W. D. GANN'S PERIODIC CYCLE
An offshoot of W. D. Gann's “Magic Cycle” technique gives us a regular, predictable periodic intraday cycle on the $TICK. This cycle changes every day, both in period length and time of beginning. But we can reliably predict when it starts with a set formula and rules. (SCROLL DOWN FOR PICS.)
Though the Periodic Cycle also applies to market data, it is most potent on the TICK, because the TICKs measure institutional buying and selling on the New York Stock Exchange. The cycle is calculated before the day begins. Our formula indicates the precise point to start the cycle. After this cycle starts, each period and alternation remain constant.
We can match this cycle with the trend (both secular and Arcana predictive) and use the alternation as a buying or selling trigger in the same direction as the trend. There are times where the TICK diverges against its cyclical direction. When price and TICK diverge from the Periodic Cycle, we are handed unmatched opportunity for market entry. Risk to reward becomes superior, because you can predict the direction and duration big money institutional buying and selling.
Moreover, the Periodic Cycle works in both trending AND sideways chopping markets. For instance, let’s say the market has been drifting up and then just flatlines. The Arcana shows UP trend. Then the Periodic Cycle changes and alternates UP on the TICK. Even in times like these when price shows almost no pullback, the cycle shows the point at which the market will continue UP.
This cycle does not point to exact bottoms and tops in price. In the toolbox of W. D. Gann, other methods like Arcana, Top & Bottom Finder, and LOV Price Projections accomplish that quite well. But the Periodic Cycle can confirm whether or not that bottom is worth buying or the market is topping out at that high. These techniques along with the Periodic Cycle are taught in our "W. D. GANN: MAGIC IN THE MARKETS" Course.
We've chosen a couple days below to illustrate how the Periodic Cycle’s effect on the TICK plays out in the SPY ETF as well. These two days, September 24th and 28th were picked because the cycle begins in different places on each day, and interacts with different trends.
Let’s look at the 28th below first, because the application of the cycle is simpler. The first thing we notice is that the cycle headed down coming into the market open. We know the length of the cycle in advance, and therefore we confirm that there will be institutional selling for the first 30 minutes or so. While this cycle leg is still declining, the TICK shoots up above 1000. During a declining TICK cycle leg, this divergence gives us a window for a selling opportunity most market participants miss.
We know the market is strong on this day when it bobs up above the open in a cycle of institutional selling. When the Periodic Cycle changes to up just before 9:30am CST, we see that the price diverges as does the TICK. In an up trend, we are seeing a buyable pullback. The cycle then dictates the up and down waves in the market for the rest of the day.
Now let's turn our attention to the 24th. Our formula tells us that the cycle starts a bit later after the open on this day. The 24th is choppier, and there hasn’t been a huge up move on the futures preceding the open.
So on this day the Periodic Cycle in the TICK more closely defines the up and down alternations in the price data. Divergences of both price and TICK to the cycle direction are smaller, but still mark great entry points. On days like these, the points at which the alternating legs change from up to down take over in marking entries.
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