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"The farther backward you can look, the farther
forward
you are likely to see."
The History of the English Speaking
Peoples
(1957)
Winston Churchill
"To make a success in trading stocks you must
get the knowledge first; you must learn
before you lose. Many traders go into
the stock market without any knowledge and lose a large
part of their capital before they learn
that it is necessary to go through a period of
preparation before they start trading. I am giving
you the benefit of more then 45 years of experience
in the stock market and laying down rules which,
if you learn and follow, will
make you a success."
45 Years in Wall Street
(1949)
W.D. Gann
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The Price-Time
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Our timely information and opinion will aid
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-Please scroll down for Fibonacci Introduction OR click
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FIBONACCI:
Trend Charts, Retracement
Analysis, and the "Holy Grail" of long term stock
market trading and Mutual Fund investing.
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Overall, it's my opinion that the Fibonacci
numbers and series were, "most
likely," developed many centuries
ago as a kind of short-cut, look up table,
or "slide rule" to calculate the effects of "compounding
interest," and/or compounding capital
gains. Remember, you only have to go
back 50-60 years to get where finding exponential
growth, or compound interest, was a very daunting
and time consuming task without the aid of calculators,
computers, or "look up tables."
For example, while I doubt that there are many of us "Boomers"
who actually used a multiplication
table, I do remember the days when
we used a look up table to find the trigonometric
functions and squares of a number, and
I'm not even on Social "no-security"
yet.
Regardless of their origins, the Fibonacci numbers,
series, and retracements
have become a major "force" in the World's
stock markets, and every trader "must"
(or at least should) obtain a good working concept
of where and when this "force" is most likely
to manifest itself
.
Into The Looking Glass:
"The Fibonacci and it's Magic--Compounding
."
(2001)
B. Bonfoey
Co-Editor: The Price-Time Review
|
WHEN
a lay person or inexperienced
trader is "actually" shown the true meaning
and value of the Fibonacci numbers,
and the simple "
exponential growth curves
" they form, it is, "many times," an experience
like finally "seeing" in your mind the correct
placement for a "key" piece of a complex puzzle
that you have been working on. Boy! You talk
about having the lights come on, this is something
like being in total darkness and getting hit by the intense
light from a flash bulb...and if anyone thinks this is some
kind of joke or bogus hype then you are very wrong.
<Natures Law & the Fibonacci: VISUAL
proof of Fibo's>
IN this area, we will show
the true mathematical function of the Dow Jones
Industrial Average (DJIA),
a common exponential growth function which
can be accurately modeled by a common
Fibonacci series, over
the "LongWave(tm)" period from 1896 to 2006 (or
the future when added). We then project that function forward
in time so you can see where the index is "most
likely" headed in the next twenty to one-hundred
years.
Dow
36,000 you say? Try Dow 17,711
as a near certainty by 2020, and "possibility"
a DOW as high as 28,756 by then! Don't
think so? Well, try a Dow Industrial Average
between 500,000 and two million 2,000,000) by the
end of this century that has a probability of being
correct which is nearly 95%...with that 5% error
in the "projection" being a discount factor for the end
of the world. Of course, I was just kidding about that
"end of the world" thing-ee.!
BY the way, If you're asking yourself: "is this guy nuts," the
answer is no, or at least not over this last "projection." FOR
those who can just do the simple math to find the FUTURE VALUE from a fixed
PRESENT WORTH at an annually compounded growth rate then just try using
DOW at 10,000 for PV, the annual growth rate at 5%, which is actually below
the long term "MEAN" rate of 5.5% it HAS RETURNED from 1896-1900 to 2006,
and calculate the FV after 100 years...the start of the "next" century
(2200). Bingo, and now we're both nutty togeathe!
<Example: Fibonacci Trend
Chart--DJIA 1900-2004>
<Example: DOW-spur trend annual rate (CAGR) from
1896-1932>
FOR
Mutual Fund Investors
with only an interest in reducing their
long term "RISK," by keeping a "casual
connection" to the parallel universe
of Technical and Wave Pattern Analysis,
then you can learn as much about R.N.
Elliott's and C.J. Collin's "Fibonacci methods"
as you want, from our massive educational
material, ebooks, or tutorial, or you can just use our
Market-View weekly analysis, trend ratings, and alerts.
In addition, and thrown in just for
good measure, for those looking for a "black box" or "auto-pilot"
trading platform, we also post, on a weekly basis, the most
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"world class" trading model: the
MSAR
, which has gained over >700% since 1/1999 and
>780% since 5/1997, while the DOW and SPX are up somewhere between
15-25% over that same 7-9 year period and with the Nasdaq based indexes,
like NDx and IIX, up a meager 10%-15%.
Needless to say, while we do our best
to leave few stones unturned for those aspects
of complex Geometric Pattern Analysis that
can have a significant influence on the U.S.
Stock Markets, including Mr. Elliott's Fibonacci
work, there are no guarantees in this business,
and we work in probabilities rather than absolute
certainties.
While many of these
complex and advanced methods are well know
to apply to other types of markets, at PTR we
deal ONLY in the analysis of the U.S. Stock Market, the
U.S. Bond Market, and to a few other World Stock Markets
if they have the capacity to materially influence
the U.S. markets, as many do...like the DAX, AEX, Hang
Seng, London Times, and Shanghi.
By the way, for those who are
very new to this and want to know "just
what the heck a Fibonacci is," then
I'll give you some "very condensed hints;"
eventhough, the full explanation gets too drawn out to
be listed here.
click BELOW (
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|
FIBONACCI INTRODUCTION
continued:
2 of 3
from 1 of 3 (at the top of this
page)
1
For the P
RICE-TIME Review
B. Bonfoey and Andrew J. Quiggly
Co-Editors
FOR
those who are very new to this and
want to know "just what the heck a Fibonacci
is," then I'll give you some "very
condensed hints;" eventhough, the full explanation
is far to complex to be listed here.
For
those of you who are totally new to it: ("Fib--O--Notch--ee")
1)
The Fibonacci "Numbers" are those numbers that form
a "simple Fibonacci Series," or "Sequence,"
which are 3-5-8-13-21-34-55-89-144 and so
on out to "wherever," or infinity.
Therefore, 8,
13, 144, and 10,946 are all "Fibonacci Numbers."
2) All "Fibonacci Numbers" are separated
from each other by a "ratio" of "about"
1.618 (increasing), or "about" .618 (decreasing
), along the "Fibonacci series." For example,
13/8 (thirteen divided by eight) is "about"
1.618 and 144/89 is "about" 1.618. Also,
8/13 is "about" .618 and 89/144 is "about" .618.
In mathematics,
the Fibonacci ratio of
1.618 is referred to as Phi (not Pi and
sounds like "f-eye" and not p-eye). This
ratio,
Phi, is actually the mathematical
"limit"
(maximum rate of change of the "slope"
of the curve... "in percentage
terms"! ) for the exponential growth
curves that are derived from the
Fibonacci Series, and it's these growth curves that
are, "many times," the underlying long term
"mean" for the geometric price verses time chart patterns
in individual stocks or stock market indices.
While the reason for why
individual stocks or stock market indexes should "gravitate"
toward only a few more common annual rates of return on investment
(CAGR), is a mystery to me, but "I think" it is tied to the "alternative
investments" in 5y, 10y, 20y (Corporate), and 30y bonds.
In addition, I also think that whole number "time steps" of 4-5y,
8-9y, and 10-13 years tie in with the longwave cycles, like the 4-Y
"Presidential Cycle," and reinforce each other.
In
addition to those traits listed above, one more "minor" trait
of these Fibonacci Numbers is that by adding
any two adjacent numbers along the series you
will get a sum equal to another Fibonacci Number. For
example, 5+8=13, 55+89=144, and 4181+6765=10,946.
While this trait has little to no real world value,
it is "interesting."
3) The reason that the Fibonacci
numbers, ratios, and series are important in stock "trends"
is that they "naturally" model some of the more
common "exponential growth
curves" produced by the long term "compounding"
of "many, but not all, stock market indexes
and many individual stocks.
<Natures Law and the Fibonacci>
That is to say, many
long term stock charts just happen to be the
same, or very close to the same, "growth
curves" generated by the Fibonacci series
when using "integer," whole numbers, for the periodic
time "steps" for "x"-- which is the mathematical
equation, or "function," independent variable for
time -- commonly labeled as (x), like as x= 4 years, 5y, 8y,
9y or whatever "whole number" in years.
Furthermore, the vast majority of "long term"
rates of return on capital for individual stocks,
and/or indexes, can "many times" be represented
by a standard Fibonacci Series IF the time
between steps
(the X, time, variable) is defined
as being both: 1) a real, integer, and a whole
number in years, and 2) having the same, or nearly
the same, time period for each step...i.e. periodic.
Each individual stock,
or stock market index, will, "eventually," determine
it's own long term "step" (time between
Fibonacci number lines along the "mean" center-line
of it's long term and semi-log scale chart). For example,
the DOW has established an "approximate" nine (9) year
"step," over the last 110 years (a 5.5% CAGR), and the S &
P 500 (SPX) index has established a "step" nearer to eight
(8) years (a 6.2% CAGR), over the last 79 years...to the
"mean," or geometric center line of their long term trend channels.
Once
this "step" is formed then it's price vs. time
chart (a standard stock chart in linear scale) will eventually
accelerate
because the natural "distance" between each
Fibonacci number (absolute value in price...like $)
becomes larger as time progresses...as long as the
stock is "compounding" capital by "retaining earnings."
Just as an example,
lets say that near it's beginning a "typical" stock
with a time "step" of 5 years will only
increase $13 by going from $21 to $34 (one Fibonacci
number segment) during those five years (a 10.1% CAGR).
Later on, after years of "growing" and compounding retained
earnings, this same stock will be, or should be, crossing
somewhere between say $1597 to $2584--without using SPLITS"--and
just as another example. If you check the list of Fibonacci
numbers you will see that crossing from 1597 to 2584 is also just one
Fibonacci number segment "crossed" during that same five year
time period (one step).
At that later point in
time, the "distance," or price traveled during
that five year period, would be a whopping
$987 (2584-1597=98) verses the $13 gained during it's earlier
five year period (first step), eventhough, it would still have the
same CAGR of 10.1%. In addition, both 5 year periods produced the
exact same gain " in percentage terms" (61.8%), and had the same annual
return on investment (a 10.1% CAGR).
Now, you know why stock prices
have a "very strong tendency" to accelerate "exponentially,"
and many times even end up going "asymptotic,"
or straight up, into a "FINAL," or nearly final, destructive
bubble top.
However, let me also point out that nearly any individual
stock can be made to accelerate, eventually, IF they are not split
at regular intervals when exceeding $100...or at least after reaching
the apex of phase (I)...in Elliott Wave terminology.
What happens after that destructive
bubble pops, called the "wave (I) final
get out rally," and "usually" a wave three of five
or five of five extended in wave (I), via Elliott Wave Theory
again, is highly complex and varies radically between
stocks, and/or a stock market indexes. However,
based on statistics and probability, and
with the help from some logistics curves, we can "many times"
make some "fair" predictions that will narrow the
future trend down to only a few more likely, and
probable, outcomes.
This subject is discussed
in the subscriber's introduction, but
it is highly mathematically oriented. By
the way, once a stock breaks down from a
"asymptotic" rise it would be very rare for it to "get
back" in line to that prior curve, and, more likely
than not, it will drop down at least one "annual rate level"
(like 61.8% to 27.2% or 10.1% to 8.3% for example) on the long
term, semi-log scale, chart, and typically two or more
rate levels (like 61.8% down to 17.4% or even 61.8% down to
10.1%...which is a time step of 5 years between any two Fibonacci number
segments).
Overall , it's
my opinion that the Fibonacci numbers and
series were, "most likely," developed many centuries
ago as a kind of short-cut, look up
table, or "slide rule" to calculate the effects
of "compounding interest,"
and/or capital gains. Remember, you only
have to go back 50-60 years to get where finding
exponential growth, or compounding interest,
was a very daunting and time consuming task without
the aid of calculators, computers, or "look up
tables." For example, while I doubt that there
are many of us "Boomers" who actually used a multiplication
table, I do remember the days when we used a look
up table to find the trigonometry functions and squares
of a number, and I'm not even on Social "no-security"
yet!
Regardless
of their origins, the Fibonacci
numbers, series, and retracements have become
a major "force" in the world's
stocks markets, and every trader "must" (or should)
obtain at least a good working concept of
where and when this force is most likely to manifest
itself.
In
our real world
stock trading, since this is no academic exercise
for us, we rank the " Fibonacci Retracements
," of a
prior wave pattern, as the single most important, and
reliable, method of all of those that we use, on a
regular basis, to identify a place in price and/or time
where a change in trend (CIT) is "much more likely than
random" to occur.
That top ranking
is followed by Cyclical
Analysis, Gann
Analysis, and Elliott Wave Theory in our order of importance.
Furthermore, contained within this method we
consider the 61.8% retracement...IN LOG SCALE, of
a prior "wave," as the most important and reliable of the
three "key" retracement (.382x, .618x, .5x).
From our work, it's fairy obvious
why this 61.82% retracement, of a prior wave or
pattern, in semi-log chart scale, is so important, and that
is because a 61.8% retracement on log scale charts, or
a semi-log scale chart, is "about" equal to a 38.2% retracement
on many linear scale charts. Needless to say, that
"fact" must place a lot of professional and amateur traders
on the same page at same time for a CIT...or at least for
awhile anyway.
In summary, the KEY to
remember is: the curve, or "geometric
pattern," for the common Fibonacci Series
(3-5-8-13-etc-etc) is a "perfect" exponential
growth curve, and can be perfectly
modeled by mathematical regression methods
using the "exact" compound interest formula,
or equation: a(1+b)^x. Furthermore,
if the time "step" (x or years) is one year (1y), exactly,
then the "annually compounded rate of return"
is 61.8% per annum...exactly. Say what?
Yep, that's El correct-O, and
I'll bet you have never read that, or even heard that,
anywhere else before...right?
Who says you can't
get something for nothing? You
just got "something" for free that took me years,
and mucho-denero, to find out.
Oh,
one more "thing-ee" here before
we move on: The "Holy Grail" of
stock market trading, which I alluded to in the
headline for this page, is a real world
"secrete"
that it will not be doled out here for free, and not
even for money. I, for one, will never make this
"extremely important information"
easily available to those shallow
individuals who wonder aimlessly about the internet seeking
"instant gratification." The world
is GRAY and COMPLEX...live with it!
THIS so-called "secrete,"
which no-one can actually "hide," is REAL, it
does "clearly" exist, it has always existed,
and it's right in the face of all "would be" stock traders.
Unfortunately for some, and fortunately for
others, the smart money perhaps, I estimate that about
99% of those looking at it can not "see it" because
they do not possess the knowledge required to do so.
In our "subscribers
introduction" to the Fibonacci, I take those
with few analytical skills so
close to the actual GRAIL that it would burn
them badly if it was actually hot...which it is not!
However, I DO NOT spell it out in simple (ton)
terms, and only those who "should see it,"
will see it...if you know what that means?
Of course, those with
the patients to read the editorials rather
than just "skim" through the comics section of
the Sunday paper do have at least some analytical
skills, and they will be in a much better position
to actually "see" the Grail, or may have already "seen
it"...and I'll bet you know exactly what that means! IF
NOT, save yourself $14 and go to "black box to easy millions.com"...and
help make THEM millions!
TO
CONTINUE
: WITH THE NON_SUBSCRIBERS INTRODUCTION
TO
THE
-FIBONACCI...part 3 of 3-
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THIS PAGE IS ALL ORIGINAL MATERIAL AND
COPYRIGHT (C) by PriceTime
LLC or it's editors:
Andrew J. Quiggly
and B. Bonfoey
"all rights reserved
"
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