Skip to comments.Fibonacci Fate Date for a Bear Bond Market?
Posted on 08/05/2011 1:42:29 PM PDT by george76
One of the greatest technicians of all time was a man named W. D. Gann (1878-1955). He had tremendous success predicting market moves much in advance. Legend has it that he occasionally sent notes to The Wall Street Journal, which accurately predicted tops and bottoms in grain markets months ahead of time.
There are two Gann principles that I have always respected. They are that historical prices alone arent predictive unless paired with time; and that the birth dates of contracts are of major significance. The birth date is the first day a contract, stock, or grain begins trading. And birth dates that occur during "Fibonacci" years are even more significant. The larger the Fibonacci number, the more significant.
Leonardo Fibonacci, the great 13th century Italian mathematician (11751250) created the Fibonacci sequence to explain behavior in nature mathematically. History has it that the first question he posed was how many rabbits would be created in one year starting with one pair.
On August 22, l977, the Chicago Board of Trade started trading 30-year bond futures. This year, August 22 falls on a Monday. It will be the THIRTY-FOURTH ANNIVERSARY (34 is a Fibonacci number). My goal is not to make a market prediction as much as to share a fascinating possibility.
The next Fibonacci number is 55, it's a difference of 21, which could determine the length of the next cycle. If this Gann cycle is accurate, it may mean a cycle high in price, a cycle low in rates in the Treasury complex could occur possibly on August 22, or thereabouts. Another way to look at this would be, that it may be the BEGINNING OF A 21-YEAR CYCLE in lower prices, higher rates.
(Excerpt) Read more at cnbc.com ...
how about if a unicorn is born in a fabinacci year? how long will its horn be?
i have no idea why i posted that. maybe just had too many honey grahms and mile for lunch
W.D Gann , Fibonacci , and Rick Santelli
The answer will be quite apparent if you examine the horn.
The fabinacci series plot is a spiral. The limbs and stqlks of trees and plants of some species grow in a fabinacci spiral. The nautilus and ammonite shell spiral is a fabinacci function. Ditto pine cones (which won’t roll down hill as a result).
It is fairly well known that the horn of a unicorn is spiral and thus a fabinacci function. There for, knowing the spiral rings and the year and subsequent fabinacci, the growth and length can be calculated year .
Tip of the hat to Lyndon Larouche and his cold fusion magazine and numerous articles on fabinacci serie and the golden mean
1” the 1st year
2” the next year
3” the next year
5” the next year
8” the next year
13” the next year
21” the next year...
You can find, or rather extract, mathematical relationships to ANY series or sequence of events, but only AFTER the fact..
Rick's a really good guy..but he should stick to RANTS from now on..
This reminds me of Hitchhikers Guide to the Galaxy. The answer to the question of Life, the Universe and Everything is “42” and the question is “what is 6*9”.
It is fascinating though. Often stocks that are correcting do seem to go to their fibonacci levels though probably be cause of all the fibonacci cult members out there trading every day.
Who knows. There are fundamental reasons though why treasuries will sell off so it could definitely come to pass.
But I just 8.
Criminal minds? What is that?
This is what happens to your mind when you spend too much time trying to understand Leesman.
Part of what makes technical analysis of securities work is that so many people use it. ie, it is a self-actualizing result by traders. And because other traders use it, I’ll use it.
The greatest fraud perpetrated upon the investing public in the last 30 years have been two theories about securities:
1. That securities price movements are random, and can be modeled with Gaussian distributions.
2. The Efficient Markets Hypothesis, wherein advocates claim that everything known and unknown is priced into a security.
Since Rick has spent quite a bit of time in trading pits before he became an on-air color commentator for CNBC, he’s got some perspective of what he speaks on trading. There are some guys who trade on chart patterns, some who use Fib fans/retracements, some who are advocates of Gann patterns, some who use candlestick patterns, some who use point-n-figure charts to find patterns... they all work to some degree on some securities some of the time.
The secret to making a profit in using these things in trading is to contain your losses. There are really only four things that can happen to the price of a security:
1. It goes up a lot.
2. It goes up a little.
3. It goes down a little.
4. It goes down a lot.
In trading, I insure that I avoid 4 and some of 3 through loss containment. The rest of condition 3 that I don’t contain by pruning losses is equalled over time by condition 2.
Too many people look for the “magic predictor” that gives them a home run every time. No such thing exists. If I’m doing everything correctly, only about 55 to 65% of my trades are profitable. Maybe one in 15 are over 10%.
IMO, too many “professionals” fed the retail investing public utter pablum about “buy and hold” and these poor people have been screwed out of huge sums in the last 10 years. We’ve had 10+ years now of sideways movement in the equities markets in the US, and we’re bound to have at least another five years of really choppy markets.
In the episode I referenced, George Costanza played a serial killer who constructed his crimes based on patterns discerdn from Fibonacci numers, and the spirals..
The series reruns constantly on many networks....see if you can find the episode, and when it's one next time..
i stand corrected sir !!
I learned about it (and later forgot) from Mathnet years ago:
Where I would take issue ( as pertains to investment advice given to the general public) is your knock on "buy and hold."
I believe in that firmly, especially when an investor is in the accumulation phase of his lifetime, AS LONG AS IT IS ACCOMPANIED BY THE FOLLOWING PARAMETERS:
1. Continuous reinvestment..the old "dollar cost averaging"..which most people do via 401ks and other self-directed plans.
2. Focus on investments that pay dividends..and keep reinvesting them. Many studies have shown the value of reinvesting over time.
3. Focus on costs. Investors are absolutely slaughtered by a fee structure that rapes them..from wrap accounts, to sales charges, to commissions, to variable annuities, to 12(b)1 fees..and the list continues..these can average as much as 2% a year over time...and it's hard to make money with a perpetual 2% haircut...
Remember Tom Lehrer..? "New Math"
If your team was victorious, press ‘won’
If you want directions, press ‘to’
If you are a woodsman, press ‘tree’
If you are in favor, press ‘for’
If you are disgusted, press ‘fie’
If you have more than one ill person, press ‘sicks’
If you are looking for a Norwegian, press ‘Sven’
If you have already been fed, press ‘ate’
If you are German and want to say no, press ‘nein’
If you are a WWII Japanese fighter pilot, press ‘zero’
If you are an astronomer, press ‘star’
If you are British and are ringing for money, press ‘pound’
Fibonacci Numbers and Nature
Fibonacci Forex Trading
Nature by Numbers (Beautiful Fibonacci illustration)
PS..only because you're a fellow former Marine..
Oops, I mean Good Won!
Your #2 is something that went by the wayside from too many professionals in the mid 90’s through the 2000’s. It seems that dividends went out of style as everyone wanted to go ga-ga over pure growth plays.
This even has rippled through into public policy. eg, I’ve never understood why there is double taxation of cash dividends. To me, a company paying a cash dividend is one of my best defenses against accounting fraud by the company. If they’re paying a dividend, then I should be able to see it ripple through their SCF and balance sheet appropriately - and if I don’t, then that’s a huge red flag.
But let’s put that particular issue aside. The reason why I have a knock on “buy and hold” is that a mindset of buy and hold (or more accurately, “buy and ignore”) grew up in the years of ‘83 to ‘00, when we had this wonderful, long secular bull run. During this period, a buy-and-hold approach worked fantastically well - even through the market crash of ‘87, when we step back away from the half-year carnage. No doubt about it, buy and hold was a sound approach in that market environment. At the start of that bull run, fees were still ferociously high, trading was expensive and decidedly not something one could do easily off the exchanges, etc. By the end of that run, the entire environment had changed to make trading much more viable for the retail investor.
The problem IMO is that these long secular bull markets do come to an end, and investment pro’s offering advice to the retail public haven’t modified their “buy and hold” advice in the light of markets like the last 10 years, where we chop up and down, back and forth, without a long (decade+) secular trend. Further, the pro’s want to ignore the historical evidence that following debt deflations (ie, what we’re now seeing), the market can take a long time to re-establish a trend. A decade or more or chop could from here be in the offing. Following the crash of ‘29, we really didn’t see the market behavior even out and settle down until about 1949, if we’re looking at a chart of the DJIA.
IMO, people have to be ready to get in and get out of the equities/bond/commodities markets at the appropriate times for some number of years to come. It isn’t helping that we have a clown posse’ in DC right now, making policy by having LSD parties in the parking garage, but the markets now clearly have the attention span of a goldfish and that means that gains appear and disappear in the space of a couple months - not years. I’m not suggesting that people would be well served by day trading (which seems like a fool’s errand in the era of HFT), but getting out when you have gains and things start to roll over as they did last week? Yea, that’s a suave idea. Short term cap gains rates be hanged - having cap gains at all is a nice problem to have, IMO. Tax efficiency is an afterthought.
re: your #3: This is why I learned how to run my own money. I finally got tired of paying those fees to an incompetent “professional” and learned what I know now. And one of the things I now know is that many professionals are far, far too sanguine about losing other people’s money. To many of them, running money is a shameless academic exercise. The aforementioned “professional” who was managing our money believed big-time in EMH (what an utter crock) and he absolutely believed in such nonsense as “You must have exposure to foreign markets!” - which in his book included things like France, and TOT and Vivendi. After he held onto Vivendi for a 75% loss and I had my own sources telling me of fraud within the company in late 2002 (which he refused to believe), I finally pulled our money out from him, made some calls and got him kicked off our broker’s list of client advisors as well. My parting shot to him about his macro theories (EMH) and failure to contain losses was “I need to be invested in a French water company-turned media conglomerate like I need a dose of the clap.”
Oh, and as for my sources on Vivendi? Yea, they turned out to be correct:
It took years to be vindicated on that one, but when the charges were finally brought, I knew I was right to run our own money and never let an advisor tell me how or what to do ever again.
It was after this experience that I learned an expensive and painful lesson about many financial “professionals:” They’re in love with their theories of how the markets, business, economics and the world work, and they’ll stick to their theories, even when the abundance of evidence of the market is turning against them. That they have the unmitigated gall to charge 2% while not making any money is my best evidence that they’re frauds and hucksters. IMO, a financial advisor should charge only when he makes someone money. Any idiot or fool can lose money. It’s easy. That sort of expertise is abundant and cheap. I could give money to any crack addict on a street corner and he’ll very successfully lose that money without charging me any additional fees for doing so. This goes to my argument for penalizing the i-banks for their idiocy too - and their wailing and crying that if they don’t comp their staff with absurd riches, they’ll “lose their talent.” Uh, ‘scuse me, but a bunch of clowns that cause what happened from ‘07 to ‘09 aren’t “talent” unless crack addicts are “talent” too.
The problem for investors is that they cannot tell whether their advisor is in love with his own theories or not until the crap starts to hit the fan. That’s when the real professionals differentiate themselves from the grifters - and by then, it is too late for the victim.
In the last 10 years, I’ve learned that none of these market prognosticators or fund managers spouting crap mean anything. There’s only price and volume, profit or loss. If a security starts going down, I don’t care why. If I have gains, I’m taking them, and if I don’t, I’m cutting my losses. Theories be damned. Theories don’t pay the bills, profits do. I’m now a member of the School of What is Working This Month.
One point about your negativism towards buy and hold..you have to distinguish if you'e talking about qualified money or not..because of the tax consequences..
When you put equities into a qualified plan, you're essentially turning a tax preferenced item...long term capital gains..into ordinary income..
Also, my business was in NY..so during the 80-90%..between federal, state, and city taxes..most were in a 50% tax bracket..
So a client who bought 1,000 shares of XYZ at $10, and happily saw it go to $20 after one year..well, if he has a change of of heart, or is in love with anothe stock, it's cost him about $4,000 to "lock in" his profit..or to put it another way..if he sells to protect his gain, the stock would have to decline by 40% for him to be "even"
The majority of my clients, when they retire, moved, or will move to states like Florida, my new home, without any state or local income tax..
Tax planning....much of it is just good common sense..but it can often have a far bigger impact that investmetn advice.. on total return..
Yes, that’s true, and I often forget that I’ve made sure to live in states with no state income tax (NV and WY) for the last 16 years. Your clients in NY state have my sympathies - I lived in NY state for one year after engineering school, looked at the NY state income tax and just up and left. Didn’t look back. Even in 1985, I saw the handwriting on the wall... which today appears to be read by a whole lot more people.
On the S&P AA+: NB now the various chimps in the FDIC, Fed, OCC, et al have come out and said “This will have no effect!”?
Basically, I read it as they’re telling S&P “Blow it out your ear.”
The diminution of credibility out of DC continues apace. What a bunch of idiots.
here’s my prediction..the other major ratings agencies have, for now, reaffirmed their AAA ratings...but when the supercommittee craps out this fall..and we have another political gridlock..while the left screams for MORE spendin g..then look for FITCH to take us down also..
Alot of the old guys were tape readers. That’s the trading technique I’ve adopted and it works extremely well.
Yea, that’s one of my hunches. Because we all know what a charlie-foxtrot that “super-committee” is going to be.
Then again, it could come more quickly than that with a few more indications of a declining economy (and attending declining tax revenues).
With S&P having put down their marker now, I’d think that it becomes much easier for the others to follow.
That would be good for folks investing in CD's and bad for people with variable rate debt. It's gonna get interesting.
I’m glad to hear that “( Im back running again) and training for a triathlon maybe this fall..”
Our third child developed pre-atrial tachycardia after we were ambushed in Uganda when she was 8 years old. She’s a fine, healthy 33 year old mother of our granddaughter now. She got over the tachycardia in high school and was able to play soccer and swim 500 meters in the state semi-finals.
Glad to hear your pump is working correctly!
PS Fibonacci numbers are fascinating!