The Daily Gann Newsletter

Overview of the S&P500 Futures Market

The market has found resistance at an important repeating price vibration of 1368 being exactly 100% of the previous range. This is also on strong solar time. The time and price components for a change in trend are strong. But this is only part of the story as Gann advises.

Position, pattern and volatility are not yet confirming a move to the short side. For a change in trend to be considered all 5 factors need to be satisfied.

As a result the trend is still considered long. However we need to be on alert for the markets next move.

Manage our open long positions with stops under the last swing bottom at 1332.

New trades are optional however entry would need to see the 1368 resistance level broken first.

Aggressive traders could consider a change in trend to have occurred once the 1333 swing bottom is broken. But the safer short entry as stated by Gann is once a lower swing top and bottom has been made. We will discuss this in the event the market moves to the short side.

Gann Analysis Consideration – Time, Price, Position, Pattern and Volatility.

Time

The swing top on the 22^nd February is:-

90 solar degrees from 25^th November 2011

225 solar degrees from 8^th July 2011

315 solar degrees from 6^th April 2011

Price

The current swing top of 1368 is at the 100% level of the previous bull range. This level puts us on high alert for the possibility of a change in trend. The bull run needs to break this price vibration level before we can consider opening any new positions.

Position

The market is showing strength by achieving 100% of the previous run – a break through this level signals further strength. It is also the double top level of May 2^nd 2011. Any further bull move through these levels of resistance will signal further short term strength.

Pattern

The daily swing chart is starting to show a few choppy irregular swings, but not enough to clearly show a change in trend. The pattern may indicate weakness but the trend remains long for the moment.

Volatilty/Volume

Remains steady at the lower levels. Any change of trend or signal day may be accompanied by higher volume. Volatitly of the days range is also decreasing as a result of lower volumes. Any increase in either of these may result in trend change. Time to be alert

Summary

Trend Direction

Daily Trend:- The daily trend remains long at this point. However I am very cautious of the time and price levels aligning with the 22^nd February. These setups are possibilities for a change in trend to occur. But at this point the market has not signaled a move to the short side. As a result we need to manage stops and open long positions once price levels of 1368 are broken

Trade Management

Open Trades:- Stop Loss positioned below previous swing bottom at 1332

New Positions:- Entry 1370 – 1 Point above 100% level with stop loss placed at the swing bottom of 1349.

Trend Reversal

Aggressive trading would consider a change in trend once the swing bottom is broken at 1332. All long positions would be stopped out and closed at this level and new short positions could be opened at the same point. Stop loss for short positions would also be placed at 1369.

Elliott Wave Analysis

Elliott Wave analysis can be helpful when considering position of the market. Position is one of Gann's 5 factors in determining a trade setup or trend direction.

From and Elliott Wave perspective we see the market structure unfolding as follow:

The main concern relating to this count is that Wave 2 Primary is about to exceed the origin of Wave 1. We also need to point out that on markets such as the Nasdaq and Dow Jones this has already occurred. This is where the limitations of Elliott Wave are seen. A new count maybe necessary in up the upcoming week and trading based on this information alone can be costly.