W. D. Gann used several types of ‘natural’ cycles in his trading and analysis. First, he used ‘magic,’ or static cycles that repeated in measured moves of time, volume, and price. Next, there were the ‘trend machine,’ cycles, or cycles in trend. Finally, W. D. Gann’s “up & down” alternating cycles from “The Tunnel Thru The Air” get the most following as the “unicorns” or Holy Grails of cycles. This page was created to explain and showcase our technique for projecting these cycles in advance using Gann’s Law Of Vibration.
Alternating cycles alternate in legs that go up-down-up-down, etc. Up always follows down and down always follows up. The green cycle lengths in the examples below and on the next page are ‘up’ cycle legs, and the red denote ‘down’ legs. After the cycle turns up, there should be higher-highs and higher-lows after the cycle turn, as well as a significant up move in price past the price at the time the cycle began. After the cycle turns down, the opposite should be true. The cycle turns do not promise to mark the exact high or low of the period, and do not guarantee that the price will not make a move against the trend direction during that cycle period.
We have a very, if not overly, strict test for these cycle lengths. In the case of an “up” cycle length, we demand that the price at the very end of the cycle leg should be higher than price at the very beginning. And the opposite for down-cycle lengths. The yellow cycle lengths marked in the examples below denote cycle lengths where that test failed. Even though these failures are few and far between, and the majority occur during off market hours, during these legs the price often makes a significant move in the desired direction in the majority of these cases. In other instances, the price remains close to flat at the end.
When you have an accurate alternating cycle and its underlying cause the way W. D. Gann did, the sequence of the alternation of the cycle lengths does not change when the market fails to perform in the desired cycle length direction (frequently referred to as an inversion.) If the cycle length is “up,” and the price at the very end of the cycle is lower than at the very beginning, then the market has failed and the next cycle length is still predicted to be down as expected. The market failure does not change the alternation of the cycle. As we found out the hard way for years, when one experiences a failed cycle length that seems to change the alternation of the cycle, the cycle has not failed. They are really missing a crucial piece of the underlying cause. As Luther Jensen pointed out in his ACSM book, unforeseen news has the power to cause market action to fail a cyclical move. So true “up/down” alternating market cycles have roughly an 8% failure rate max for the annual cycle legs. Most years experience a 4% failure in cycle lengths. For the monthly lunar cycles, we find the average failure rate for cycle legs using our criteria to be about 10% max with most months experiencing 5% in the failure rate. But again, at least a third of those occurrences are predicted failures and in reality a trader would have profited off another third of the legs where the market moved significantly in the predicted direction before failing at the end of the cycle.
The bottom line on these cycles is that Gann used them as a tool for confirmation and confluence. Gann used alternating cycles as places to enter and exit when trading with the Arcana and other techniques. Add the tedious nature of drawing these cycles out in his time, and you have the reasons why he devoted a smaller amount of written material to these cycles than other techniques. Those trying to trade this technique as a stand-alone system will see frustration.
All the examples of alternating cycles below were drawn out in advance. Included below are monthly lunar cycles, W. D. Gann’s annual cycle, and the most recent occurrence of the “Robert Gordon’s 7 Days” cycle from one of the last chapters in “The Tunnel Thru The Air.” Not every lunar cycle for each year is shown. Our legal counsel forbids us from posting future predictions. Source of charts: Wave59.
2018 ANNUAL ALTERNATING CYCLES
The 2018 annual W. D. Gann cycle is now complete. Of note was the “message to the Fed” pattern that began October 3rdish. This was the same “fall for no apparent reason” that we ran into in August 2015. Same environment- the FED threatening to raise and the market yelling at them, “Don’t you dare or we’ll do this!” Suring this pattern the annual cycles saw the failure of two legs in a row. Very rare, but it denotes market manipulation against natural law. Not bad, 89% of the cycle legs succeeded in predicting direction.