Using Gann theory to predict the recent trend of Nasdaq
U.S. stocks have been on a tear in 2021, but have recently fallen back slightly, so how do we see the recent U.S. stock action using Gann's theory?
Since the outbreak of the pandemic last March 2020, the U.S. has launched unlimited QE. total margin debt (Margin debt) borrowing has only increased. It has hit a record high. It accounts for almost 3.7% of total U.S. GDP. This is already more than the total amount of the dot-com bubble in 2000. In response, mainstream commentators and antipodeans alike have warned of systemic risk, warning that the 1929 crash may have been the worst in U.S. history.
Mizuho Financial Group found that a large percentage of respondents intended to invest a portion of the U.S. stimulus money in stocks and bitcoin. Of the $380 billion in stimulus checks they interviewed, about 10.5% will fall into these asset classes, or $40 billion. According to the Bank of America report, the new inflows this year have not only pushed the stock market to new highs, but have also attracted new investors, not only older investors, but also a group of young retail investors. The report said, "The strong momentum of these young retail investors not only supported a strong rise in the stock market, but also prompted older investors to buy and hold, and to buy bond funds to achieve a balanced asset allocation.
The large number of new investors entering the market is not good insight,
First, we use linear regression channel analysis, which is a good way to identify potential key levels of future price action by plotting the normal distribution of trends. Statistically, linear regression analysis is the use of past data to predict future trends. Linear regression channels include five equilibrium lines for reference, namely the extreme optimism line (95% optimism), the over optimism line (75% optimism), the medium line (long term trend line), the over pessimism line (75% pessimism) and the extreme pessimism line (95% pessimism).
We can see that by importing two decades of data, you can see the Nifty in an extremely optimistic situation.
In Gann, the time is the most important. The longer the market takes to cross the top or fall below the bottom, the greater the rise or fall. It is always important to consider how long the market has been up from its extreme lows or down from its extreme highs. Usually, at the end of any market, the index either moves up to a new high or down to a slightly lower level and then stops because the time cycle has run out.
Using the Gann cycle method, we found that U.S. stocks now have a cycle one month before and one month after October. But this is one of them, and there is a bigger one to come.
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