PTR's Fibonacci Trend Theory(tm)
The Fibonacci Summation Series produces a exponential growth curve that is nearly the same as the exponential growth curves generated by those investments that earn and compound interest or capital gains. Since the stock market is essentially based on the mathematics of compounding interest, the vast majority of long term price charts will have "a very strong tendency" to follow upward sloping straight lines "in logarithmic" chart scale, or log-linear (semi-log) chart scale. That is because exponential curves appear as steeply rising curves in linear scale, but as straight lines in semi-log scale.
In the late nineteenth and early twentieth century, calculating an exponential curve would have been a daunting tasks, so we believer that speculators either began using the simpler Fibonacci Series as an "approximate" proxy for the exponential curve, or they just inadvertently, and incorrectly, linked the significance of the Fibonacci series to something that was actually being produced or influenced by the mathematics of compounding, and had no real connection to the Fibonacci series. Never the less, regardless of how these numbers came to be tied to stock prices and price-time patterns, it is very clear that they are currently connected with a high degree of predictability.
The introduction to this section explains the process for "locating" one or more "possible" existing AND future "mean" trend lines that price "may have" a tendency to follow more then a random and unpredictable path. The long term exponential regression "mean" tells you where the price average is now and where it has been in the past, but the Fibonacci trend seeks to determine a "mean" line that price is "somewhat likely, or "very likely," to be following in the future.
Copyright(c) 2003
The PriceTime Review
Andrew J. Quiggly
Editor
S&P 500"cash" Index (SPX) 5/25/04. NEAR TERM ANALYSIS ONLY !!
One of the major tenets of PTR's Fibonacci trend theory is that stock prices, or their indexs, will have a "very good to strong tendency to form straight trend and mean lines in logarithmic chart scale," and these trends also have a "good" to "very good" tendency to become continuous from any major high to the next major low, or from the prior major low to the next major high. By experimenting with possible trends that meet the requirements, we "will" identify one or more "possible" MEAN trend lines that "may" aid us in forming our current opinion and future expectations.
The near term chart of the SPX index, below, shows an excellent example of one the important tenets (doctrines) of our Fibonacci Trend Theory. We are "not" expecting" price to come back up to the ATH, made at 1552 on 3/24/2000, because price already "came very close to" tagging the Fibonacci number line at 1597, and "very close" meets the requirement of a "tag," or "bounce" from these key number lines. Of course, this does leave the door open for another run to actually "touch" or pass through that number line, at 1597. Never the less. if you check the long trend graphic <SPX: Long Fibo. 5/25/04> you can see that this would be the 7th tag since 1974, and would then unbalance that "spur" tend, up from that 1974 low to the 2000 high, with the six tag "spur" trend made from 1942 to 1968. While there is, of course, a possibility for that to occur, and it would then make the seven tags from 1974 to 2000 "balanced" with the seven tags up from the 1932 low to the 1968 high, I still think it's unlikely, do to a number of reasons, including the wave ratios of these long trends.
Anyway, IF we assume that price will not come back up to 1597 anytime soon, years, then we can "look for" where a new "future trend down" may form. Now, since we do not have at least two "real tags" to work with, then we will have to do a lot of "what ifs," and the results will be "highly skeptical" until confirmed or refuted by actual price. However, these "hypothetical" Fibonacci trends can still be useful to use, since they present yet another reason why the SPX index "may" gravitate to a particular "target" that is identified by one of the other pattern or technical methods that we employ.
For the SPX index, as shown on the near term chart, we have identified two 'better then random" points on the Fibonacci number line at 987. The first one is the big purple circle in the summer of 2003. This circle is based on the assumption that a Fibonacci down trend is "somewhat" more likely to use the same time "steps" or the same "relative" angles going down as they used going up, in log scale, and the line down from the ATH that passes through this circle is the same "relative angle" as the long spur trend up from 1974 to 2000. While we consider this "a stretch at best," it does pass through one of our major down side targets, at 610 in October, 2006. The other big purple circle on the number line at 987 was placed based on our "expectations" that the bear market "price low" will come in either October, 2006, or anytime in 2010. We also "suspect" that the final low for the Bear Market (2010-2014) will be a higher low, like it was in 1942.
If price does fail to get back to 1597, as we expect, then when it passes through or otherwise "tags" 987 again, that "point" (or points) back to the ATH will project a new "possible" Fibonacci trend line. One of the key points for these tags is the "time" per step, which means the time between tags on the Fibonacci number line. For example, if we assume that SPX "touched" 1597 at the high (3/24/200), and then 987 in the summer 2003, then the circle is a valid point in our future trendline "projection." The time from that ATH high (3/24/2000) to the summer of 2003 is about 39 months, so we can "roughly expect" that the "mean" tend line down will "touch" the Fibonacci numbed line at 610 in two "steps" of 39 months, or "about" 78 months. That would get is right back at our October, 2006, target. Needless to say, we are fully aware of that tag as we do this analysis, as we most certainly did "skew" our "possible tags" to fit this key target, which we already arrive at by other means. Therefore, the fact that this hypothetical Fibonacci trend line does head right to that target should not be considered even circumstantial evidence unless, or until, we get some actual confirmation as we approach that October, 2006, time period. By the way, October, 10, 2006 is the "hypothetical' exact bottom (trough) of the next four year market cycle low (10/90-10/94-10/98-10/02-10/06?).
For the
PriceTime ReviewS&P 500 "cash" Index (SPX)
5/25/2004
The Fibonacci Summation Series produces a exponential growth curve that is nearly the same as the exponential growth curves generated by those investments that earn and compound interest or capital gains. Since the stock market is essentially based on the mathematics of compounding interest, the vast majority of long term price charts will have "a very strong tendency" to follow upward sloping straight lines "in logarithmic" chart scale, or log-linear (semi-log) chart scale. That is because exponential curves appear as steeply rising curves in linear scale, but as straight lines in semi-log scale.
In the late nineteenth and early twentieth century, calculating an exponential curve would have been a daunting tasks, so we believer that speculators either began using the simpler Fibonacci Series as an "approximate" proxy for the exponential curve, or they just inadvertently, and incorrectly, linked the significance of the Fibonacci series to something that was actually being produced or influenced by the mathematics of compounding, and had no real connection to the Fibonacci series. Never the less, regardless of how these numbers came to be tied to stock prices and price-time patterns, it is very clear that they are currently connected with a high degree of predictability.
The introduction to this section explains the process for "locating" one or more "possible" existing AND future "mean" trend lines that price "may have" a tendency to follow more then a random and unpredictable path. The long term exponential regression "mean" tells you where the price average is now and where it has been in the past, but the Fibonacci trend seeks to determine a "mean" line that price is "somewhat likely, or "very likely," to be following in the future.
Copyright(c) 2003
The PriceTime Review
Andrew J. Quiggly
Editor
S&P 500"cash" Index (SPX) 5/25/04. NEAR TERM ANALYSIS ONLY !!
One of the major tenets of PTR's Fibonacci trend theory is that stock prices, or their indexs, will have a "very good to strong tendency to form straight trend and mean lines in logarithmic chart scale," and these trends also have a "good" to "very good" tendency to become continuous from any major high to the next major low, or from the prior major low to the next major high. By experimenting with possible trends that meet the requirements, we "will" identify one or more "possible" MEAN trend lines that "may" aid us in forming our current opinion and future expectations.
The near term chart of the SPX index, below, shows an excellent example of one the important tenets (doctrines) of our Fibonacci Trend Theory. We are "not" expecting" price to come back up to the ATH, made at 1552 on 3/24/2000, because price already "came very close to" tagging the Fibonacci number line at 1597, and "very close" meets the requirement of a "tag," or "bounce" from these key number lines. Of course, this does leave the door open for another run to actually "touch" or pass through that number line, at 1597. Never the less. if you check the long trend graphic <SPX: Long Fibo. 5/25/04> you can see that this would be the 7th tag since 1974, and would then unbalance that "spur" tend, up from that 1974 low to the 2000 high, with the six tag "spur" trend made from 1942 to 1968. While there is, of course, a possibility for that to occur, and it would then make the seven tags from 1974 to 2000 "balanced" with the seven tags up from the 1932 low to the 1968 high, I still think it's unlikely, do to a number of reasons, including the wave ratios of these long trends.
Anyway, IF we assume that price will not come back up to 1597 anytime soon, years, then we can "look for" where a new "future trend down" may form. Now, since we do not have at least two "real tags" to work with, then we will have to do a lot of "what ifs," and the results will be "highly skeptical" until confirmed or refuted by actual price. However, these "hypothetical" Fibonacci trends can still be useful to use, since they present yet another reason why the SPX index "may" gravitate to a particular "target" that is identified by one of the other pattern or technical methods that we employ.
For the SPX index, as shown on the near term chart, we have identified two 'better then random" points on the Fibonacci number line at 987. The first one is the big purple circle in the summer of 2003. This circle is based on the assumption that a Fibonacci down trend is "somewhat" more likely to use the same time "steps" or the same "relative" angles going down as they used going up, in log scale, and the line down from the ATH that passes through this circle is the same "relative angle" as the long spur trend up from 1974 to 2000. While we consider this "a stretch at best," it does pass through one of our major down side targets, at 610 in October, 2006. The other big purple circle on the number line at 987 was placed based on our "expectations" that the bear market "price low" will come in either October, 2006, or anytime in 2010. We also "suspect" that the final low for the Bear Market (2010-2014) will be a higher low, like it was in 1942.
If price does fail to get back to 1597, as we expect, then when it passes through or otherwise "tags" 987 again, that "point" (or points) back to the ATH will project a new "possible" Fibonacci trend line. One of the key points for these tags is the "time" per step, which means the time between tags on the Fibonacci number line. For example, if we assume that SPX "touched" 1597 at the high (3/24/200), and then 987 in the summer 2003, then the circle is a valid point in our future trendline "projection." The time from that ATH high (3/24/2000) to the summer of 2003 is about 39 months, so we can "roughly expect" that the "mean" tend line down will "touch" the Fibonacci numbed line at 610 in two "steps" of 39 months, or "about" 78 months. That would get is right back at our October, 2006, target. Needless to say, we are fully aware of that tag as we do this analysis, as we most certainly did "skew" our "possible tags" to fit this key target, which we already arrive at by other means. Therefore, the fact that this hypothetical Fibonacci trend line does head right to that target should not be considered even circumstantial evidence unless, or until, we get some actual confirmation as we approach that October, 2006, time period. By the way, October, 10, 2006 is the "hypothetical' exact bottom (trough) of the next four year market cycle low (10/90-10/94-10/98-10/02-10/06?).
Andrew J. Quiggly
Editor
