It’s a scary headline and one that can cause some dilemma amongst market traders. It’s not a pleasant thought to contemplate when the current market situation seems daunting, considering the possibilities that things could get a lot worse. And, as this article should show, the cycle of depressions is nearing a climax where the astute trader must accept the possibility of a financial disaster and prepare for it.

Firstly, let’s look at the last great depression: The last Great Depression occurred in 1929 when, mainly due to government mismanagement of the economy, unemployment ran to 25% whilst those who had jobs had their wages cut by up to 40%. The Great depression was not caused by the stock market; it primarily began as a result of the demand for gold as some countries adopted floating currency valuations after World War 1, whilst others stayed with the gold standard. The US held around 40% of the gold reserves and as other countries devalued their currencies, the amount of gold leaving the US caused the Fed to raise interest rates. The rate it charged on loans to member banks would stem the outflow of American gold and dampen the booming stock market. As a result, the United States began to receive more shipments of gold. By 1929, as countries around the world lost gold to France and the United States, other countries’ governments initiated deflationary policies to stem their gold outflows and remain on the gold standard. These deflationary policies were designed to restrict economic activity and reduce price levels, and that is exactly what they did. Thus began the worldwide Great Depression.

I have studied the great depth of material left behind by W.D.Gann, and his work is still as relevant and necessary today as it was in his time. Gann developed a theory of market timing and cycles, and as such he was able to predict market turns months and years in advance.

To explain this in one article is certainly impossible, but if we take a look at the core essence of this work we will see how the time frame of 2019 is potentially a financial disaster for the whole world.

Gann discovered many tools and techniques, but for today we will look at just two: the number 144 and the number 90.

The number 144 is a Fibonacci number, a series of mathematical numbers and ratios used in nature for the design and construction of all things. Indeed, Gann did earlier refer to the discovery of 144 in markets as his greatest discovery. Let’s look at a few examples of 144 in markets:

In the Australian top 200 stock listing is a company called Amcor, a world leader in cardboard packaging. Here we see a high March 21, 2006 at $7.74. Exactly 144 trading days later the next major top formed October 16, 2006 and prices suddenly reversed. Or maybe it was also the fact that from the previously low Aug 16 at $6.15 the market had risen $1.44 or 144 cents to make a high at $7.59 on October 16, 2006.

So this October 16 date was crucial to Gann traders because it was 144 days from a previous top and 144 cents above the prior low.

These types of counts abound in the markets if the trader knows to look for them. Another fabulous example is Rio, a huge mining company once sought by BHP in a merger deal.

This stock made a major top May 19, 2008 at the height of the merger rumours, only to fall just as dramatically when the merger was abandoned. The stock fell from $124 to $23 in Dec 5, 2008 where it began to recover, some 143 trading days from the May 19 top. Another example, from the Dec 5th low the market rallied to a minor low July 7, some 144 days later where a rapid rally drove prices from $46 to $64 in less than 30 days.

As I mentioned, there are far too many examples of 144 in the markets, but similarly the number 90 is also as frequent and reliable as a market indicator.

The FTSE 100, the UK stock market index, shows a fabulous example of this number at work.

The FTSE made a major top June 2007 as the Global Financial crisis emerged, and 90 weeks later it made a major low.

The number 90 in numerology means change, redirection or obstacle. Have a look at the change or redirection in the Australian dollar/US dollar currency chart, 90 months from the major low at47 US cents in April 2001 brings us to October 2008, where the Australian dollar bottomed out at 60 US cents and at time of writing is now nearly 87 cents.

So, how does this give us 2019 as a depression target?

Using another of Gann’s famous discoveries, the 50% rule is a major factor. Gann recognised that half way between a high and a low is a very important juncture where markets can reverse, and I have seen this aspect literally thousands of times. Most street wise traders look for the half way point and prepare to start a trade once the market confirms a reaction at this point.

The last Great Depression occurred in 1929.

If we add 90 years, the great Gann discovery, we end up with 2019 as a market reversal. Interestingly, the previous depression occurred in 1840, nearly 90 years to the 1929 depression.

If we accept the 50% theory in a time line and 1929 to 2019 is 90 years, then 50% of 90 being 45 years means we would have a marker in time at 1974. In 1974 the world experienced a severe recession, where banks failed spectacularly in the UK due to house  prices falling dramatically.

If we then use our target of 144 months  ( or 12 years) before 2019, we have 2007 as a marker…the start of the Global financial crisis!

The final test will come 90 months before 2019, lets say October 2019 as the Depression date. 90 months prior to this will be the first quarter of 2012. If this is a marker in time where an event, say a severe pullback like Sept 11 2001 or the like occurs, it will leave me in no doubt that 2019 is very likely to be a world economic disaster unparalleled in human history.

In reality, this is simply a forecast that may or may not eventuate. However, forewarned is forearmed and in my opinion forecasts are dates to watch. Having been forewarned we can make the most of a bad situation. I suspect that we really have probably around 5 years to get our respective houses in order before the subtle signs emerge of what is to come, and sadly many will suffer extreme consequences if this forecast does eventuate.

I hope this article is of some value to you, and in saying that I am not trying to frighten you into action, I am suggesting you make a plan for an event that has the very real possibility of complete financial Armageddon for those who bury their heads in the sand.

I wish you every success,

Alan Oliver.

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