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In a message dated 6/21/00 5:32:30 AM Pacific Daylight Time,
bfulks@xxxxxxxxxxxx writes:
> I think Gann stuff, fib ratios, astronomy, Elliot Waves, Dow Theory,
> etc., are all of this latter category. If you come up with a
> technique, publish it, become a guru, and sell enough books, you may
> be able to convince enough people that your technique works well
> enough to have enough people try it to make it REALLY work.
and:
In a message dated 6/20/00 11:41:26 PM Pacific Daylight Time,
kentr@xxxxxxxxxxxxxx writes:
> Personally, I don't believe there is any scientific or statistical reason
> why Fib ratios should work
I hesitate to disagree with these two guys. I think they are both huge assets
to the list......but:
I believe there was a study that found the stock market has spent, over more
than a hundred year period, about 62% of its history going up, and 38% going
down.
On May 26 I sent, in part, the following Email to several famous gurus:
"The recent low in the NDX is [about] a 38.2% decline off the top. The 1987
decline was a 38.2% decline off that top. Each decline lasted two months. The
1987 decline was a fibo five years after the creation of the S&P futures. The
NDX decline was five years after the creation of the NDX futures. The two
crashes are separated by a fibo 13 years."
I posted to the list that day in response to some overwhelmingly bearish
comments:
"FWIW, in the NDX there is a (nearly) two year trendline cutting through near
3000 and so far it's holding on a daily close basis. Moreover, "predicting" a
bear market after a nearly 38% decline (4816 - 38% is +/- 2976) ....snip...
it is wise to let the market tip its hand. Even a bear market bounce could
produce a 1000 point rally (62% of this decline is near NDX 4100)."
Actually 62% is actually closer to 4070, the NDX hit 3990 so far.
First, regarding the gurus: all of them either dismissed "my 38.2" or said
they hadn't even thought about it. If memory serves me, sentiment in the
press, the list, gurus, etc., around that low was very bearish. I'm not aware
of anyone publicly mentioning it was a big fibo pattern, nor any resemblance
to 1987. My point is this: markets make big turns when the greatest number of
traders are NOT expecting it. Most traders are wrong at the big turns: it is
their panic to get out / catch up that fuels those moves. Most traders lose,
they don't catch the big turns, they fade them. When systems and methods
become too popular they stop working.
I agree with Bob and Kent that it is difficult to code or otherwise use fibos
in a "scientific" manner. I do not use them in systems, and I do use systems
to trade.
Most of my systems are based in short term price patterns. Nonetheless, I do
take note of what I perceive to be important fibos, in combination with price
patterns, and may adjust my stops, position size, etc., accordingly.
I agree that the exact science of fibos in the market is not clear cut, but
you only need contemplate your navel (we are about 62% from the navel down to
our feet, 38% from the navel to the top of our heads), or the structure of
your hands and arms (each joint relates to the next by the fib ratio), to see
the growth patterns of the Universe reflected in Man. It is a small leap to
assume the market is a reflection of us.
Bill Wynne
TradeWynne@xxxxxxxxxxxxxxx
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