Gann Global Financial

This is an update on a specific wheat situation that we laid out for you in our last video. In light of today’s trade (Oct 12), we saw the wheat futures  push up about 5.5% on a one day range. The Wheat futures advanced over 25 cents in the December futures contract.

What we’re conveying to paying subscribers (you have the opportunity to look over our shoulders with this video) as expressed in that last update, was that we had equaled the greatest bear market in history in 150 years of trading in the wheat market, equaling The Great Depression decline from 1928-1932.

We also pointed out that the recent decline off the June 1st high to last week’s low equaled the greatest leg down in the history of the wheat market at 57%. So this oversold condition, by the law of action and reaction, something we talk to subscribers about all the time, leads us to the old Wall Street maxim “The bigger the bull the bigger the bear” or “The bigger the bear the bigger the bull.” That has actual statistical truth. When investors or traders push markets to extremes of euphoria or despondency (depression), the aftermath of that many times brings some very significant moves. The wheat market had all of the DNA for that to take place. But I’m updating subscribers with respect to what is playing out as a very,  good scenario here currently on long futures positions from 4.64, we closed at 4.94¼, about 30 cents off that entry price.

Disclaimer: This video is published from information believed to be reliable, but it is not necessarily complete nor can it be guaranteed for accuracy.No solicitation is made here for individuals to buy or sell futures contracts or options on futures. Futures and options trading is inherently risky and should only be undertaken by individuals with adequate risk capital.

We are also long the December 560 call options, actually a number of strikes but the 560 call options we purchased at 7.5¢ and they closed at 21.5¢. When you see the type of movement and velocity that we have seen in the wheat in the last three days, obviously it stands to reason that the options have the potential to, the volatility premiums and the movement 13% advance in the wheat market all come in to play and very favorable.

We do have an order working in the December Gold futures contract, but I’m not going to go into it.  Gold prices are sitting on the cusp of moving to new all time highs. It fractionally broke the futures contract highs from back in July of 2008 just by $2.50 last week, and if we push through a second time the possibility is that we push through with follow through to the upside. This is also a recommendation. We had a recommendation on the dollar index but this is actually canceling that recommendation.
Looking at the S&P 500, we push to a new high today in the S&P and our projections have been calling for this market moving higher to a minimum of 1130, so we have room to the upside and that would potentially complete this combination of first two legs to the upside. The backdrop of what is taking place in the wheat is a bullish stock market, and that has been the case.

Turning over to the dollar index, we have been pointing out to subscribers this double bottom low here at 76.02½ and 76.04½. The market broke to new lows last week, experienced a snap back rally, and if we continue lower, obviously a decline in the dollar is bullish for commodity prices so one of the reasons that the gold prices have been advancing has been the inverse of what is taking place with the dollar and so a continued decline on the dollar would be bullish for the gold market.  We have a gold forecast stating it can continue higher. It’s been advancing for a little over three months, and it has advanced 17% which is actually relatively modest. That is from the last major correction, 17% to the upside. We do have some room there.

What I had pointed out to subscribers today, I said, A continued break down, a decisive break of the double bottom, definitely cannot be ruled out. The trend is down. In fact, it would be evidence supporting our long term bullish argument in overall commodity prices based upon the 60-year cycle which calls for an advance to new all time highs into the year 2011.

Now, I’m going to get into the Goldman-Sachs commodity index as a representation of commodities overall. We’ll be looking at  our commodity forecast via that chart in a moment.

Based upon what occurred during the boom and bust cycle in 1948, the post-WW2 boom and bust cycle, in the aftermath of the bust, similar to what we have experienced in our market, within three years overall commodities actually advanced to new all time highs as of 1951. That exceeded the 1948 highs so it’s a very interesting parallel that we have playing out between our market and what occurred during 1948.  With regard to the wheat I say, At this juncture continued weakness in the dollar would likely be supportive of our long positions in the wheat.

What I’m pointing out to subscribers is that the psychology is right. That could play very much into our favor as far as a continued surge to the upside in the wheat market.

Yes, we can see some backing and filling as far as the number of days and that kind of thing, but the market really has been moving up at a tremendous clip over the last three to four days. In the gold market you can see that we exceeded the March, I said the July high, it was the March 17, 2008, high of 1060. we hit 1062.70 last Thursday. This capture on this chart this commodity was trading at 1055.90 as of Monday afternoon I believe we are at about 1057, so we are a hop and skip from pushing new highs after having clipped the highs, sold off a little bit, and then pushed back to the upside.

A continued break down in the dollar coupled with an advance to new highs in gold prices would presumably provide inflationary fuel to our projected short term spike up in the price of wheat. Yes, I believe that a major low is in place in the wheat market, but the initial thrust off the lows, they can be sharp but they’re generally short-lived and they’re followed by backing and filling. There are some internals to what is taking place in the wheat based upon history and that history goes back to 1858.

There is no other service out there that provides that kind of perspective. We have basically developed software to analyze a market and compare it and search history to find the closest historic parallels to what is taking place in the wheat market, and that is why we are saying, Well, based upon the DNA of what is taking place in our wheat market.

We had sent out the video to you. If you saw it the other day it was before this big surge in the wheat market, so we’re not telling you something after that fact. We’re telling you this market is due to go. We’ve recommended already that subscribers enter long positions. I’d like to do that. I’d like you to see our work real time as far as what takes place.

Looking at the Goldman-Sachs index you can see the price pushed up almost to exactly the June 11th high, and commodity prices have been moving sideways over the last three months, basically, but most of the markets have been on the move.

The crude oil is not too far from its highs for the move. Gold prices and the silver market are at their high for the move. Copper is not too far from its high for the move. The soybean complex has been surging. The corn and the wheat getting into the act. The overall commodity index, the bias is up. The trend is up. We’ve been saying it since the lows were in place in February, that this would be a long term bull market in commodities and that is indeed what has taken place. Over the last three months it has been rather choppy but the long side of the market remains the trend. I say, Overall commodity prices are also on the verge of pushing up against the highs for the move. We are in a place where all those who have been on the wrong side of the trends have a ‘logical place to scream uncle.’ Today we traded to within 75 points of the June 11th high on the Goldman-Sachs nearest futures. So anyone on the wrong side of the dollar index is facing this monumental double bottom which could be broke decisively. Anyone on the short side of the gold market is faced with this all time high from back in 2008. The market pushing into new all time highs.

There is a lot happening in these markets with respect to the markets being at a point that could steamroll those that are on the wrong side of the market. Obviously they are on the defensive, on their heels, and if we push this Goldman-Sachs to new highs as a representation of individual commodities pushing to new highs, that is going to be a very painful situation for those who have been fighting the trends in these markets. That also leads to potentially a short term panic buying covering of shorts and that plays into our hands as far as the wheat is concerned.

The wheat market put its lows in last week, October 5th at 2.47½.  As of the close today, up 25% from Friday’s close. I don’t have the closes yet for today because they don’t come out until later in the afternoon, but that would place us up to three dollars a bushel in the wheat market which means that we have exceeded all of this minor commodity trading down towards the lows, and we’ve reversed to the upside, so that is a bullish sign.

What we’ve been telling subscribers, it’s very likely that we will see a spike to the upside similar to what happened in June – 35%; December 55%; and this move off the low here in June to the June high. I’m going to show you the equivalent in the December futures contract. Those rallies were 22%, 31%, and 30%, so you can see we had an extreme wide-range advance today, closing at 4.94¼ up 13%, 4.96½.

I said this on Friday, The rally above the September 15th minor high at 481½ followed by this minor retracement will be a very constructive pattern if we can experience an advance above the 483 high. We had already been long in the market. We entered options the day after this wide-range low, on this day, those are the options that have tripled. On the next day we entered long futures positions at 464, the market is up $.30 here. This is my comment on 10-12, today, he rally above 481½ to 483 and retracement beneath 477¼ this minor high, followed by today’s advance to new highs issued a minor breakout retracement buy signal.

So, there are six patterns that we use to enter market positions, whether longs or shorts. We had a minor buy signal which was issued today which confirms our previous buy signal. This is basically giving us green lights that it appears that we not only on the right side of the market, but we are poised for continued follow through the upside.

I said, I’ll be keeping an eye on the minor high of 516½ that’s the high up here, buy stops will be building above this level. I would expect that during this run that we would see that 516½ exceeded and we have the possibility, basically I have three projections that this market can move up anywhere between 21% to 31% with a median yes at 27%.

Those aren’t huge moves but that is going to result, if we were to move up 31% basis the December futures then our call options will be at a 9:1 risk reward premium. We will make nine times what we risked on these options.

So 31%, given the law of action and reaction the action being one of the greatest legs in history to the downside, and this is since 1877, is going to result in the law of action and reaction, that’s where the term reaction comes from in a market, and even if this were a bear market rally the market can move up very quickly as it did during these previous bear market rallies.

Our projections do show that a final low is in place in the wheat market and so this market is going to be on the table for us for the foreseeable future I believe, in terms of the potential profitable moves.  We will and are keeping subscribers apprised to this. I thank you for tuning in today, and I always enjoy presenting material that is available nowhere else since no one has gone through the laborious task of acquiring daily price data.

It took us about 15 years to get the daily prices; to computerize it, to build the software application, to analyze it. A huge, huge amount of work, but the fruit of that is the type of analysis that you’ve seen over the last two videos.

Disclaimer: This document is published from information believed to be reliable, but it is not necessarily complete nor can it be guaranteed for accuracy.No solicitation is made here for individuals to buy or sell futures contracts or options on futures. Futures and options trading is inherently risky and should only be undertaken by individuals with adequate risk capital.