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It is vital to know history when you are investing or speculating with your hard earned money is because price history is a reflection of human psychology in action.

Prices move from overbought to oversold levels because human nature does not change.  Traders’ hopes, fears, pride and greed all come into play at major turning points in the markets.

We must know when the probabilities are in favor of these extremes having been reached so we can enter positions and trade opposite of what the public sentiment is.

At critical market junctures, an intimate knowledge of history can show us when a market has reached the extreme to which the herd mentality can carry prices.  Here at Gann Global Financial, we put together what we believe is the largest price database in the world so we would know when the DNA of a current market situation matches extreme situations in the past.

In this new video, I show you what I believe is a very profound market truth based upon the daily trade in the stock market since 1886.  The analysis we show you will provide an important and yet common sense window into a market truth which can be capitalized on over and over again.  This will show you why we have a competitive advantage over other participants seeking to profit in the financial markets.

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Given the aggressiveness of the projected overall commodity advance in 2010, the ideal will be for us to enter long positions in multiple commodities.

In this regard, we could be provided with a rotation of buy signals. In other words, long positions could be entered in wheat which could the first market out of the gate.

With some profits under our belt, this could be followed by buy signals in the soybean and gold markets.

The net result is that we could wind up with substantial long positions during the most bullish portion of the 60-year cycle.  This doesn’t even take into account the possibility of being able to pyramid these moves.

In this video, I update you on the imminent buy recommendation I see setting up in the wheat market.  If the market unfolds according to our projections, purchases of well placed wheat call options over the next two weeks would provide a minimum risk/reward of 12 to 1.

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In this video, I show you what I believe is a stellar example of a market “fugitive” we are in hot pursuit of. That market is the soybeans (and so too the soybean complex).  The trade we are experiencing is closely akin to what has occurred only twice in 73 years of futures trading in 1949 and 1977.

Based upon these precedents, our price action would be a precursor to what were 58% and 73% advances in 4 months, 5 days and 3 months, 2 days.  Both moves were preceded by the same DNA we are experiencing in our market and each of the advances, once they were underway, ranked in the top 10 legs up in history in the soybeans since 1936.

The prospect for our market replicating these precedents is very exciting.  The implication with regard to the risk/reward potential is profound.  We can surmise that if our market were to advance as quickly as these two, the reward would be upwards of a twentyfold return on well-timed call option purchases.

As many of you have gathered, I am very passionate about providing subscribers with a window into history which is available nowhere else – what I consider to be a proprietary advantage.

However, there is one character quality I have found which enables some of our subscribers to produce the greatest returns.  That quality is the ability to demonstrate patience and await the key opportunities we are able to present to them.

You see, uncommon historic moves with uncommon opportunity are not available every day in any one market.  It takes time for price patterns and formations to mature to the point at which they support “runaway” advances or “runaway” declines during which time W.D. Gann said, “a great deal of money can be made in a short period of time”.

As a result, uncovering historic cycles, patterns and formations which precede runaway moves, are what I am most passionate about.  These are the moves which by definition have a significant impact on the peoples’ net worth who participate in them.  I liken our pursuit of these opportunities to capturing a fugitive.  Accomplishing this feat requires research time and patience.

By spending 25 years computerizing daily price data as far back as possible, our objective was to study all of the idiosyncrasies which precede major moves in the 21 markets we follow.

What is especially exciting and gratifying is when a market replicates a historic situation which has occurred perhaps only a handful of times in history in any one market.  These historic set-ups can telegraph with a high degree of accuracy the start of a dramatic price move.

These patterns are recurring because: 1. Human nature is a constant and fears, hopes and greed are a major factor in historic price moves.  2. Each market has its own personality which is discernable by studying history.

Patience

I invite you to watch the video I have produced which lays out in detail the historic record of what is taking place and the rationale behind what could be one of the best opportunities of 2010.  As a result of what we believe is an imminent opportunity in this market, we are providing a 24-hour second chance to take advantage of the discounted offer to our “Complete Forecasting and Trading Package.”

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Probabilities Favor Higher Commodity Market Prices in Soybean Oil

* Please comment on the video at the bottom of the page *

We had a coiling price formation at the bottom most similar to 1976 in that the probabilities favor that we are in a runaway leg to the upside.

This is a market that we initially established long call options positions. For subscribers, the July of 38 call options we purchased at 60 points, as of today’s trade they are trading between 180 and 200. So we all ready have a 200% return on our money, but the prospect is that this market is going to continue higher.

The December 5th 2009 low was projected as a final low. The first leg up in a bull market continued into the January 7th high. Then a secondary correction, the first correction in an overall bull market took prices down into the low of 29.66. And now, if this is a second leg in the bull market, it should exceed the January 7th high, which is just a stone’s throw away.  I’ll say the next stop is a rally over the January 7th high in Soybean oil of 37.81.

Upcoming Trade Entry Point Using Futures and Options

Given the velocity of the advance so far, it’s overbought even for an extremely bullish market. The probabilities are greatly in favor of a minor correction of approximately 200 points.

We saw a very minor correction, a six percent decline. Since the crop report came out the market has been surging higher. Undoubtedly there are buy stops building above the 37.81 level basis the all-session chart. I believe the pit session is approx 37.73.

I would expect that this market is going to run above those buy stops and at that point we could get a very minor sell-off of as much as 200 points before the resumption of the advance.

The probabilities continue to increase for our being in the midst of a classic runaway advance. If so, we would expect only minor corrections on the order of the previous sell-off of 204 points.

We have long call options positions. We have long futures positions. We’ve been adding to positions on the way up. I don’t rule out the possibility of adding for a third time in a pyramid type situation if we rally above that January 7th high and then retrace beneath it. I’ll have more to say on that but this market is potentially in a very strong position.

The soybeans are in a very similar position as the soybean oil. We’re not too far off the January 12th electronic session high of 1069.

We are a stone’s throw from the January 12th highs in both the soybeans and the soybean oil. This is a very favorable position in that there will be a significant number of buy stops accumulating above these highs.

In addition, in both markets an advance to new highs would indicate a high probability we’re in the midst of a second leg up in an overall bull market. By definition, the classic bull market is a market that makes higher highs and higher lows.

We had a low December 5th, the first rally high, a higher low, and if we can push through and make a higher high that would confirm a bull market.

We don’t buy breakouts into new highs. Generally there are retracements after those breakouts occur. There is a lower risk opportunity standard in long positions so we’re definitely looking at that as a possibility to add to profitable positions or pyramid in this particular market because our projections are showing that we’re only about halfway to our overall objectives to the upside.

* Please comment on the video at the bottom of the page *

Soybean Complex  Analysis

Current trade action in the Soybean Oil is tracking the angle of ascent of the aggressive 1976 precedent. Hopefully that’s how things continue to play out. Of course we don’t know that but that would be a home run situation for subscribers..

If we were to replicate this advance, the 38 July call options would advance from our average entry price at 60 points to at least 800 points, which would be a 12:1 risk/reward. The 34′s would probably be in the neighborhood of 9:1 risk/reward. The 36′s, I think 11:1, and the 38′s would be the greatest risk/reward but obviously there is a long way to go, but so far so good.

Currently the value of the options is approximately a 135% advance from where we entered.

As far as the May futures contract, I’m watching the relative strength in the soybean oil relative to the soybeans and the soybean meal. After lagging both the soybeans and the soybean meal, soybean oil is actually up 18% off the 2966 low, soybeans 17% off the low, and soybean meal 15%.

I view this as a favorable development. One of the reasons I’m more bullish on the Soybean Oil  is that it was more over sold than either soybean meal or the soybeans.

Soybeans topped out in March of last year, as compared to the Soybean Meal and Bean oil which topped out in June or July.

Actually, into this December 5, 2009 low, that was the completion of a second leg down in a bear market. We’ve spent more time on the bear side of the equation on the soybean oil than we have in either the meal or the soybeans. By virtue of that, that is one of the factors that I felt would, as a result of the law of action and reaction, favor the soybean oil over the other two markets.

On a short term basis though, Soybean oil pushed above a recent minor high and is showing relative strength to the other markets is very favorable.

* Please comment on the video at the bottom of the page *

High Probability a Final Bear Market Low is in Place in Overall Commodity Prices

Point two: I believe there is a high probability of final bear market low is in place in overall commodity prices. The sheer violence of the waterfall decline followed by the trading range we have experienced since December argues for a final low; however, there are a couple of qualifiers here.

First, the damage that has been done, wealth destruction, has been so great there is no expectation nor historic precedent for commodity prices regaining the historic price levels achieved last year for a very long time to come.

Carrying Charge Premiums Diminish Wealth Building Opportunity

Secondly, the carrying charge premiums in the various markets, most notably in the crude oil and energy markets, are exorbitant and greatly diminish the probability of any great wealth-building bull market occurring for probably a very long time. In other words, we are projecting a bull market in overall commodities but one which needs to be approached as a trading market for the time being.

As you will see, the excessive carrying charge premiums are also in effect in the wheat, corn, oats, and cotton Just as a review, for those of you that perhaps don’t understand how the carrying charge premiums work, if we take the current contract in the crude oil, let’s just say the May contract, and we look at the contract in May of 2010 (one year hence), the 2010 contract trades between 20 and 30 percent above the current price. In other words, the current price on the nearest futures of the spot market is far beneath the future contract in May of 2010.

When you go out and you buy crude oil for delivery in 2010, you have to pay this huge premium. What we know historically, and we have done a huge amount of research on this, is that when there are large premiums in a market like that, it is a hindrance to making money. This is because, even if there is a bull market, that bull market in the cash market would have to advance 20 to 30 percent over the next year just for you to break even in the futures market.

It is like the market has a 27 percent interest rate. The equivalent of a credit card rate of interest in holding current contracts. This makes market participants dependent upon the market, the spot price, to move up more than what that premium is in order to make money, and that makes things very difficult for those on the long side.

Really, what it amounts to when we have conditions like this is it is better to be a trader in the market back and forth, and it goes back to also the option market; doing option writing can be the most effect means to make money in this environment.

Potential for a Final Low Based on 1920 and 1948 Historic Crash Precedents

I first want to show a table of all of the bear markets which have taken place across our board between 2008 and 2009. We see that most markets did bottom in 2008 and with a number following through into this year. Basically December, October, and December lows is when the final lows were established.

Now, the overall decline in these markets was 60 percent, but you can see that those in the purple were over 70 percent, all of the energy markets and also the copper markets. Anytime you see markets move really into the 60 percent and into 70 percent, we are looking at historic bull markets of the highest order.

The percentage retracement of the previous bull markets which started in 2001 averaged 78 percent. In a matter of  about five months, all of these markets retraced what took seven years of advances in price to culminate in the final top.

We have seen a waterfall You could call it a crash, call it whatever you want, the expletive that you would want to use for this market. It is of the highest order of deflation that we have ever seen in 200 years. In 1920 and also 1948 waterfall declines, or crashes occurred, but they culminated. In other words, those precedents established final bear market lows. It is based on those two precedents (1920 and 1948) that I believe that we have a final low in place.

The carrying charge premiums as of March 25th for 12 months out:

• Heating oil: 16 percent higher than the nearest futures
• Crude oil: 21 percent higher than the nearest futures
• Gasoline up 14 percent higher than the nearest futures
• Corn 14 percent higher than the nearest futures
• Oats a whopping 29 percent higher than the nearest futures
• Wheat 17 percent higher than the nearest futures
• Orange juice 19 percent higher than the nearest futures
• Cotton 20 percent higher than the nearest futures
• Lumber 19 percent higher than the nearest futures

Generally, this means that there is going to be basing action, or backing and filling all the way up. That does set our expectations. One thing that is interesting here is that you can see that in the soybean complex which we are holding long call option positions in, you can see that the premium is only six percent in the bean oil. Actually, it would be considered backwardation in the case of the soybeans. The distant contract is trading five percent lower. This would be considered normal premiums. Therefore, by participating in Soybeans, it means that we are buying value, and we don’t need to see the spot or the cash price advance like we would need to see in these other circumstances. That being said, that is a good market for us on this basis to be long in right now.

The Great Bear Markets in History

Crude oil declined 78 percent in five months and eight days. On a percentage basis that ranked as the seventh greatest out of a total of 20 that were in the elite category. But in terms of time, it ranked as number 20 in terms of length. It was far and away the shortest bear market in history; the second shortest being the cotton market during the 1920 to 1921 period.

On that basis, I had felt that we would probably see another leg down in the crude oil, obviously not the velocity that we have seen in our market that we had seen into the December low because we had come down 78 percent. I am not sure if that is gong to be the case. This ranks as the greatest decline in any commodity in terms of percentage move in the shortest period of time in history, and so it ranks at number one of twenty. This decline was rapid, culminating in dramatic fashion, and a bear market low is probably in place.

These are the historic bear markets following the great inflations in history. In 1920, we had this dramatic waterfall decline, but the final low in June of 1921 was a historic low, and the next bull market started, but the bull market was gradual in comparison to the decline.

1929-1932: Great Depression Deflationary Scenario in Commodity Prices

In the 1929 to 1932 period, all of the commodity advances were extremely modest, so this deflationary scenario in commodity prices during the Great Depression is one of a kind in terms of our historic database. The rallying power and consolidation in our market means we have basically divorced ourselves from the likelihood we are mimicking the minor rallies during the Great Depression.

What can we take away from that?

• We are not carrying the earmarks of the Great Depression at least in terms of overall commodity prices
• Our decline was much more rapid than occurred during the Great Depression
• We are experiencing consolidation that we didn’t experience during the Great Depression.

In other words,  overall commodity prices definitely have a unique signature that is more akin to the 1920 market than the Great Depression 1930′s market. That in and of itself would tell us that we are not a perfect parallel to the Great Depression. Hopefully that means that we are not going to see our economy disintegrate. That would be in favor of the possibility that we even have a low in place in the stock market, and that certainly is a possibility.

This is the 1949 market, but the waterfall decline in this market occurred and culminated, and then a major low was established, and you can see that the market moved higher here and actually exceeded the bull market top in 1948 but didn’t do so for about two years.

60 Year Cycle Almost Right on Schedule in Commodities

The Goldman Sachs chart (see video) shows projections of how these historic market movements occurred by overlaying them on a current chart to see how a mimicking move would play out.

This 60-year cycle I believe is the most important. It projected a final low in commodities in April of 1949, and our low is February of 2009. That is within two months of this replicating the 60-year cycle 1949 low.

Crude oil bottomed in December, but overall commodities touched a new low in February. On that basis, it would say that we are going to start s long-term bull market in commodities, but it was very modest to begin with.

Great Commodity Bear Markets

In 1974 market spiked up.  Then, the market ultimately culminated in a final runaway advance in 1980. We did see a spike up, a sell off, a violent rally, and then a secondary decline, but this waterfall decline in 1974 did culminate in a historic low in 1975.

This was a very short-lived bear market. Following the historic high in 1980, we experienced the crash of precious metals into March of 1980, and then overall commodity prices advanced until September of 1980. That started a long-term bear market which actually didn’t culminate until the year 1998.

(See the video for a chart of the Goldman Sachs commodity index) The recent decline in the Goldman Sachs commodity index is the greatest wealth destruction decline in commodity prices in history in the shortest period of time.

Between July 2, 2008, and February 19th, we declined 66 percent in seven months and 17 days. Recently, we have seen an advance of about 25 percent to the upside. Lately we have had basically trading range action.

The problem is that if we have this modest leg up in commodities and markets like the crude oil are at a 20 percent premium and cotton are at a 20 percent premium in these distant contracts over the front, then that diminishes the potential return to the up side. We need to calculate that into the equation and say that we expect to see some of these markets make modest moves, at least in the futures contracts whereas the underlying cash will be more dramatic.

* Please comment on the video at the bottom of the page *

I want to point out a number of things here. We had mentioned back on February 24th that the soybean complex held its own in spite of continued weakness in the stock market, that would be an indication that the market was in a strong position and that has been borne out.

Also, sometime back we had pointed out the 60-year cycle, which is the most important inflationary cycle that we’re looking at right now and has the potential for turning commodity prices higher, that was the shortest lived historic deflationary move in history.

Based upon that 60-year cycle, that was one of the cycles that put us short back in July of last year. The final bottom basis that 60-year cycle was as of February 9th, suggests we would have bottomed as of February 9th, but the time period based upon the 60-year cycle in the soybeans would have bottomed as of March 2nd which was exactly our low in the soybeans. That is very interesting that that time period came in right on target.

In looking at that 60-year cycle, the ascent which took place once the final low was in place; the leg up which took place in the soybeans during 1949 into July of 1949 suggests we basically are running really hot to the upside. But based upon an average overall ascent during the 60-year cycle, this would be the progress that we would expect in our market.

Now, dropping down in the soybean oil, we have felt that this market was in a stronger position than the soybeans. It topped out in March of 2008 whereas the soybeans didn’t top out until June, so we actually established a lower top in soybeans so the overall bear market is more mature.

You can see this 1976 precedent bottomed within one day of our low. The ’76 precedent bottomed as of March 17th. Our low at 2966 this past week established its low on March 16th, within one day.

In both these, the soybeans and the soybean oil, we have some bullish cycles which have now come into play.

In looking at our call options positions, obviously, a very favorable session today in the soybean oil. The July options expire on June 26th so these are the options that we’re holding.

If we were to replicate the 1978 advance, again, we would see the market push up the $46 level. Following the 1976 precedent would mean prices would go up towards the $46 level. We have plenty of time on these options to see this borne out. These were very significant moves, 57% and 48%.

If we have the same DNA and we’ve demonstrated it up until right into this buy signal, then we would expect to see this market experience, that kind of percentage of gain, and the possibility would be to see these options increase 10 to 12 fold.

We will likely look to take profits before, on partial positions, anyway, we would like to take profits on the way up but the prospect is for a real home run situation there.

I like how everything is playing out as far as the soybean complex is concerned.

* Please comment on the video at the bottom of the page *

We’ve experienced a very sharp decline in terms of velocity, and we’ve had five days where the market has done some backing and filling. That is actually a very healthy thing in that the market was getting a little ahead of itself, so profit taking and backing and filling is a very healthy process. Nothing goes down a straight line even though these are the greatest legs down in history.

These are the greatest legs down in history in the stock market (the red lines and target points on the lower right), and yet you do see that there is backing and filling on the way down, as one would expect. A couple of observations: other than the correction after the first leg decline on the 29th, all five bear market rallies were complete by February 7th.

Here’s our target zone (the red box). This was the last of the bear market rallies to complete (U 1930). You can see that we are well off that February 7th date, so the probabilities are very high, that this is a bear market with extremely high probabilities that the January 5th high is the high for this bear market leg.

The other side of the equation is if this market did continue to go higher and continued higher beyond the February 7th high, then the probabilities would go up that we have an important low in place. That being said, these target zones tell us a great deal about whether the market is conforming to historic norms because as soon as it stops doing that, then we have to say, “Okay, something else is going on here.”

But right now, this market is conforming beautifully to what we would expect for another leg to the downside. Now the other thing is, if the current decline has started another leg down, it is running pretty hot relative to the legs down during the Great Depression. That was what I said at the recent low, but now we’ve had five days of consolidation, so the market is in a healthier position here, healthier in advance of what we would expect to see as a breakdown into new lows below 797 with a break of the 737 low with follow-through to the downside.

At the 797 low, this is what we were telling subscribers. We have a buy pattern. If I was looking to go long, the reversal higher after breaking the 813.50 low by 16.50, which is what we did; we broke this 813.50, dropped down to 797 and ran into a ton of sell stops down there and panic sell orders. But the reversal from there actually issued a buy signal if we were looking to be a buyer, but since we believe we’re in a bear market, in bear markets you don’t take buy signals, and in bull markets you don’t take sell signals. We go with the trend, but we did get a buy signal, and we have to respect that.

A break of 797 would increase the probability we are in the midst of a leg down and an overall bear market. A break of this low would indicate follow-through. This is particularly true in light of the last five days of trade, so if we break this 797 low, we have trade action, trade recommendation for subscribers on what to do in anticipation of follow-through to the downside.

This is the setup in the March S&P. The last was at 839.80 and I believe that we closed a little bit higher today, as I’m coming to you just before the close on Tuesday afternoon.