Why U.S. Stocks Went Sideways in 2011
Using Fibonacci Projection to time the next BIG stock market turn

By Bob Stokes
Mon, 23 Jan 2012 17:45:00 ET

Why did the S&P 500 go net sideways in 2011, while overseas markets lost 10% - 50% of their value?

"... the market has been waiting to satisfy ratios heralded by a long-dead mathematician."
The Elliott Wave Theorist, January 2012

The thirteenth century mathematician is Leonardo Fibonacci of Pisa. He's known for the Fibonacci sequence of numbers, which are 1,1,2,3,5,8,13,21,34,55,89,144, and so on to infinity. Each number is the sum of the previous two numbers, starting with 1 and 1.

Many scientists, mathematicians and others have observed that Fibonacci ratios are widespread in nature -- from galaxies to the human form to the DNA molecule. Another natural form that displays Fibonacci ratios is the price pattern of the financial markets.

The Wall Street classic Elliott Wave Principle says (p. 122):

Can we both theorize and observe that the stock market operates on the same mathematical basis as so many natural phenomena? The answer is yes...The Fibonacci sequence governs the numbers of waves that form in the movement of aggregate stock prices...

It also states (p. 147-148):

Frequently...durations and time relationships themselves reflect Fibonacci measurements. Exploring Fibonacci numbers of time units appears to go beyond an exercise in numerology, fitting wave spans with remarkable accuracy. They serve to give the analyst added perspective by indicating possible times for a turn, especially if they coincide with price targets and wave counts.

In Nature's Law, [Ralph Nelson] Elliott gave the following examples of Fibonacci time spans between important turning points in the market:

1921 to 1929 -- 8 years
July 1921 to November 1928 -- 89 months
September 1929 to July 1932 -- 34 months
July 1932 to July 1933 -- 13 months
July 1933 to July 1934 -- 13 months
July 1934 to March 1937 -- 34 months
July 1932 to March 1937 -- 5 years (55 months)
March 1937 to March 1938 -- 13 months
March 1937 to April 1942 -- 5 years
1929 to 1942 -- 13 years

In Dow Theory Letters on November 21, 1973, Richard Russell gave some additional examples of Fibonacci time periods:

1907 panic low to 1962 panic low -- 55 years
1949 major bottom to 1962 panic low -- 13 years
1921 recession low to 1942 recession low -- 21 years
January 1960 top to October 1962 bottom -- 34 months

There are other Fibonacci time relationships in the stock market.

In fact, the evidence strongly suggests that we're facing a big one in 2012.

When?

The just-published Elliott Wave Theorist presents two revealing charts which tell you.

Take your time with both charts. You'll want to absorb all the details.

We believe you'll draw the same conclusion as we do.

See what we see by taking a risk-free look at the new Elliott Wave Theorist. Learn about a first-time ever Special Offer>>

Get 57% Off 6 Full Months of EWI's 2 Flagship Letters - and Get 2 of Bob Prechter's Best-Selling Books for FREE

You have a limited-time opportunity to read ALL of Robert Prechter's latest Elliott Wave Theorists and ALL of the latest Elliott Wave Financial Forecasts (EWI's two flagship letters) - 7 recent issues in all, including Prechter's 54-minute video issue - at a deep discount off regular prices. (Plus it's all risk-free for 30 days!)

Rating: - based on [10 rating(s)]
Rate this content:

EWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:
• Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
• Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
• Theorist -- Bob Prechter's monthly big-picture insights.
Get complete details and start your risk-free trial today >>
Free Video Course
Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.