Updated Gann Fan Grid of the SP500 Dec 18

Dec 18, 2009: 11:58 AM CST

In following up on last night’s post on the “Gann Fan and Volume Update on the S&P 500,” I wanted to show a quick updated “Gann Fan” Grid of the S&P 500 – it’s also showing a critical level to watch at the 1,120 level which is – as we all know – a major inflection point in the market.  Let’s take a look.

Using a 2 point input to construct the lines, I’m using TradeStation’s default Gann Fan indicator starting with the 1,576 October 2007 high and creating the angles “down right” if you want to replicate this chart.

To me, this is just a fancy way of saying “There’s a trendline that connects the 1,576 high, May 2008 high of 1,450, and the – so far – 2009 high near 1,120.”

Still, it’s something to monitor, if even just for fun or for a reference.  These advanced methods to me are “Chart Art,” where the importance of these methods comes in identifying confluence, and never in a single method or trendline in isolation.

The last time I took a look at this chart was my July 28 update on the “Gann Fan Chart Art Update on the S&P 500.”

Compare those the previous grid at that time to the current ‘resolution’ to find that the same trendline existed at that time which is now serving as resistance here at the 1,120 level.  Just extend that trendline forward (the difference is that the prior chart is examining daily data and this with weekly data, and in the prior chart, I used 1 point per box instead of the 2 points shown above).

Gann lines can serve as targets to play for in the ‘open air’ between them once a Fan line is broken… and we’re now at an inflection point that could serve as resistance, so we’ll have to watch this closely.

Just like the 50% “Bear Market” Fibonacci retracement at 1,121, any break higher above this level would ‘pop stops’ of those betting against further price advances, and their stop-losses would help fuel further higher prices.

That’s why it is so important to look for key inflection points and watch them closely to see if the hold… or are broken.   The resolution clues you in to the next likely short-term move in prices.

Or, just take it as chart art with spurious trendlines drawn!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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