It’s fascinating to realize how often the markets precisely head for the targets they had pre-defined in the past. Within the Gann terminology the targets are described as magnets that the markets have to head for inevitably. Those magnets/targets are where the decision is made whether the prices want to rebound from the magnets or have to break through them.
At any Gann magnet always a "little battle" about the continuation of the present trend takes place. In case the magnet is broken or broken through, the trend frequently accelerate, i.e. it is confirmed or even intensified. On the other hand a rebound from a magnet leads to corrections in the trend or in case of important and/or strong magnets to a change in trend, respectively.
Last week, to a T the leading index S&P 500 worked its way up to the point where its most important daily magnet is positioned that as early as Monday will show us whether a correction until 1305 points will begin or the index will head for the 1374 with only little correction potential left:
Thrashed out to the stop, I’d like to phrase, suitable to the Greek election result, the market will decide what it is going to do. The magnet of the upper line of the 3rd double arc is reached. That one will be broken upwards on Monday being responsible for the possibly coming correction. After a quite choppy beginning of the week, with the Friday close the index headed exactly for the target we had forecast last week:
Expecting the election result, the market positioned with the Friday close of 1342.84 precisely at the magnet being able to do the final jump over the resistance of the upper line of the 3rd double arc in the daily setup… but also to rebound from it, of course. We’ll buy the possibly coming correction. We’ll recognize a correction in the offing if the market opens with a gap down at about 1335. In that case it will be very, very likely that it wants to correct the upwards move of the last 10 days by at least a 50%. We’ll buy that correction. Our buy limit is now at 1305, target 1374, SL at a daily close below 1266.
I consider the down scenario and the 50% correction that possibly begins on Monday to have a chance of just a 35%, for it’s more likely that the market will receive the election result positively for the moment, perhaps opening with an up gap.
Whereas in the last issue I was still pretty sure we had to work on the assumption of a correction starting at the upper line of the 3rd – please read my analysis of June 10 about that – now I’m more convinced of the possibility of the following course:
The 65% scenario:
Initial point is the 8 Candle GUNNER24 Up Setup started on June 04. As supposed in the last issue as well, the initial impulse comprises 8 candles. With the Blue Arc we can produce an ideal connection between the tops of the fourth and the eighth candle. The setup becomes valid because the Thursday close as well as the Friday opening happened exactly at the upper line of the first square. A setup is always confirmed if some important price marks at the important magnets of a setup are to be identified exactly.
The reason why I think that the following analysis is preferable is simply because in this setup some unambiguous buy signals appeared on two consecutive days. A) With the Thursday candle the Blue Arc was broken and B) On Friday the limitation of the first square was broken. Thus the first double arc is becoming the next target in this setup! Now this 8 Candle GUNNER24 Up most probably overrules the daily12 candle up and with it the resistance of the upper line of the 3rd that is existing in it. The 8 candle daily up is showing us that the 1343 on basis of three weeks is not expected to be a big problem any longer!
All in all, on Monday, or maybe not before Tuesday the market is supposed to target the next important resistance magnet at 1354 turning down from there. At 1354 the first double arc is situated that is cut there by the still valid resistance Gann Angle which comes from the 10/04/2011 low.
If Monday opens with a gap, according to the motto "sell on news" the market will have to find its top on Monday/Tuesday at 1354 falling down again onto the upper line of the first square in the course of the following days and testing them extensively. 1325-1330 - the correction is not supposed to go lower…
A further buy signal will arise if the first double arc in the daily 8 Candle GUNNER24 Up is broken on closing price basis. I.e. even if Monday closes above the double arc it will be a new buy signal. Target will be 1374 until the beginning of July. From there the market is expected to turn testing at least the June lows again or even fall below, as analyzed here and there.
I was asked by some clients to go into the possible up targets of this swing again. Well, in the 8 daily up above we make out the 2nd double arc at 1380-1370. The next higher important resistance results from the monthly 3 Candle GUNNER24 Up Setup:
Here, the monthly resistance Gann Angle is playing a decisive part. In June it’s passing at 1364. But since the next significant high is expected to happen in July, the 1374 will be allowed in July. That possible height is owed to two important supports that are responsible for the actual up swing: A) the horizontal support that started from the intersection point of the upper line of the 2nd with the beginning of the setup - there, at 1266 June marked its lows - and B) the support diagonal where June opened at 1310…
The actual weekly 5 Candle GUNNER24 Up is showing us the next higher weekly resistance area likewise in the 1370 surroundings:
The next horizontal resistance is passing at 1372. In 3-4 weeks it will be cut by the dominating resistance diagonal that is responsible for the rebound from the year-highs! It’s a strong resistance!
Thus, for this up swing we can identify the same resistance or target zone, respectably, in three different important time frames!
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