Currently, broad market indices are captured in the shrinking Fibonacci spiral (SFS), the result will be seen in the time interval from December 2012 to 2020. Figure 1 shows the value of the currency in the society. The method of providing currency, whether it is a gold standard or simply a declaration, affects mass psychology. Models of mass psychology form various cycles that are associated with progress through long-term periods. The stock market is the most advanced way of possessing the characteristics of human psychologists - from greed to fear, with all their intermediate combinations.
In the 1930s monetary policy based on commodity security made people more honest, which was a direct reflection of this policy. Over time, the economy has become increasingly unstable, higher-order events have increasingly interwoven with the economy and markets.
It should be noted that each cycle has ups and downs, but there are a lot of vertices in the SSF, located within 5% of the given time marks. After them, corrections range from 40% to 50%.
Fibonacci spiral tied to the market
Everything in the world is tied to the coefficient of fi (61.8%), called the golden section. This coefficient is based on a numerical sequence calculated by the Fibonacci mathematician at the end of the 12th century. This sequence consists of numbers, each of which is the sum of the two previous ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, etc. The farther the numbers are in this sequence, the closer the division of the previous number into the next will yield a coefficient of 61.8%.
One of the creations of nature is the Fibonacci spiral, which can be constructed starting with squares of smaller size and adding progressively increasing 1.618 times squares, as shown in Figure 1. The spiral can be expanding or contracting. When forming a spiral, the area of each square does not matter, only its length is of interest. In July 2011, it was noted that wide indices of the US stock market began to form the SSF in 1932, with subsequent peaks occurring within 3% of the deviation from the estimated dates, calculated by multiplying the previous part of the SSF by 0.618. Figure 2 shows the data from 1932 to the present day. As the FSS approaches zero, the ratio 0.618 is violated and the individual coefficients that are indicated in Figure 3 need to be taken into account.
A unique feature of the SSF is that for past time marks the coefficient is different, and only then it starts to approach 0.618. Examples are shown in Figure 3. As we approach the time stamp of 2013 and onwards, the coefficient fluctuates around 0.625. For positions in long, it would be safer to close most of them when approaching the next mark, when the coefficient in relation to the previous reaches 60% (0.60).
The markets are seized in the SFS
Several key points about the SFS were identified and presented below:
- The shrinking Fibonacci spiral shows only the vertices in the Dow Jones and S & P 500 indices. The length of subsequent corrections is different. The 1987 timeline fell on an instantaneous collapse, which ended in a few months, followed by a 13-year uptrend. The length of the correction is an undefined value.
- Up to the present time, at each time point on the Fibonacci spiral, each subsequent point has reached a higher high, each increment was less and less in percentage terms than the previous movement. Exceptions were 1966 and 1987 (for example, DJIA = 40 in 1932 to DJIA = 995 in 1966 in relation to any other period under consideration - an increase of about 44 times during this time period).
- After each peak there followed a painful fall not less than 40% -50%.
- Each point of the contracting Fibonacci cycle is more compact than the previous one, and volatility will increase as we approach the singularity point around 2020-2021.- As you approach the singularity point of this cycle, the golden ratio is likely to break, as described in Figure 3.
- This cycle is set in motion by collective human psychology. All events that occur with individuals are personal success or failure, death, birth, accidents, wars, etc. - occur by accident. The tops of the cycle are like cities on the map, the train moves between them at a constant speed. Arrival at the destination takes place at a specific time. What happens to passengers does not affect arrival. This cycle could be stopped by nuclear war, asteroid impact to Earth or another event of the same magnitude. Cycles can be stopped, but we must admit that we are in a big cycle that is nearing completion.
Inside the main SFS
Everyone who is familiar with the nesting doll knows that this doll separates in the middle to accommodate a smaller doll. Following this logic, the existence of large compressible Fibonacci spirals containing smaller ones is possible. But they must be properly coordinated.
The SFS on gold started at a low of $ 253.80 per ounce on June 21, 1999, and grew until February 28, 2008. This is eight years, eight months and seven days. If we take 61.8% of this time (1962 days to July 13, 2013), then gold could either form a peak at this point, or stretch a few more months after this date. This can be thought of as a smaller SFS cycle that operates within a larger SSF.
The use of SFS in the future
The SFS is a cycle that is followed by broad stock market indices since 1932. Each cycle has its own unique rhythm. In this case, the rhythm is based on the Fibonacci principles. When someone can figure out which signal the loop is based on, everything becomes absolutely clear.
It must be remembered that the underlying causes of the SFS lie in currency manipulations that affect many things, including the cost of gold and other goods. This cycle is superior to all others.
Cycles are devoid of emotions. They follow their own rhythm until external forces force them to change their model. Some cycles, for example - the daily biorhythm, are recorded genetically, just like the rotation of the Earth around the Sun. Others, for example - heart rhythm and blood pressure, are subject to external factors, since internal changes are related to external ones (nutrition, music, etc.).
Another important cycle that should be mentioned is Elliott's wave theory, which attempts to identify models and cycles in the stock market and trace their path. In this theory, subjective deviations may exist, because everyone has his own opinion. The rejection must be eliminated, for this one should avoid such things as personal opinion and news. To make it difficult. One way to improve the accuracy of the cycle is to have a statistical base that supports the conclusions.
Statistical analysis is very useful for determining whether the result is (statistically) significant or aberrant. The importance of the results of real testing lies in the fact that it gives a sufficiently large amount of data to calculate the mean value, or the mathematical expectation. Based on the calculated mathematical expectation, it is possible to determine other statistical indicators: mean square error, standard deviation and% CV (covariant deviation, mean square deviation / mean * 100). Based on this, further research can be conducted to confirm or disprove the hypothesis.
Although this cycle may seem logical, and the trade of this model is easily profitable, will it work if everyone knows about it? It is very unlikely that the shrinking Fibonacci spiral will be scientifically recognized before 2020. This cycle is based on the broad masses, carried away by emotions experienced at a particular moment in time, regardless of the degree of their illogicality.