The Weirdness of Markets

When I was a college freshman in 1966 I often spent spare time exploring the university library's stacks looking for interesting and out-of-print stock market books. One Sunday afternoon I stumbled upon bound volumes of the Ticker Magazine, a monthly periodical written, edited and published by the late Richard Wycoff. The 1909 volume of the Ticker contained an article about a fellow named William D. Gann.

You should read the article yourself and imagine the effect it had on a scientifically inclined but very naive 18 year old student of markets. I puzzled for a month over this article, wondering just what methods Gann might have used to produce the reported results. Making no progress I put the article aside and returned to the study and application of standard technical methods to the stock market.

Years later, in 1978, I had my second encounter with Gann. I noticed an advertisement in Barron's for an annual stock market forecast supposedly prepared using Gann's methods. From that point forward I tried to learn anything I could about the forecasting techniques Gann used. Nowadays there are many sources of Gann materials as a web search on his name will quickly show.

My study of Gann's courses and books led me to several conclusions. First of all, I believe the legend of Gann is just that, a legend. His market achievements have been grossly exaggerated. His forecasting techniques were for the most part developed by others who preceded him. Gann did preserve these old methods for posterity and this is his true legacy. These methods hint at an underlying order or pattern that all markets follow.

On exchanges all over the world one sees certain symbols. Among these are the signs of the zodiac, a circle divided into eight parts, a square divided into 4 smaller squares and into 4 triangles and various representations of the number 45 and the number 9. The Chicago Board of Trade is the most symbolic of all the exchanges. For example, the CBOT building has 44 stories plus 1 observation deck = 45. There are 9 windows on the trading floor facing LaSalle street, each has 45 panes.

There are certain common themes in all these symbols. The number 9 shows up all the time: the digits of 45 add up to 9 as do the digits of 360 (number of degrees in a circle and in the zodiac). If a circle is divided into 8 parts, each of 45 degrees (symbolically 45 is the same as 9) then 8 x 9 = 72 and 7 + 2 = 9. The number of degrees in the 4 angles of a square is 360 and if a square is divided into 4 smaller squares the total number of degrees the figure represents is 4 x 360 = 1440 , again a number whose digits sum to 9. The number of degrees in the angles of a triangle is 180 and a square subdivided into 4 triangles symbolizes 4 x 180 = 720, again a number whose digits sum to 9.

My own view of this symbolism is that it points to a mathematical order or pattern all markets follow. This is also the view of a friend of mine who pointed out this symbolism to me. Although I love patterns, my scientific training and experience as an economist initially made me skeptical. But eventually I found convincing evidence that this order exists. Markets are weird in ways that are difficult even to imagine.