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(Video) Does Fibonacci Analysis Reveal the Stock Market Trend?
The new July-August Elliott Wave Theorist uses Fibonacci ratios to anticipate prices

By Bob Stokes
Mon, 21 Jul 2014 16:00:00 ET
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Editor's note: You'll find the text version of the story below the video.

Fibonacci helps tell the story of an epic stock market trend.
Look inside the new double issue of The Elliott Wave Theorist for 2 weeks -- only $1 »

Fibonacci numbers follow a sequence that begins with 0 and 1, and each subsequent number is the sum of the previous two (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on). 

After the first several numbers in the sequence, the ratio of any number to the next higher is approximately .618 to 1; its ratio to the next lower number is approximately 1.618 to 1.
 
Fibonacci ratios appear throughout nature, from the shape of galaxies and seashells to molecules and even the human body.
 
 
 Here's why these ratios should be of keen interest to investors:
 
The Fibonacci sequence governs the numbers of waves that form in the movement of aggregate stock prices...
 
Elliott Wave Principle: Key to Market Behavior, 10th edition, p. 122
 
Long- and short-term market charts are often filled with Fibonacci relationships. Here's one example from Elliott Wave Principle with the accompanying commentary:
 
 
 
[The chart] illustrates the natural law of the inwardly directed Golden Spiral and is governed by the Fibonacci ratio. Each wave relates to the previous waves by .618. In fact, the distances in terms of Dow points themselves reflect Fibonacci mathematics. ... Showing the 1930-1942 sequence, the market swings cover approximately 260, 160, 100, 60, and 38 points respectively, closely resembling the declining list of Fibonacci ratios: 2.618, 1.618, 1.00, .618 and .382.
 
Elliott Wave Principle: Key to Market Behavior, 10th edition, p. 123
 
What does a discussion of Fibonacci have to do with today's stock market?
 
The just-published double issue of The Elliott Wave Theorist says:
 
Waves in the Dow Jones Industrial Average produce mathematical poetry in time and price...
 
Sometimes the poetic expression is a quasi-geometric form. Other times it is a set of Fibonacci price and time relationships. When both occur, it rhymes. ...
 
There will come a day when you can see both the structure and the time and price relationships clearly, and everything falls into place... Let’s present the evidence.
 
The new July-August Theorist includes 23 chart-filled pages. See it for yourself. The Fibonacci analysis in the new issue is comprehensive and tells you where EWI expects the market to go next.
 

 



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