Global stock indices have taken a bit of a pounding in the month of October. It’s not the first time October has been a rough month for long term investors, and I’m sure it won’t be the last, either. In Chart 1 below, you can see that the Dow Jones Industrial Average (I am using the code INDU in ProfitSource software, which goes back to 1910, however, if you want to trade the Dow Jones, you will need to use EYM-Spotv for the E-mini Dow Jones Futures Contract). As you can see, the Dow has lost 10% of its value in October.
Chart 1 – The Dow Jones Industrial Average Top on 3 October, 2018
If you cast your mind back to DVD 9 of the Ultimate Gann Course, David talks about his 1989 forecast (the footage on the DVD was recorded in November of 1988!), and notes that it would be 60 years after the 1929 high. 60 years is one of Gann’s Master Time Cycles. The 1989 high was almost 30 years ago, which means it has been nearly 90 years since that awful crash of 1929. 90 years is another of Gann’s Master Time Cycles.
These Master Time Cycles do not always work perfectly – sometimes they run a little bit ahead, sometimes a little bit behind. You’ll hear David say on DVD 9 of the Ultimate Gann Course that he thought 1989 would be a worse crash than 1987, because it would be 60 years from 1929. David even notes that he couldn’t see why markets would start working on 58 years instead of 60 years – and yet, 1987 turned out to be the bigger of the two crashes. This means that we can’t just sit back and assume 3 September, 2019, the 90 year anniversary of the 1929 top, is going to give us a major top. It might – but there’s a bit more to our analysis than that.
On page 20 of the Ultimate Gann Course (well done if you read this page when I asked you to), David shows you a chart that compares two separate periods of the market. This is a very basic ‘Comparison Chart’, which our MFC students would recognize. During the Stock Market Crashes video, I showed you a series of crashes, looking for similarities between them. My hope was that Safety in the Market students, after reading page 20 of the Ultimate Gann Course, would start comparing some of the different crashes, to see the similarities between them.
I would strongly encourage you to recreate Chart 2 below in your ProfitSource software, using split-screen mode. You can do this by clicking on Charts, New Price Chart and Split-Screen. Take a moment to compare the two runs in the market.
Chart 2 – Dow Jones Industrial Average Comparison of 1914 to 1929 and 2002 to 2018
The run up into the 1929 top began in December of 1914 and lasted just short of 15 years, or 180 months. That’s a long bull market! The price ran from 53.2 up to 386.1, meaning the 1929 high was 7.25 multiples of the 1914 low. In October of 2002, the Dow made a low of 7197 points. The current high in October, 2018 is 26,951.81, which is 3.75 multiples of the low.
I don’t know about you, but I see a lot of similarities between the two charts. The low to low time frame between December, 1914 and August 1921 is very similar to the low to low time frame between October, 2002 and March of 2009, although March, 2009 was a lower bottom, while August, 1921 was a higher bottom. The first two years of the comparison were also remarkably similar, and many of the lows lined up throughout the comparison.
Interestingly, the comparison begins with the December 1914 low and the October 2002 low. These dates are 88 years apart, which I’m sure you’ll agree is not quite 90 years! However, if we were following a straight 88-year comparison, we would have already seen the 1929 high come in September of 2017. This was not the case – you can see that the current bull market has run further than the 1914 to 1929 run (note – technically the current bull market began in 2009, however, due to the similarities between the charts, I am still lining it up from October, 2002). And this is why Master Time Cycles alone are not a stand-alone technique. They need to be combined with other techniques.
Now, I would encourage you to take some time to study the run into the 1929 top, on a small scale, and compare it with the run into our current 2018 highs. Interestingly, the current high on 3 October, 2018 is 89 years and 1 month after the 3 September, 1929 high on the Dow. That’s starting to get a little bit closer to the 90 year Master Time Cycle. But take a look at Chart 3 below. Here, I have lined up the 1929 top with the 2018 top on the exact date, to study the run into each top. What do you make of the charts?
Chart 3 – The 1929 High and the 2018 High
For students who own the Master Forecasting Course, I would encourage you to do some further research on Master Time Cycles by studying the supplementary booklets that come with the MFC (and for those of you that don’t have an MFC… maybe it’s time to start thinking about getting a copy?) There is a lot more to them than what I have covered here. It is also worth revising Dan’s Lesson, and the Nikkei Dow Comparison Lesson.
So, what does this all mean? I believe that the October, 2018 high on the Dow will prove to be either the final high of the bull market, or the ‘high before the high’. To put this in perspective, take a look at Chart 4 below.
Chart 4 – The High of 1929 and the High Before the High
We won’t know for sure whether we are dealing with the final high or the ‘high before the high’ until the dust settles on the current falls and we have seen a Re-test of the extreme high. If that Re-test of the top fails, then hold on to your hats!
Now is a great time to do some work on global stock indices. If you don’t trade currencies, then perhaps a major high or low on the Euro wouldn’t be of much concern to you. However, most people have at least some exposure to the stock market, either through their share investments or through their superannuation or 401K plans, so the movements of global indices should be of interest to EVERYBODY. We are approaching a crucial time in the markets. If we see anything like a repeat of 1929 and The Great Depression which followed, it will be a savage, long, and difficult time. Remember, the 1932 low was LOWER than the low of 1914. Imagine if we broke the GFC low from 2009? What would the state of the world be?
Take the time to do a bit of study and get yourself prepared. If you are not following global indices, I’d suggest you pick one and start following it. I would also encourage you to re-watch the Stock Market Crashes video on YouTube, with the benefit of this article. There is more than one nugget hidden in there! And remember, if you haven’t subscribed to our YouTube channel, please take the time to do so.
All the best,