Squares & Waves by Pauline Novak-Reich
What do Gann’s square of nine and the Elliott wave theory tell us about the S&P 500 index? We’ll explore.
Are the world’s indexes about to turn south for the fourth time since the 2007–2011 global financial crisis (GFC) and Eurozone slumps? W.D. Gann’s square of nine and R.N. Elliott’s wave theory may help shed light on what the future holds. Gann taught us that the behavior of the market is subject to the time factor and the law of vibration, while Elliott postulated that money markets unfold in a fixed eight-wave pattern. Bull markets advance in three motive waves, each followed by a downward correction. Bear markets decline in a zigzag A-B-C pattern, in which waves A and C are motive and the B wave between them corrects upward.
In this article I’ll focus on the S&P 500 index’s B wave—the wildcard of the 2007–2015 bear market rally that penetrated the October 31, 2007 peak of primary wave [V]. The amalgamation of Gann and Elliott into one school of thought highlights the geometric mapping of each of the eight waves of the Elliott wave cycle onto the Gann square at 180º or 360º angles. Given that markets move only up or down, only two angles determine the trend.