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Jeff Cooper: The Trend According to the Wheels Of Time

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The bear market scenario may be back on the table

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Note: This article was written Sunday night. Despite the events in Paris and the futes being off solidly overnight, the 2024 level held with authority.

"Obviously the thing to do is to be bullish in a bull market and bearish in a bear market...I came to learn that  even when one is properly bearish at the very beginning of a bear market it is not well to begin selling in bulk until there is no danger of the engine back-firing."
-Jesse Livermore

"Volatility is greatest at turning points, diminishing as a new trend becomes established."
-George Soros

Most market participants who have been through more than one market cycle have learned that price is the final arbiter -- unless they are dyed in the wool fundamentalists who subscribe only to buy and hold -- believing that there is not a time to buy and a time to sell: it didn't do much good to identify stocks that advanced strongly off the October low unless you could identify when to sell.

It's easy to SAY that price is the final arbiter, but what does it really mean?

Unless you have a method to measure and qualify price action, the trend is a drunken fool.

For me the analysis of price revolves around:

1) The behavior of the  swing charts on the various wheels of time -- the daily, weekly, monthly and quarterly wheels within wheels and
2) The behavior when time and price 'square-out' or balance out according to the Principle of Squares, one of  the key methods of market visionary W.D. Gann.

Gann often referred to a Square of 9 Chart (or a Time & Price Calculator), a tool which embodies the Principle of Squares.

When I first started studying W.D. Gann, it became evident that the techniques he was using were not out-rightly presented in his books. It became clear that Gann used words in an intentionally cryptic way, never unequivocally revealing his methods.

Some suggest Gann was enigmatic in order to sell his courses. Some believe it was because he wanted seekers to seek and in so doing they would truly learn.

Be that as it may, after at least a decade of using a paper Square of 9 Chart (which is all Gann had), I was able get a user friendly physical wheel fabricated.

Once I had done so, it sparked a flame in my imagination and I was able to see physically how the harmonics of time and price line up to predict potential turning points.

Over the years I have come across several traders who use the Square of 9 Wheel, but they use time and price independently. I have never seen anyone marry time and price to forecast turning points in the way that I use the Wheel.

Although Gann never said it specifically, I have come to understand that the essence of his discovery is that time points to price and price points to time.

At these junctures, a secondary or primary trend change MAY occur.

The trick of the Wheel is that while all major highs and lows are time/price square-outs, not all time/price square-outs are changes in trend---it depends upon the subsequent BEHAVIOR.

It is this melding or vibration of time and price in the way I use the Square of 9 Wheel that I believe embodies what Gann said with authority was the inexorable key to all market action, the Law of Vibration.

"Vibration is fundamental; nothing is exempt from this law; it is universal, therefore applicable to every class of phenomena on the globe."
-W.D. Gann

"After years of patient study I have proven to my entire satisfaction as well as demonstrated to others that vibration explains every possible phase and condition of the market."
-Gann

Let's take a look at some examples  in glamours.

Last week we walked though the triple Head & Shoulders in AAPL

AAPL left a signal reversal bar at an all time high of 134 on April 28 this year.

On the Square of 9 Wheel, 134 is 90 degrees square April 28 for a potential time/price square-out.



On November 5, FB left a signal reversal bar from an all time high of 110.65.

On the Square of 9, November 5 is 90 degrees square 110/111 for a time/price square-out.





On November 11, AMZN hit an all-time high of 675. November 11 is 180 degrees straight across and opposite November 11 for a time and price balance point.

By November 13, AMZN had declined to 642.





The above time/price harmonics in these FANG's correspond with last week's sharp selloff, suggesting that the bear market scenario may be back on the table -- especially since as flagged in this space, 2120 (SPX) is straight across and opposite November 3. On November 3, the SPX rallied to a recovery high of 2116.48. Close enough.

In rallying back to less than 1% of all time highs on November 3, the SPX may have traced out a return rally test failure of its May all-time high.

The index has pulled back to its 20 week moving average which should act as support in an uptrend.



The 20 week line on the SPX also ties precisely to our projection last week that breaking 2071 with conviction should elicit a push to 2024.

At the same time, Friday morning's report used an hourly SPX with a projection to 2024.



As noted in this space early last week, 90 degrees down in price from the November 3 SPX 2116 high is 2071 with another 90 degrees down equating to 2024. That level got hit in a heartbeat. As flagged on Friday morning, "the August freefall started on a Thursday on a break on the SPX 200 day moving average. On Thursday, the index also knifed meaningfully under its 200 day line. A close under the 200 day on the Friday basis indicates more defense."

Following a bad Thursday/Friday on August 20/21, Monday, August 24 scored the largest one-day point decline in history.

Considering the pattern, it will be interesting to see what plays out today.

Another 90 degrees down ties to 1981 SPX.

A full 360 degrees off the 2116 high gives 1937.

The end of this week is the 7 anniversary of the November 21, 2008 crash low. This was the low around the world when many key stocks bottomed. The end of this week is 90 degrees square a price of around 1970 so this may be important if it is seen by Friday.

Conclusion.

Last week the SPX turned its weeklies down following our square-out near 2120 and November 3. Bearishly, for the near term at least, the index accelerated once the Weekly Swing Chart turned down (on trade below 2080) The big picture monthly wheel of time on the SPX is concerning...the SPX traced out 3 consecutive lower monthly lows in August thereby turning the important 3 Month Chart down.

Into November, the SPX traced out two consecutive higher monthly highs in league with the 3 Month Chart pointing south, leaving the index in the monthly Minus One/Plus Two sell position.

The subsequent angle of attack down is suggests caution is warranted.

Performance.

In the month of October the DMR swing picks gained approximately 4%. This brings the performance through October to just over 20%.

P.S. if you are interested in acquiring a Square of 9 Calculator please contact me at jeffreycooper@earthlink.net

Form Reading

MNK




P.S. if you are interested in acquiring a Square of 9 Calculator please contact me at jeffreycooper@earthlink.net

Twitter: @JeffCooperLive

Get Jeff's commentary plus day & swing trading ideas each day with a FREE 14 day trial to Jeff Cooper's Daily Market Report.
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No positions in stocks mentioned.

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