Prepared by Gann Angles

June was a powerful month in the stock market, making new highs for 11 trading days from June 6 to June 20, an exciting new record for the books. Many pros and the public alike are convinced that this is now normal stock market behavior and will (and should) continue indefinitely into the future. But those of us who were trading in 1973 remember what it was like to have a Dow 50% retracement in less than two years. Not pretty.

When a stock market as strong as this prevails, many of our tried and true indicators fail us as well as several Gann techniques that have been infallible until recently. But despite all the failures, momentum oscillators still work. Using 14- and 28-trading day slow stochastics, when they reach up into the 90's and down into single digits, they still remain unbeatable. And so it was that during the week ending June 20, that we had several days readings at the 96 and 94 levels on the two oscillators, so it was no surprise that we have a Monday close down 194 points on the Dow. Yes, we recovered from it, but be warned that it's the first of many such record down days ahead of us in 1997.

It's been difficult to almost impossible to identify the timing for the top but I'm still trying. If we have not made top by the end of June, there are some powerhouse dates in July. Let's look at the Anniversaries:

HI-July 2, 1986. . . . . . . . . . 11 years***

HI-July 6, 1988. . . . . . . . . . 9 years****

LO-July 7, 1993. . . . . . . . . . 4 years****

LO-July 8, 1932. . . . . . . . . . 67 years**

HI-July 16, 1957. . . . . . . . . . 40 years*****

LO-July 16, 1996. . . . . . . . . . 1 year***

HI-July 17, 1985. . . . . . . . . . 12 years***

HI-July 17, 1990. . . . . . . . . . 7 years*****

LO-July 25, 1984. . . . . . . . . . 13 years****

HI-July 31, 1992. . . . . . . . . . 5 years*****

Notice first that out of 10 dates, 6 were highs and we have been in a major bull market for 23 years so that's noteworthy. Also notice that last year's low of the year was on July 16 as well as this year's 40- year Anniversary, plus 2 highs in 1985 and 1990 on July 17. Very compelling dates for week-ending July 18. We may have already seen the high by the time you receive this. Last month I gave you a Dow price projection for a potential high at 7720 which was exceeded in June by more than 200 points. We tried. It was a 20 x multiple of the 388 high from 1929. If, bit if, we make new highs in July, let's shoot for 8100 which is Fibonacci 21 times 386 (actually 8106) plus the square of 90, which Gann himself would crow about. But December puts!

Here are major breakpoint prices: Dow close below 7397; cash S&P close below 851; September 97 S&P 500 close below 864; OEX close below 832; NASDAQ close below 1382; Dow Utility close below 222; Dow Transports close below 2657. Any closes below these key levels are sell signals. Utilities and Transports are closest.

Trading Strategy

I urge you not to buy nearby puts but to go all the way to December 97 so you give yourself max time for your money. Yes, they are overpriced but with the momentum in this market you will be repaid handsomely for the extra premium. Remember that Gann's most important principle is that price is a function of time, so buy yourself time; price will come to you in the next 5 months.

While the stock market has been breaking records on the upside, bonds have reluctantly sustained a mild rally that began in April at the same time as the stock market low. While in a rising trend, the price action has been like dragging a tree up a steep mountain. Bonds made their last high in February 1997 and have not been able to regain that high. All of this is a bit of deja vu from the 1987 market where bonds topped in early March as the stock market went wild on the upside until August. But this time around, at least so far, bonds have not been as weak as they were in 1987.

But that can change quickly too as this is also the 4th year since the bonds made major high in October 93 and the 4th year from the high following a 12-year bull market cycle "should" be a heavy down year to complete the down phase. So far it has not followed the expected scenario but could change as we move into the last 2 quarters of the year.

Right now we should focus on positioning for the big breakdown. On June 25, hourly bonds closed below their breakpoint, giving an hourly sell signal. But the key level is a sell signal on the daily chart. A close in September T-bonds below 110.10 will be a major sell signal. At that time you can go short futures and/or buy December bond puts for a position hold into October/November.

LO-July 2, 1984. . . . . . . . . . 13 years****

LO-July 7, 1995. . . . . . . . . . 2 years***

LO-July 11, 1994. . . . . . . . . . 3 years***

LO-July 13, 1978. . . . . . . . . . 19 years***

HI-July 14, 1934. . . . . . . . . . 63 years****

HI-July 18, 1993. . . . . . . . . . 64 years****

There are not many major turns in July suggesting that the June highs may hold but use the dates to coincide with our Ganntimer reversal dates.

The continuing weakness in the new distant soybean contracts as they come on the board is both disturbing and bearish. They have brought on both July 1998 and July 1999 contracts, (to which Gann traders pay attention) with their current closing prices 668 and 655 respectively. The November 1998 contract is 637, 20 cents below the 1997 contract. With widespread announcements on nightly TV news about the expected effects of a new El Nino forming worldwide, it's strange that these bearish relationships still prevail in the soybean complex. Or is it?

On my weekly July continuation chart, I have plotted the July 1998 contract below the current July which is holding above 800 and expires on the 21st. This week the July 1998 contract broke below 668 and November 12, 1996 key low. The July 1999 contract at 655 is just that much lower. After July 21, July 1998 will be the lead contract on this chart, looking for the next major support level on the downside which goes back to February/May 1995 at 560/570. Gann's genius with these continuation charts of the same contract month, year after year, can be trusted to show the truth of the market.

HI-July 2, 1990. . . . . . . . . . 7 years****

HI-July 6, 1989. . . . . . . . . . 8 years***

HI-July 7, 1972. . . . . . . . . . 25 years****

HI-July 9, 1976. . . . . . . . . . 21 years***

HI-July 12, 1985. . . . . . . . . . 12 years*****

LO-July 12, 1996. . . . . . . . . . 2 years***

LO-July 13, 1973. . . . . . . . . . 24 years*****

HI-July 13, 1981. . . . . . . . . . 16 years***

HI-July 15, 1986. . . . . . . . . . 11 years****

HI-July 19, 1993. . . . . . . . . . 4 years***

LO-July 21, 1978. . . . . . . . . . 19 years**

LO-July 23, 1964. . . . . . . . . . 33 years***

LO-July 26, 1969. . . . . . . . . . 28 years****

LO-July 26, 1988. . . . . . . . . . 9 years****

It's a very long list but you can use it to back up the Ganntimer reversals. Use any rally during the month to get short for a run down to the weekly support levels given above. July and August are both good months for declines that make major lows so don't be afraid to short into strength. Right now December wheat looks good for a rally back to moving average resistance at 383. Use Ganntimers to enter. Wheat daily oscillators at 8 and 9, so don't miss it. Plus July is seasonal low after long decline.

It's doubtful that the precious metals will bottom until the stock market tops so there's nothing yet that we can do in these markets except wait for them to come to life. Silver has been trading sideways, popping up over daily moving averages and then dropping back again but looking like it may be ready any day. Platinum had the quick run up, then down but trying on the upside again. Gold is just making new lows by a dollar or two but Homestake Mining has held the April low, diverging bullishly from the metal itself. We need to continue to be on the sidelines until we have some confirmations, so just be patient.

LO-July 2, 1985. . . . . . . . . . 12 years*****

LO-July 5, 1974. . . . . . . . . . 23 years***

HI-July 6, 1973. . . . . . . . . . 24 years****

LO-July 11, 1975. . . . . . . . . . 22 years****

HI-July 21, 1988. . . . . . . . . . 8 years****

HI-July 24, 1992. . . . . . . . . . 5 years****

It's a short list for this month but you can use it to reinforce Ganntimer reversals. We did make a low last year in gold in June, so perhaps the new lows last month can generate some price action. Otherwise, stand aside.

July 18/21: IBM-180CD from Jan 21 from major high; 90CD from April 22 low; 360CD from July 24, 1996 low.

July 18/21: Sugar-180CD from January 21 key low; 90CD from April 17 low; 90 CD from April 23 high.

July 18/21: Soybeans-180CD from January 20 high; 90CD from April 18 low; 240CD from November 21 major low; 240TD from August 19 low.

July 18/21: Swiss Franc-90CD from April 21 high; 270TD from July 5, 1996 low.

July 21: Wheat-180CD from January 22 high; 90CD from April 22 major high; 144TD from December 31 low; 120TD from February 3 low.

July 25/25: Eurodollars-90CD from April 28 low; 360CD from July 30, 1996 low.

July 25/25: Stock Index-180CD from January 28 low; 90CD from April 28 low; 144CD from March 3 major low; 270CD from October 29 major low.

July 25/28: Gold-180CD from January 27 high; 90TD from March 21 high; 133CD from March 3 major high; 288CD from October 10 high.

July 25/28: Silver-90CD from April 28 low; 144CD from March 3 major high; 144TD from January 6 low; 288CD from October 10, 1996 high.

July 25/28: Cotton-180CD from January 28 high; 270CD from October 31, 1996 high.

July 25/28: Live Cattle-90CD from April 28 low; 120TD from February 10 low.

July 25/28: Pork Bellies-180CD from January 27 high; 90CD from April 30 high; 144CD from March 3 high; 120CD from March 28 major low.

July 25/25: Homestake-90CD from April 28 last low; 144TD from January 6 low.

July 28: Corn-180CD from January 29 high. No cluster but strong astros.

July 28/29: Treasury Bonds-180CD from January 29 low; 90CD from April 28 low; 90TD from March 25 high; 144CD from March 7 high.

July 29: Copper-180CD from January 30 low; 144CD from March 7 high; 120CD from March 31 high.

July 29/30: IBM-180CD from January 30 high.

July 30: British Pound-180CD from January 31 high; 120CD from April 1 high.

July 30: Japanese Yen-90CD from May 1 major low; 90TD from March 26 low; 120CD from April 1 high.

July 30: Wheat-90CD from May 1 high; 120CD from March 31 high.

July 30/31: Sugar-90CD from May 2 low; 288CD from October 15, 1996 high.

August 1/4: British Pound-90CD from May 5 low; 360CD from August 6, 1996 low.

August 1/4: Corn-180CD from February 3 low; 180TD from November 25 high; 270CD from November 5 low.

~July, 1997Gann Angles

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