His two forecasts into the future at the end of the article failed to occur. Those results are disconcerting after one reads about eleven phenomenal trades in which both the trend and reversal point were supposedly given in advance. After these two failed forecasts, Gann all but disappears in recorded financial print between 1910 and 1918.
Secondly, there is a less than inspiring story about how that article was conceived according to a man who was there. F.B. Thatcher claims to have been Gann's advance man at the time. Thatcher told well known trader and author Larry Williams in the early 1970's that the article was embellished. The story is in a recent book published by Williams. Maybe some portions of the forecasts were embellished, as Thatcher suggests, in order for Gann to make a name for himself early in his career.
Lastly, having discovered (finally) how the Square of Nine pinpointed his target prices, I know one must have the Start Price in order to set the 0 line to arrive at a possible end price (PEP). In Gann’s United States Steel forecast, he predicted a top of at least 58, and no higher than 59. Then he gave the next low point before this top actually occurred. Not knowing for sure that 59 was going to be the top, one cannot set the 0 line on the correct price, in order to arrive at the 42 predicted price low. I don’t see how that particular forecast could be real.
Another bothersome factor for me occurs thirty two years after the article is written. At the end of the 1909 article, Gann predicts Wheat will trade at 1.45 in the spring of 1910. The highest price for Wheat in 1910 was the 1.16 area and it went lower for several years. Yet in 1941, when he publishes the book, How to make Profits in Commodities, on page 79, Gann says the following: “1910-February and May, Wheat high, 1.16 and 1.17. Note 118-1/8 was one-eighth of 1.35 and 1.20 was one-fourth of .75 to 1.35, making this a selling level.” If 1.16 was such an obvious selling price, why forecast 1.45 thirty-two years ago in 1909? Did he not think that article was still around?
There is also a discrepancy in the type of forecasts he allegedly made that strike me as peculiar. It is almost as if another personality included this forecast in the 1909 article. Not one of the (non-day trade) eleven forecasts in the article mentions when, in terms of time, a price reversal will take place. There is a lone example where the speaker tells how Gann forecasted the Industrials would culminate on an exact day in August to within four tenths of one percent of the actual high. The inconsistency of using time once and then never using it again in any of eleven forecasts strikes me as odd. Why not forecast the dates on all the forecasts if he really could do it once?
There are other reasons why I question the validity of the exact portrayal of his trading in that article, notwithstanding some over-the-top predictions and unflattering personal recollections of Gann by a few who knew him, including his son.
Believe what you want about whether the forecasts were 100% truthful, but there is no doubt in my mind that in those forecasts is an algorithm based on the Square of Nine that points to all the prices he predicts or discusses. The method still works today, it just isn’t known by very many in the trading business.
I can see where the Gann method in these forecasts offers sensitive numerical points of force, but without a known trend, the points are not necessarily going to get touched. Trend and the price points have to work collectively in order for a forecast to work. If Gann made those forecasts, he had to have used some sort of trend determination. His two forecasts in the future were wrong on the trend, but I can see why he selected the 1.45 price target in May 1910 Wheat based on a previous low in price and time.
Gann used astrology, cycles, and arcane methods to devise his trends. I think he then combined his algorithm from the Square of Nine with his trend calculations to arrive at a price point that would coincide with the change in trend. Without the correct trend, the multitude of possible numerical outcomes on the Square of Nine is overwhelming. It is a lot easier to use the points offered that are close to the prevailing price rather than forecasting a price reversal way out into the future. This is why I definitely see how all three of his intra-day trades were probably done exactly as they were defined in the 1909 article.
Using what I call the Prime Start Price, I could give some reversal points off a known SP500 low or high with an assumed trend that would have a strong likelihood of being some sort of reversal in price days or weeks ahead, but how much of a reaction is unknown and whether the points get touched is unknown. Which sensitive price point would be the final one that completely reverses the trend would also be uncertain.
The Prime Start price is the price recorded by the stock exchanges. There is no floating of the decimal. If the SP500 made a low or high at 1180 and a new trend commenced, the Prime Start Price is 1180; not 80 or 180 according to the floating of the decimal on the Square of Nine. On a stock low or high at 52, 52 is the Prime Start price; not 152, 1152, 1052, 520, or 1520. The other five numbers do represent 52 on the Square of Nine as Start Prices. They are just not the Prime Start Price. In order to use the Square correctly, one has to use all the different Start Prices with the Gann method. There are six or seven ways to represent each Start Price on the Square of Nine. There are three ways to represent a date or time. One can conclude this from observing Gann’s trades in the 1909 article.
I should mention that even with the correct method, the same as used by Gann in all the 1909 forecasts doesn’t always work. Other times, it identifies terrific reversal points. Support and Resistance levels can get broken when the force behind them is powerful. One interesting rule in using the method is that I found the failed support points to be excellent resistance levels when price bounces back to them. One uses the broken support point to enter a short trade with the down trend with tight stops just above the old failed support point.
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