retracement, historically that goes without even being said. That is just a historic fact. It’s on that correction that we would look to be being a buyer in both the stock market and the commodity market.

Commodity Market Observations: Goldman Sachs

Following the March 6th low in the stock market, stocks have advanced as much as 39%, and overall commodities 28%. That’s off of the March 6th low.The stock market bottomed at this point in time, commodities had all ready bottomed some weeks prior, so you can see that the advancing of commodities and stocks have basically gone hand-in-hand.

We have projected these markets continuing to trade in tandem with one another. Once the current leg up is in place in the stock market, and a sharp correction takes place, the probabilities would likely favor a sell-off in overall commodities as well.

In other words, if these markets remain joined at the hip we could be provided with ideal opportunities to enter long positions in both stock and commodities if the corrections coincide with one another. Obviously we would be selective in which commodities we would purchase.

Questions We Are Asking of Commodities Markets History and Stock Market History

So we are faced with, right now, answering the questions from history.

• Once the first legs up were complete in 1920, in 1948, in 1932, other deflations, 1974, what did the corrections look like prior to the next legs up?
• Then, what did the second legs up in the overall bull markets look like?

The way we’re viewing this in the commodities is that we have a range of commodities. Some of the commodities are going to be the leaders, and some of them are going to be the lagers. The challenge that I have as a publisher is to recommend and apprise subscribers and provide rationale for which commodities are going to lead and which ones are going to lag.That is homework that we are doing right now for subscribers in anticipation of the likelihood that we will see a correction in a point in time here, and it could be imminent as far as what is taking place in the stock market.

If the stock market experiences a correction here, it’s very possible and likely that commodities would also experience some deflation as well since they’ve been moving together.

Once those corrections are complete, that’s where we would be loading the torpedoes for what is the perfect place to enter long positions, historically, in speculative investment markets?

Commodity Trading for Subscribers

The last chart that I want to show you is the soybean cash (see video). The soybean complex has been one of the complexes that we have rejected as a leader during these legs up.

In the case of the soybeans we put our lows in December, rallied into January, and put a higher bottom in March. The final low in overall commodities was February 18th, so soybeans actually bottomed before the index did so this was a bullish indication for soybeans saying that it was in a stronger position and should lead during the current leg up, and it has.

We have a very well defined target zone in the soybeans based upon the 1974, ’77, ’49, and ’76 highs. We continue to progress along these angles of ascent into what would be projected highs.

The 1974 top occurred on May 28th, and we are coming up on that this week; the first of our cycles to top out. The subsequent cycles with 1976 topping out on June 26th and that is the last of them. We are pushing up towards our target area in the soybeans.Once these highs were in place, dramatic sell-offs took place. This will likely very much coincide with a deflationary move in overall commodities based upon the likelihood that the stock market would be declining as well.

That sell-off in the soybeans and the soybean complex could provide an ideal opportunity to get short, and while it would be a countertrend trade being the the soybeans are in a bull market right now, it would set the stage for a likely very severe correction in the soybeans. If you’ve been listening to recent videos you know that we’ve been long the soybean complex so we are going to be looking to take profits. We are down the road on this leg up and we are monitoring it very closely. The other side of the mountain will be a leg down and then from there a subsequent leg to the upside in the soybeans.

All of these projections we’re going to be providing to subscribers. The soybeans have been nothing short of remarkable with respect to how closely we have followed the key historic precedents ever since experiencing this historic decline. We hope we’ve given you some insight on what is to take place with regard to the overall investment environment.

We covet the opportunity to have you as subscribers during what should be a tremendous wealth-building opportunity if we experience corrections.

You can watch this video and gauge it, but I can tell you this, if corrections occur in the stock market and overall commodities, if that is something that starts to unfold over the next month to month-and-a-half, a correction, then be assured that we’re going to be on point over here in terms of projecting the completion of those corrections in anticipation of those very significant wealth-building moves to the upside.