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Technical Analysis – Gann Angles on the current Dow Jones Industrial Index DJI

Posted by ozstock on Dec 9th, 2008

This is an interesting week. Not only is the American market set to respond to a major stimulus package, but the Gann angles show that we may be at the cross roads. Before analysing the current DJI graph, please note the following technical details:

- The chart below is a weekly chart. Daily chart are too volatile, monthly is good for a longer term view.
- Gann love the 45 degree angle. But that was possible only because the weekly time scale is comparable to the price time scale of certain stocks in Gann’s time. Eg. it is reasonable for a stock to move one unit over one week.
- My adopted Gann angle will be a gradient of 10 for the DJI. i.e. 10×1 gradient correspond to Gann’s 45 degree. In fact, I will be using gradient terminology rather than degrees.
- The purple line starts from the Origin or Zero, at a particular significant time, eg on the date of the highest point.
- Unlike other charting techniques which simply “connect the dot” from peak to peak or trough to trough, Gann’s methods are based on fixed angles or gradients. Gann’s lines DO NOT aim to the fit graph, rather the graphs can be predicted by Gann’s lines.

(The technical notes above should also be applied to my previous article on Gann)

So the BIG question, “ARE WE THERE YET”? Have we reached the bottom?

1. Usually a bear market has about 3 or 4 drops. But note the 1929-32 had a first big drop followed by 6 other drops for over 2.5 years. In the Credit Crunch of 2007-08 (hopefully not -09 as well) there have been 3 significant drop followed by a huge drop in late September 2008 (the fourth one). The bear may be over ???

2. It certainly crossed the major -10×1 gradient but not really near the -20×1 gradient to find support. So it can drop to that level next.

3. The 20×1 gradient starting from a value of 0 at the date when DJI was highest ever, is acting as a support from the bottom. More interestingly, it looks like it is squeezed upwards by the -10×1 line. It may bull towards 9500 on 27 Jan 2009. Or if it breaks below 8500 this week, it may crash further.

4. Looking purely with time, it is 60 weeks since the major high. To square the time and price, anticipate the DJI to move down 6000 points from 14200, which is about 8200 within this week.

So the final answer is All of the Above; ie. monitor the signals mentioned above. To put it simply, if it does not follow the purple line up, then it will drop further.
It is very interesting that it rests so nicely on the 20×1 line from “O”.