The weakness in the markets we are seeing has been attributed to heavy selling out of Europe related to the spikes in COVID-19 infection rates. The weakness is also coinciding with uncertainty related to the US election. A potent combination to reckon with. In such a situation, liquidity becomes a concern, as market participants digest the uncertainties and begin to sit on their hands or just leave their wallet on the old hip. In addition, the equity markets are also just coming out of what is known as the WD Gann panic zone. That would be 49 to 55 calendar days from the high of a market. As most stocks are said to have topped on or about the 2nd of September, that window in time is pegged between October 21st and October 27th. Notice how the equity markets began to accelerate in selling pressure in that widow in time. One might ask why 49 to 55 days. Gann used many different techniques and one was number theory as expressed in the view of the ancients. To Gann’s way of thinking the number 7 was a “fatal” number referred to many times in the Bible. 7 times 7 or 49 being especially so. This cycle can be associated with multiple time frames. Gann also looked at 49 weeks, months, and years. He viewed the "49-50 year cycle" and the period just after "5-7 Jubilee” years as very important. According to Gann, in that jubilee timeframe -stocks would find an "extreme" high or low. So, if we look back 50 years in time that would be the early 1970’s, a period of high inflation and low equity valuations that lasted for some time. Oil embargoes and other economic disruptions occurred. It was in 1971 that Richard Nixon instituted price controls and took the nation off the gold standard. Today we have seen extreme equity valuations, overabundance in oil & gas, and begrudgingly low inflation. History has a way of repeating itself, and often clues can be found in the numbers.
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