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Neal,
Thanks for sharing your paper. I've noticed that sometimes
people would rather argue the origins of this number series than
to simply overlay them on the charts and try to understand the
"pattern recognition". If a high and a low is posted in a
security, commodity, or index, you would think people would take
the time to overlay the retracement lines, fans, and arcs. I
never look at a chart without doing the following:
1. Draw the prices in candlesticks
2. Draw trend lines, support, and resistance lines
3. Apply fib retracements and arcs
4. Apply 10+ formulas
Pattern recognition is a real "fuzzy" kind of thing to define.
After looking at tens of thousands (probably hundreds of
thousands ) of charts... I would have to say in my humble,
subjective opinion: Fibs work and they work real good.
Now, I know there's been discussions that allude to the history
of Fibonacci and whether western Europeans would be allowed to
teach these theories and so on and so on. I'll try to settle
some of these arguments by passing along the "family"
knowledge that was told to me by a direct descendent of old
Leonardo. My buddy, Dino, from Detroit, related this story
about his ancestor while watching a Red Wings game and knocking
back a few "boiler makers" at the LIndell AC:
"My great grandfather, twenty one generations ago (a fib #), was
from a place called Pisa. Some people think he was born around
1170, but the rumors are that his godparents were drunk when he
got baptized and they could of scribbled anything on the
baptismal records, so let's just say it was around 1170. Leo
was a real wild and crazy guy and he had heard that the Egyptian
women were not as up tight as all those Catholic girls in Italy.
So, having happy feet, Leo boogied to Egypt to check out the
chicks. He hooked up with this lady near Gizeh and after they
had been together for about a month, she suggested that they go
down to the pyramids at the fall equinox and "do it" in the
catacombs. Well, the experience changed Leo's whole life.
Pretty soon you couldn't drag him away from the Great Pyramid.
He studied the pyramid and discovered that the Egyptians had
incorporated the "golden ratio" (*Steve's note: I don't even
want to get into to my stories about my Greek uncle Manuel
Mandalakis, from Crete) into the geometrical proportions of the
structure. At night, he continued to study anatomy. The chick
dumped him for some Basque sheep herder, from the Spain, and he
eventually boogied back to Italy... heart broken, but with a
greater appreciation of what "doin' by the numbers meant". End
of story".
So, how can you argue with Dino's story? Do you want him to put
a cigar out on your forehead? Some years later, in an Aspen bar
named Andre's, I was hangin'out with Dino's sister: Marie.
After five long island teas and a few Frangelica chasers, Marie
whispered in my ear: "Stevie, I'll tell you this just because I
think your cute, you're from Detroit, I have a weakness for
second generation Hungarians and I think I'm in lust. I don't
tell just anyone! That painter dude da Vinci was named after my
ancestor Leonardo and his parents taught him those numbers when
he was growing up and he did all his paintings using those
numbers (*Steve's note: the first paint by numbers series).
Let's blow this pop stand and I'll take you home and show you my
snail shell collection, my dried sunflowers, and the spiral
galaxies, painted on my bedroom ceiling...it glows in the
dark!." How could I refuse?
So, there you have it. Knowledge passed down through the ages
from direct descendants of Leonardo Fibonacci. But hey, why
take their word for it. I once knew this drummer in a rock band
who ended up writing some things based on this number series
(Bob Prechter: The Major Works of RN Elliot). He used to say,
"Stevie, it's all in the harmony man, dig the harmony. Zappa,
Monk, Miles, Bird, Hedrix...it's in the harmony".
And although I never met Elliot, I live by his words of wisdom
(as it pertains to all things in life): "Even though we may not
understand the cause underlying a particular phenomenon, we can,
by observation, predict the phenomenon's recurrence."
I'm thinking of unsubscribing this list, based on Groucho's
wisdom: "I'd never join a club that would have me as a member".
Happy Holidaze,
Steve Karnish
CCT
----------
> From: Neal Hughes <neal@xxxxxxxxxxxxx>
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Theory behind Fibonacci?
> Date: Saturday, September 05, 1998 7:53 AM
>
> At 01:53 AM 9/5/98 EDT, you wrote:
> >In response to some of the posts on this list, I spent some
time fooling with
> >the Fibonacci retracement tool built into Metastock. I
dismissed it in the
> >past without looking at it, but, it appears there may be
something to it.
> >Does anyone know the theory behind Fibonacci numbers as they
relate to
> >securities? Do they work just because the technical analysts
think they are
> >going to work and act accordingly or is there more to it than
that?
> >
> >Then again, maybe it doesn't matter why they work as long as
they work.
> >
> >Thanks,
> >
> >Dan
> >Pocatello, ID USA
> >
>
> Dan, no-one really knows why Fibs work. If we knew, everyone
would use them,
> so they would no longer give me an edge in the markets, so I'm
not looking
> forward to the day when we figure it out. Since we don't
really know, it
> takes a leap of faith, which stops most people from using
them, just the way
> I like it.
>
> I studied some old charts printed in the old classic book
"Technical
> analysis of
> stock trends" by Edwards and Magee. Those charts date back to
before Fibs were
> popular, before computers and charting software. Fibs worked
great in those
> times!
> That's before they could have "worked because they are
self-fulfilling"..
>
> There are more advanced Fib techniques than the simple
retracement tools in
> charting packages, which give me a further edge. Follow the
link at the bottom
> of this message to explore those techniques.
>
> I once wrote a page or two on why I think fibs work, read it
here:
> http://www.halcyon.com/neal/fib.html
>
> Best wishes,
> -Neal.
>
>
> ---
> DiNapoli Fibonacci techniques -
> http://www.fibtrader.com
>
>
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