IMAKEMONEY (Robert W May) sent this to us SEGA people by email this weekend. I don't know if anyone is interested in this sort of thing but it sure is interesting to me.
Fibonacci "Golden Ratio" of 1.6180339887498949 (FIBO)
What are Fibonacci ratios ("Fibos")?
The Fibonacci golden ratio is based upon simple numerology.
Take any two numbers, e.g., 0 & 1, and add them together.
Next, take the sum and add it to the larger of the two numbers,
i.e., 1 + 1 = 2. Now add the new sum to the old sum, i.e.,
2 + 1 = 3. As you continue doing this you'll get a numerical
series like the following: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34...
The further out you go in the series, the closer the ratio of
two consecutive numbers comes to 1.6180339887498949 (or, if
you take the ratio of a number to the next higher number, 0.618...).
On a final note, if you create a new series based upon the
exponential values of the golden ratio, i.e., 1.618034 to
the X power, you'll get a new Fibonacci series in which
each number is the sum of the two previous numbers, e.g.,
1.618 to the -1 plus 1.618 to the 0 equals 0.618 + 1.00 = 1.618,
and 1.618 is 1.618 to the 1st power.
Now, if you take the time span between the June 1992 alignment/peak
and the current possible alignment/peak and multiply it by 1.618...
(which is also 2.618, or 1.618 to the 2nd power, times the length
of time between the January 1994 alignment/peak and the current
possible alignment peak), then you get the time span from the 1991
alignment/price-low and today.
If you keep doing this to the time periods between each of
the alignment/Elliott Wave stock market turning points above,
all the way to multiplying the time span between now and Jan. 1994
by 1.618 to the 6th power to find the time span from the 1962 peak
to the present, then you uncover the code of Elliott Waves and
historical cycles. The correlation found by comparing the
lengths of time between the key planetary alignment/stock market
turning points noted above with exact Fibonacci relationships is
over 99.9 percent.
Found in Nature:
Now, to understand why this is so, you might note that
the time span of plantery orbits in our solar system (i.e., the
time it takes for each planet to make one complete revolution
around the sun), are related by Fibonacci relationships.
Specifically, given that the Earth takes one year to orbit the
sun, the time that it takes Venus to orbit the sun is
1.618 to the -1 years. The time it takes Mercury to orbit
the sun is approximately 1.618 to the -3 years. Mars is roughly
1.618 years, the asteroid belt is roughly 1.618 to the 3rd years,
Jupiter is approximately 1.618 to the 5th years, so on and so forth
(note that Pluto does not fit).
The Spiral Calendar is a twist on Fibonacci analysis of markets.
Rather than attempt to pick turning points based on retracement ratios of trend distance in points, it attempts to pick turning dates by applying a derivative of the Fibonacci series to a calendar of Carolan's creation.
The idea is that there is a Fibonacci "resonance" (my word) that extends outward from a given major market event in a spiral. Every so often, the spiral intersects with calendar time, producing (or merely documenting -- I'm not a mystic, so how would I know?) a harmonic event in the market again. In his book, Carolan shows as one of his examples that the 1929 crash in the stock market had a harmonic resonance that occurred within a couple of days of the October 1987 drop. Interesting, huh? So, to apply this as a trading system, one takes dates in the past and looks for coincidences of harmonics in the future.
To construct a list of target dates, one identifies major high and low peaks in the past; the more you have, the more future turning points you will generate. You then create a spreadsheet (yes, really, it works best in a spreadsheet and not Tradestation) that has your list of past turning points in the first column, and then a series of calculated date projections into the future from each of those original dates. Still with me? Well, get the book... You then look through the enormous array of dates that you've generated for dates that match each other, given a few simple rules that Carolan supplies. I wrote some macro tools to do this automatically and generate a nice list of date clusters, which made the whole process a lot less painful. These clusters of matching dates then identify your future turning point predictions.
Does it work? Actually, it does, but with one major flaw. After you get a big enough set of major past turning points, you generate a vast array of future clusters.
Elliott Wave Charts (w/Fibos):
MarketSwing Discussion: http://marketswing.com/discus/messages/2/2.html?1030290930