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 Price- Time Review
Andrew J. Quiggly
Editor

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   At this time, I don't see much to discuss for the DOW in regard to a near term Fibonacci trend.  The spur up from the 1974 low and the main trend are illustrated on the long term graphic and discussed in that analysis.

   From the way I see it right now, 6/1/2004, if the index gets above that major resistance at 10,750, then I fail to see any reason why we won't see a "test" of Fibonacci 10, 946 for sure.  This then, of course, places the possibaility of a full blow gun job to new highs  well within reach when you consider that the FED fully intends to ignore any reference to inflation as they grease that bull path going into the fall election.  After that, who knows for sure, but It's my opinion that "things" will get real tight...like flip a coin?

   One important point I want to make here is what we regard as the minimum trend.   In a downward biased Fibonacci Trend, per our theory, the retracement or bear market must retrace at least one full "set" of adjacent Fibonacci number lines. For example,  from 1966 to 1973 the Dow Industrials Average (shown n the prior graphic) run along the Fibonacci number line at 987 for those seven years before it dropped below the next lower Fibonacci number line, at 610. The final low of that bear market then ended a few days later at 570, in 1974. This is an example of a "minimum longwave retracement," and it was "essentially" executed by a .618 "operator.  

   At that point, the retracement had "crossed two adjacent Fibonacci lines, and completed the "minimum" down trend. That is to say, in simpler terms, in order to have a "trend" you have to at least connect two Fibonacci number lines by a "trend line," and in many, or most,  "short term trends" that may never occur.