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As Weird As It Gets – Predicting The Market Top With Gann, Demark, And Elliott Wave Analysis

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), IVV, IWM, SPY

By Chris Diodato

In my Tuesday post and in today's post, my objective is to support my thesis that the market is going to make some sort of important top around October 22-26. In another post, I used the Demark sequential to show that the market will be very vulnerable to bullish exhaustion. Now, to explore the market with the very little known methods of W.D. Gann.

Here's the chart of SPY (I used the ETF because I wanted gaps included. Indices don't gap). I use the "Square of 52″ and the 45 degree and 22.5 degree angles to find points of support and confluence.

The market seems to respect 45 degree trendlines from market bottoms quite well. The practice of drawing those trendlines for support has been used since the early days of point & figure charting. What I consider more notable is that when an important 45 and 22.5 degree line cross, the market tends to reverse. The next cross is scheduled to be around October 24.

Before we finish, let's show one more chart. Here's the same chart, with the Elliott Wave labels, and the time length of each of the two impulse waves, A and C, labeled.

The equality point for wave C gives us a price target at 1566 on the S & P 500 on the last day of October.

So, in summary

  • Demark Sequential says we are vulnerable to a reversal near October 26 on both monthly and weekly time frames
  • Gann angle analysis says that a key pivot will occur near October 24
  • Gann time degree analysis says that the market will top on October 31, just in time for Obama to get reelected
  • Elliott wave analysis says the top will be around 1566 on the S & P 500

Now I definitely won't be doing this type of analysis that often, but it's just nice to sometimes get a different point of view, and especially one that you will never see on the news media. To judge this signal when the time comes, look for consolidation during the last two weeks of October and our first sell signal in the beginning of November. Until then, if you're not long, you're wrong!

Happy trading!

~Christopher Diodato

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.