THE PRINCIPLES OF GANN’S LAW OF VIBRATION

 

 

 

In December 1909 Gann gave an interview to the “Ticker And
Investment Digest” magazine. That was sixteen months after his
important discovery of August  1908. The overall conclusion from
this interview is that Gann had discovered a unique method of
precisely forecasting the trend of stocks and commodities, which
was based upon what he called the Law Of Vibration, and he was
achieving great financial success in its practical application.
Therefore Gann’s major discovery of August 8 1908 appears to have
been some crucial and practical part of his forecasting method, that
he called the Law Of Vibration. Sixteen months later, in his interview
to the “Ticker And Investment Digest”, Gann provided a partial
explanation of this Law Of Vibration.

THE PRINCIPLES OF GANN’S LAW OF VIBRATION
The principles of Gann’s Law Of Vibration, as discerned from his
interview of December 1909 to the “Ticker And Investment Digest”,
are as follows.
1. Stocks and commodities (and everything else on earth) vibrate.
Moreover, vibration provides a comprehensive explanation of
price movements in financial markets.
“Vibration is fundamental; nothing is exempt from this law; it is
universal, therefore applicable to every class of phenomena on the
globe…. After years of patient study I have proven to my entire
satisfaction, as well as demonstrated to others, that vibration
explains every possible phase and condition of the market”
(Ticker interview).
2. Stocks and commodities vibrate in accordance with both their own
individual energy/ vibration (i.e. internal vibration) and also in
accordance with energy/ vibration transmitted through space (i.e.
external vibration).
“From my extensive investigations, studies and applied tests, I
find that not only do the various stocks vibrate, but that the
driving forces controlling the stocks are also in a state of
vibration” (Ticker interview).
3. The overall energy/ vibration of a stock or commodity is reflected
in its price.
“These vibratory forces can only be known by the movements they
generate on the stocks and their values in the market” (Ticker
interview).
4. Financial markets essentially comprise a series of impulses that
produce price movements with specific rates of vibration.
“Science teaches that an original impulse of any kind finally
resolves itself into periodic or rhythmical motion” (Ticker
interview).
5. The price movement of a stock or commodity unfolds in a coherent
way. This is because stocks and commodities are essentially
centres of energies and these energies (or vibrations) are
controlled mathematically.
“Stocks, like atoms, are really centres of energies. Therefore they
are controlled mathematically…. There is no chance in nature
because mathematical principles of the highest order lie at the
foundation of all things” (Ticker interview).
6. When the overall vibration of a stock or commodity is in balance
its price will maintain a constant rate of vibration (i.e. prices will
form a trend). Consequently this overall rate of vibration (or trend
line) can be precisely measured and future prices forecast by
means of the so-called Gann angles or Gann fan lines (i.e. 1 x 1, 1
x 2, 1 x 4, 1 x 8 angles, etc. and their subdivisions).
“The power to determine the trend of the market is due to my
knowledge of the characteristics of each individual stock and a
certain grouping of different stocks under their proper rates of
vibration. Stocks are like electrons, atoms and molecules, which
hold persistently to their own individuality in response to the
fundamental Law Of Vibration…. After exhaustive researches and
investigations of the known sciences, I discovered that the Law Of
Vibration enabled me to accurately determine the exact points to
which stocks or commodities should rise and fall within a given
time. The working out of this law determines the cause and
predicts the effect long before the Street is aware of either”

7. These principles can be applied to forecast the trend of stocks or
commodities over multiple time frames. For example, a minor
impulse may produce a price movement with a specific rate of
vibration that lasts only a few hours. Alternatively, a major
impulse may produce a price movement with a specific rate of
vibration that lasts for a number of years (e.g. the rise in the Dow
Jones Industrial Average from 1921 to 1929).
“The law which I have applied will not only give these long cycles
or swings, but the daily and even hourly movements of stocks”
(Ticker interview).
8. The external energy/ vibration acting on a stock or commodity is
in fact astrological influences.
Unfortunately Gann does not explicitly state this in his Ticker
interview. This is perhaps not surprising in view of the fact that
Gann made it clear he would not provide a detailed explanation of
his Law Of Vibration (“Mr Gann has refused to disclose his method
at any price”, Ticker interview).
Consequently one has to turn to Gann’s semi-autobiographical
novel entitled “The Tunnel Thru The Air”, which he wrote
eighteen years later in 1927, for supporting evidence of this key
principle. 

THE PRACTICAL APPLICATION OF GANN’S LAW OF VIBRATION
We will now turn from an examination of the general principles of
the Law Of Vibration, as discerned from Gann’s interview to the
“Ticker And Investment Digest”, to an examination of the key steps
in its practical application. These key steps in the practical
application of Gann’s Law Of Vibration are as follows.
1. Identify the point in time that marks the start of an uptrend or
downtrend. This can be achieved by examining the daily, weekly
or monthly price chart of the stock or commodity.
2. Identify the predominant astrological influence (or cycle) driving
the uptrend or downtrend. In order to achieve this it will be
necessary to examine previous cycles of the stock or commodity
in order to identify which particular astrological influences have
driven the stock or commodity in the past. In this task it will be
especially helpful to examine the all-time high and all-time low
price of the stock or commodity because at these price extremes
the astrological influences will typically be very strong or very
weak, respectively. Thus, under the Law Of Vibration, a high price
is caused by a high rate of vibration, which in turn is caused by
strongly positive astrological influences (and vice versa).
3. Identify the general rate of vibration of the uptrend or downtrend.
This can be achieved by placing the origin of the Gann angles (or
Gann fan lines) at the starting point (in time and price) of the
uptrend or downtrend. In this task it will be helpful to have
prepared a transparent plastic chart overlay inscribed with the
major Gann angles (i.e. 1 x 8, 1 x 4, 1 x 2, 1 x 1, 2 x 1, 4 x 1, 8 x 1,
etc.) and their subdivisions.
4. Forecast the approximate date when the predominant astrological
influence (or cycle) that is driving the uptrend (and was identified
in point 2 above) will end. This can be achieved by consulting an
ephemeris and the astrological chart of the start of the uptrend or
downtrend.
5. Forecast the future price when the uptrend or downtrend will end.
This can be achieved by identifying the intersection of the general
rate of vibration of the uptrend or downtrend (point 3 above) and
the forecast date that the uptrend or downtrend will end (point 4
above).
6. Monitor one’s forecast, which comprises all of the above elements.
In particular, note that short-term positive astrological influences
will increase the rate of vibration and temporarily drive prices
above the long-term rate of vibration (i.e. above the long-term
Gann angle identified in point 3 above). Conversely, note that
short-term negative astrological influences will decrease the rate
of vibration and temporarily drive prices below the long-term rate
of vibration (i.e. below the long-term Gann angle). However, when
these short-term influences expire, stock or commodity prices will
revert to their long-term rate of vibration (i.e. the long-term Gann
angle).
EXAMPLES OF THE PRACTICAL APPLICATION OF GANN’S LAW OF
VIBRATION
Two examples of the practical application of Gann’s Law Of
Vibration, which are provided in his interview to the “Ticker And
Investment Digest”, will now be examined.
1) September 1909 Wheat Futures Contract (please see chart).
“One of the most astonishing calculations made by Mr Gann was
during last summer (1909) when he predicted that September wheat
would sell at $1.20. This meant that it must touch that figure before
the end of the month of September. At twelve o’clock, Chicago time,
on September 30th (the last day) the option was selling below $1.08and it looked as though his prediction would not be fulfilled. Mr Gann
said, ‘If it does not touch $1.20 by the close of the market it will
prove that there is something wrong with my whole method of
calculation. I do not care what the price is now, it must go there’. It
is common history that September wheat surprised the whole
country by selling at $1.20 and no higher in the very last hour of the
trading, closing at that figure” (Ticker interview).
1) Gann identified the start of the uptrend in the September 1909
wheat futures contract as a price of 94 cents on January 26 1909.
2) Gann identified the predominant astrological influences driving
this uptrend.
3) Gann identified the long-term rate of vibration of this uptrend,
which was 0.1053 cents per day (or 1 cent per 9.5 days).
4) Gann forecast that the predominant astrological influences driving
this uptrend would remain in force until at least the end of this
futures contract (i.e. until at least September 30 1909).
5) Gann forecast that at the end of the futures contract the price
would be $1.20. This was based on the starting point of the
uptrend (point 1 above), the long-term rate of vibration (point 3
above) and the contract’s expiry date of September 30 1909.
6) In monitoring his forecast, Gann observed that since the
beginning of the uptrend on January 26 1909 short-term
astrological influences had temporarily driven prices above and
below the long-term trend or rate of vibration. Gann also
observed that between July 21 and August 26 1909 stronger
short-term negative (or malefic) astrological influences had
driven prices down well below the long-term rate of vibration.
Moreover Gann observed that commencing August 26 1909 (i.e.
the low point of 96¾ cents) these strongly negative short-term
influences started to expire and he forecast that they would fully
expire over the next month, when prices would revert to their
earlier long-term rate of vibration.
Importantly, Gann received corroboration of the low point in
August from the fact that a price of 96¾ cents on August 26 1909
equates to a rate of vibration of 0.0132 cents per day (based on
the starting point of 94 cents on January 26 1909). This rate of
vibration is one eighth of the long-term rate of vibration of 0.1053
cents per day. Another perspective is that on August 26 1909 the
long-term rate of vibration of this wheat futures contract had
halved three times. Thus from August 26 1909 Gann forecast and
observed the simultaneous expiration of the short-term negative
astrological influences and the doubling three times of the rate of
vibration, as the long-term rate of vibration was regained on
September 30 1909.
2) United States Steel Stock Price (please see chart).
“He (i.e Mr Gann) came to me when United States Steel was selling
around 50 and said, ‘This Steel will run up to 58 but it will not sell at
59. From there it should break 16¾ points’. We sold it short around
58 3/8 with a stop at 59. The highest it went was 58¾. From there it
declined to 41¼; -17½ points” (Ticker article).
1) Gann identified the start of the uptrend in U.S. Steel as a price of
21 7/8 cents on October 23 1907.
2) Gann identified the predominant astrological influences driving
this uptrend.
3) Gann identified the long-term rate of vibration of this uptrend,
which was 0.0950 cents per day (or 1 cent per 10.5 days).
4) Gann forecast that the predominant astrological influences driving
this uptrend would remain in force until October 1909 and hence
in November 1908 he was only forecasting a short-term
correction. More specifically, Gann made his forecast “When
United States Steel was selling around 50", which was in early
November 1908. Gann then forecast that due to short-term
negative astrological influences a correction would start on
November 14 1908 (i.e. within two weeks).
5) Based on the starting point of the uptrend (point 1 above) and the
long-term rate of vibration (point 3 above) and the starting date
of the correction (point 4 above), Gann was able to forecast that
“Steel will run up to 58 but it will not sell at 59”. In fact the price
of U.S. Steel peaked at 58¾ on November 14 1908.
6) Gann then forecast that the short-term negative astrological
influences that he had identified would remain in force until
February 23 1909.
7) Gann then had to forecast what the rate of vibration would fall to
on February 23 1909 (i.e which Gann angle would provide support
before the long-term uptrend was resumed). Importantly, in
making this forecast Gann sub-divided the rate of vibration. More
specifically, and as the price chart of U.S. Steel shows, Gann
forecast that the price of U.S. Steel would fall to the bottom of its
current vibratory band and then finally fall three quarters of the
band below. Thus Gann firstly forecast that the short-term
correction would last until February 23 1909 and secondly that
the rate of vibration of U.S. Steel would fall on that day from its
long-term rate of 0.0950 cents per day to (1/1.5) X (1.25/2) X
0.0950 = 0.0396 cents per day. This is in fact exactly what
happened. More specifically, on February 23 1909 U.S. Steel made
a low price of 41¼ cents (which based on the starting point of 21
7/8 cents on October 23 1907 equates to a rate of vibration of
0.0396 cents per day). From that point the long-term uptrend of
U.S. Steel was resumed.
An important point from this example is that Gann did not merely
use his so-called Gann angles as a crude measure of the rate of
vibration of stocks and commodities. More specifically, he did not use
them simply to measure the doubling and halving of the rate of
vibration. Rather, he also discovered and employed sub-shells within
a principal energy level. This is analogous to modern quantum
theory. Therefore we have discovered another important principle of
Gann’s Law Of Vibration; namely the rate of vibration of stocks and
commodities, as measured by so-called Gann angles, conforms to a
series of principal energy levels and sub-shells. As we have seen, an
important implication (and practical application) of this is that rates
of vibration, as measured by these principal energy levels and subshells,
constitute support and resistance levels. This therefore
clarifies the statement made by Gann: “By knowing the exact
vibration of each individual stock I am able to determine at what
point each will receive support and at what point the greatest
resistance is to be met” (Ticker interview).
Moreover, this principle in turn sheds light upon a somewhat obscure
concept that Gann briefly introduced in both his stock market course
and his commodities’ course, namely the concept of lost motion:
“As there is lost motion in every kind of machinery, so there is
lost motion in the stock market due to momentum, which drives
a stock slightly above or below a resistance level. The average
lost motion is 1 7/8 points.
When a stock is very active and advances or declines fast on
heavy volume, it will often go from 1 to 1 7/8 points above a
halfway point or other strong resistance level and not go 3
points. The same rule applies on a decline. It will often pass an
important resistance point by 1 7/8 points but not go 3 full
points beyond it. That is why I advise using a stop-loss order 3
points above a top or 3 points below a bottom” (W. D. Gann
Stock Market Course, chapter 10).
In summary therefore, from examining examples of the practical
application of Gann’s Law Of Vibration, we have identified three
further principles of the Law Of Vibration:
13) The rate of vibration of stocks and commodities conforms
to a series of principal energy levels and sub-shells. More
specifically, the principal energy levels equate to a doubling
and halving of the rate of vibration and the sub-shells equate
to a fourfold division of a principal energy level.
14) These principal energy levels and sub-shells constitute
important support and resistance points.
15) When a stock or commodity is very active, momentum will
often drive the price very slightly above or below the precise
support or resistance point, which is determined by the rate
of vibration (in conjunction with astrological influences).
GANN’S ANNUAL FORECASTS
As the above examples from the Ticker interview show, around 1909
Gann was employing his Law Of Vibration to precisely forecast stock
and commodity prices up to several months forward. However,
starting around 1915 Gann produced and sold annual forecasts of
the stock and commodity markets. Although Gann produced these
annual forecasts up to his death in 1955, relatively few survive.
Nevertheless, from the surviving annual forecasts, it appears that
Gann produced them in exactly the same way as he had produced his
earlier shorter-term forecasts; namely based on the Law Of
Vibration.
One particularly accurate annual forecast was Gann’s 1929 stock
market forecast (which Gann reproduced in the appendix of his book
“Wall Street Stock Selector” that he wrote in 1930). In summary,
Gann’s 1929 annual stock market forecast was completed and
distributed on November 23 1928 and included the following
elements:
1) A narrative which stated “General Outlook For 1929. This year
occurs in a cycle that shows the ending of the bull market and the
beginning of a prolonged bear campaign…. The fact that it has run
longer and prices have advanced to such abnormal heights means
that when the decline sets in it must be in proportion to the
advance. The year 1929 will witness some sharp, severe panicky
declines in many high-priced stocks”.
2) A projected graph or chart of the Dow Jones Industrial Average
which forecast this index would peak on August 7 1929 and then
start a major downtrend for the rest of the year.
3) A projected graph or chart of the Dow Jones Railroad Average
which forecast this index would peak on August 8 or 9 1929 and
then start a major downtrend for the rest of the year.
Although it should be noted that the Dow Jones Industrial Average
and the Dow Jones Railroad Average both peaked on September 3
1929 (rather than in early August), overall Gann’s annual stock
market forecast for 1929 was highly accurate.
Moreover, from a careful examination of Gann’s 1929 stock market
forecast it is possible to discern further principles of the Law Of
Vibration. These principles are as follows.
16) Although the Law Of Vibration comprises a number of
elements, the time factor is the most important. More
specifically, throughout his career Gann used the term “time
factor” as a substitute or synonym for astrological influences.
Therefore astrological influences are the most important
element in the Law Of Vibration.
“The time given for tops and bottoms is the most important
factor for you to know and watch. It makes no difference about
the price a stock is selling at. So long as you know when it will
reach low or high levels you can buy or sell and make money….
Remember you must buy and sell at the right time regardless of
prices. No matter how high stocks are, if they are going higher,
you should buy. It makes no difference how low they are; if the
trend is down and they are going lower, you must sell short and
go with the trend” (1929 Annual Stock Market Forecast).
17) In applying the Law Of Vibration to the stock market, it is
important not only to assess the astrological influences (i.e.
external vibrations) but also the internal vibrations of a
stock. For example, assume that during a general stock
market uptrend there is a short-term correction (due to
negative astrological influences) and most stocks fall in price.
If during that period of time a particular stock merely moves
sideways, rather than falls, it indicates that the internal
vibrations of that stock are especially strong and therefore it
will subsequently perform strongly when the overall uptrend
(i.e. positive astrological influence) is resumed.
“The Dow Jones 30 Industrial stocks are representative of the
active industrials and most of them will follow the Industrial
Curve (i.e. Gann’s forecast) very closely. But some of the
individual stocks that are in strong or weak position will vary
from this Curve and make tops and bottoms at different times.
These special stocks and their position will be covered in the
supplements each month” (1929 Annual Stock Market Forecast).
18) Stocks and commodities typically do not switch from an
uptrend to a downtrend until their rate of vibration has
slowed down. This reduction in the rate of vibration can of
course be observed as prices move sideways (or down) over
time to lower (and slower) Gann angles.
“The ones (i.e. the stocks) that make top in the early part of the
year and fail to reach higher levels in July or August will be the
ones to lead the decline, because they will have had longer time
for distribution. Guard against selling short the late movers until
they have had time to complete distribution” (1929 Annual Stock
Market Forecast).