Monday, January 7, 2008

Fibonacci Summation Series in nature

THE METAPHYSICAL NATURE OF PRICE MOVEMENTS

Not directly related to HPC but cosmic food for thought.
Price (stocks, commodities etc) is the end result of all economic and psychological pressures and by examining the patterns of price movements, insights into the hidden forces can be explored. In the following, special attention is paid to the examination of these forces through the graphic presentation of price movements in the market as revealed through the Fibonacci Summation Series, the Dow Theory and the Elliott Wave Theory.

Posted by sold 2 rent 1 @ 09:03 AM (1049 views)
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13 thoughts on “Fibonacci Summation Series in nature

  • The drawback with all these analyses of graphs is that they don’t take account of the other variables going on at the same time. It’s all very well working out the ‘third wave in a bull market’ will end at a certain point, but it doesn’t take account of the nutter in the middle east who decides to go off on one, or the change in exchange rate caused by a butterfly flapping its wings in Guatemala….

    The graphs of gold price versus the different currencies are a case in point. If you analyse the dollar/gold graph you can get a completely different result from the graph of gold/another currency.

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  • wonderful article, thank you so much.

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  • not metaphysics, merely human group psychology.

    re. the gold graphs: the reason you will get two completely different graphs is that gold is only traded in dollars. therefore in any other currency, you are looking at the aggregate of gold/dollar and dollar/sterling (or whatever).

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  • Cornishman and S2R – I have been an Elliott “Waver” for sometime after reading Frost and Pretcher’s book. In 1978 they predicted a huge Bull – infact Pretcher concedes that where he was wrong was forecasting the end of the bull prematurely. In essence the timing issue is difficult because you can have some interpretations (it is an Art not a science). The Gold chart in USD is a case in point. I looked at this and in pure Elliott terms the October to December triangle was due to be resolved to the upside (in technical terms that was due to happen 2/3rd along the length of the apex).

    Infact Cornishman i would disagree with you they DO take account of other variables – the waves are the result of the physcological reaction TO the news, and thats what moves the market (not the news itself). As for the dollar gold chart the reason it conforms to the wave therory (and perhaps others dont) is that that is the most used comparison by people actually placing their orders. There are just too many instaces of the 5 waves in markets to make this co-incidental. A case in point could be the Karachi index after the assasination of Bhutto. The count allowed for the market fall (although it didnt predict it, i could go into this more ).

    To be honest the people that are blinkered to this actually ensure it happens. When markets move the 5 waves up 3 waves down are pretty self-evident (although again i concede you can sometimes only anticipate the end of the move within a range and that range may need to be changed depending on the action and if the waves extend). The difficulty is often when markets are quiet, and thats because people arent that interested in trading them. If you look at the House price index chart on the front page of this site you can see 5 waves. Therefore we are due 3 down – now as to when / if and how that can be predicted before the event …. thats the interesting (and profitable) question.

    I think you can get a free subscription to EWI – google it – and it may be of interest!! Just keep an open mind!?!?

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  • I must just explain a bit more- Pretcher was predicting the bull run against a backdrop of a flat market over a number of years, and against virtually all the perceived wisdom at that time. Not only that but all Fib (years) analysis they concluded resulted in a major pivot in 1987……

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  • sold 2 rent 1 says:

    techieman from yesterday’s post about gold

    “The analysis for gold depends on whether there will be hyperinflation or a deflation , in whatever the denominated currency. If hyper inflation then up up and away – if deflationary then (look at the 1929 – 1932 period) heading for a fall”

    You are 100% wrong here on the deflationary outlook. I am surprised as you are normally spot on.

    Gold mining stocks rocketed during The Great Depression – see graph
    http://www.thelongwaveanalyst.ca/downloads/Homestake.doc

    Gold was a fixed price set by the govnmt. Had it been floating it wouild have rocketed too.

    No matter what the outcome of hyperinflation or deflation gold is going to the moon.

    The only caveat I will put in is for the 2012 Mayan Calendar theorists whereby we evolve to a higher level and as such gold’s 5000 year history of safehaven is no longer needed as we have moved on in evolution. Money is just a concept and can be anything we want.

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  • s2r – You are right about Gold being fixed. I was being a bit lazy, I was lumping Gold with Silver. Silver was a free market. That had a high in 1920 and made a final low at the end of 1932. Im sceptical about Gold if there is a deflation first. At the end of the deflation though (and obviously we are not talking weeks here) then Gold will be a great asset to hold as its non Fiat money.

    I can see why people might think gold wouldnt lose value in a deflationary environment and i can understand why you may think Gold and Silver differ, but im not convinced. Im a bit heisitant on Gold right now, looks overbought, a fall and then I will wait see. But s2r a couple of things:

    1. Thanks for the compliment. 2. I have no “pride of position” here and freely admit i could be wrong and that its a good idea to hold SOME gold – i just wouldnt want anyone to want to put their life savings in it (what i do with my money is my business and if i am wrong i will take it and NOT go looking for a government bailout – which really makes me angry actually – but thats a different issue). 3. (i know i said couple!) I will look at the link – thanks. 4. I trade the charts so the “long term ” is after lunch!! ;-). 5. If you stick your head on the block be prepared to have it chopped off – if not though is that not merely existence!! 6. I dont think I’m often right which is why i am happy to be convinced that there isnt going to be a HPC – although of course i think we are entering a huge NEW downward trend as opposed to a (e.g. 1990) counter trend (and it would take quite a bit of convincing for me to change that view).

    One question i have for you though is whats yr view re deflation / inflation. I basically think the jurys out but i tend toward the former (even though the evidence is that “they” will do all they can to thwart it which may induce hyperinflation).

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  • techieman – I’m not as learned as you on this and I’ll concede that group psychology must play a part in things; but if your system was any good, everyone would be using it. Having said that, if a lot of people did use a certain system, it would be able to predict its own inflection points quite easily and then would re-inforce its ups and downs – and maybe this does happen to a certain extent.
    Whilst mass reaction to events may be predictable – a lot of the events themselves are not. You seem to admit that the system is flawed when you say that “and that range may need to be changed depending on the action and if the waves extend”. That’s the same as Gordon Brown saying that he always meets his golden rule – he just changes the rule when it suits him…

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  • s2r – have looked at the link. Understand that Homestake sold in 2001 to Barrick – http://www.thestreet.com/markets/aarontaskfree/1472654.html [the article is interesting re the price]. I would though like to see a chart between the 75s (freely floated) Gold and the price of the mines, and the Silver correlation.

    I have read something on this that states that mining shares only rose slightly…from 29 – 32 ands only soared after the bottom of the crash. So it would be good to see the mining sector – but it looks like what ive read may be wrong!! Thanks for the info.

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  • @ cornishman – I am quite easy going and can concede a number of issues. But please dont liken me to Gordon Brown – I saw the AM interview and posted what i thought was a Classic comment that Crash sold our Gold and reinvested in the Euro!! And now look at the Euro! I cant see how comentators dont see the irony of that – yes the Euro is strong because of our policies to create a huge bubble!! Its as if the pound being weak is great for us!! And its the smugness of the man that gets me.

    At the end of the day (and dont take this the wrong way) we believe what we like – all i can say is ive traded using the E.W. and its left me in good stead. Prior to that i traded fundamentally and when we exited the ERM i believed the government saying they would stay in the ERM and defend the pound. A good – albeit expensive – lesson for me.

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  • sold 2 rent 1 says:

    cornishman,

    The trick with Fibonacci numbers and the stock market has always been in getting the starting point and the wave count right. There are waves within waves.

    techieman,

    Regarding hyperinflation or deflation
    A cap on public sector pay rises, rising unemployment and continued offshoring will ensure no wage price spiral. IRs need to come down hard and fast to save the day. Central banks will fail here and long term rates may stay high if base rates fall anyway

    The end result should be deflation. 200 years of history says deflation will happen.
    If this is the end of a 200 year grand super cycle then anything could happen.

    It could be the big depression that finally kills off the debt based banking system altogether.
    Add in an evolutionary/technological/quantumn physics blow-off phase and nothing seems impossible.
    The Large Hadron Collider atom smasher comes on stream next year.

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  • techieman – yes sorry, I suppose equating what you said to something Gordon Brown does could be taken as quite an insult. It wasn’t meant quite in that way!

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  • s2r – yep – looks like we are def on the same page but we read a different paragraph re the precious metals!! Good to hear your views as ever.

    Cornishman – Sorry i probably overreacted. In any case its really not until you use Elliott (as SR2 will probably agree) that you can see the waves. Of course I can understand people saying its rubbish and pointing to failings and examples as you have used against my extension point, but it is something useful to have in your armory and does IMO justify spending some time learning.

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