STOCK MARKETS AND GOLDEN RATIO : IS IT SUCCESSFUL?

The Stock Market, Phi and the Fibonacci Series

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Human expectations occur in a ratio that approaches Phi

Changes in stock prices largely reflect human opinions, valuations and expectations.  A study by mathematical psychologist Vladimir Lefebvre demonstrated that humans exhibit positive and negative evaluations of the opinions they hold in a ratio that approaches phi, with 61.8% positive and 38.2% negative.

Phi and Fibonacci numbers are used to predict stocks

Phi (1.618), the Golden Mean and the numbers of the Fibonacci series (0, 1, 1, 2, 3, 5, 8, ...) have been used with great success to analyze and predict stock market moves.  Forbes ASAP featured a story on the work of scientist Stephen Wolfram in cellular automata (underlying rules that determine seemingly random phenomenon) stating "This seashell may hold the secret of stock market behavior, computers that think and the future of science."

Markets may be as geometrically perfect as a spider's web

Ermanometry Research shows the markets to be perfectly patterned, explaining that humans, being part of nature, create perfect geometric relationships in their behaviors, not unlike a spider spinning a geometrically perfect web with no conscious awareness of its amazing feat.  Ermanometry applies the logarithmic spirals found in sea shells with dynamic ratios in 3D to relate one market move to others.

Phi, or Golden Ratio, patterns often define the timing of highs and lows and price resistance points

The golden ratio, or phi, appears frequently enough in the timing of highs and lows and price resistance points that adding this tool to technical analysis of the markets may help to identify key turning points.  The photos below illustrate how the Golden Mean Gauge and Phi-based analysis software can be used to identify these turns in the market.  The middle arm of the gauge keeps the phi point of the outer arms as the gauge is opened and closed.  The lines of the phi-based software are all in phi relationship to one another.  The ratios of Fibonacci numbers, commonly used in technical market analysis, converge on phi as explained on the Fibonacci Series page.  Click on each photo to enlarge.

DJIA Daily Chart from 1/2004 through 11/04 using PhiMatrix software	DJIA Monthly Chart from 1/2000 through 6/2003 using a Golden Mean Gauge

Phi and Fibonacci numbers define the price movements of stocks in Elliott Wave Theory Fibonacci numbers were used by W.D Gann and R.N. Elliott, pioneers in technical analysis of the stock market.  In Elliott Wave Theory, all major market moves are described by a five-wave series, adding to the potential to identify the turns described above.  The classic Elliott Wave series consists of an initial wave up, a second wave down (often retracing 61.8% of the initial move up), then the third wave (usually the largest) up again, then another retracement, and finally the fifth wave, which would exhaust the movement. In addition, each of the major waves (1, 3, and 5) could themselves be separated into subwaves, and so on, and exhibit other Fibonacci relationships.A sample stock price wave analysis could look something like this:

Major, minor and sub waves are shown in RED, YELLOW and GREEN and the total number of increases and decreases (2, 5 or 8) is a Fibonacci number.  Note too that the predicted end result is based in the Fibonacci series as well as the end price is 61.8% of the high and 0.618  is equal to 1/ and 0.382 is 1/2.

Here is a 'Fibonacci series'.
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, ..
If we take the ratio of two successive numbers in this series and divide each by the number before it, we will find the following series of numbers.
1/1 = 1
2/1 = 2
3/2 = 1.5
5/3 = 1.6666...
8/5 = 1.6
13/8 = 1.625
21/13 = 1.61538...

34/21 = 1.61904...

The ratio seems to be settling down to a particular value, which we call the golden ratio(Phi=1.618..).

The golden ratio is an irrational mathematical constant, approximately 1.6180339887.

 

Flower Patterns and Fibonacci Numbers

Why is it that the number of petals in a flower is often one of the following numbers: 3, 5, 8, 13, 21, 34 or 55? For example, the lily has three petals, buttercups have five of them, the chicory has 21 of them, the daisy has often 34 or 55 petals, etc. Furthermore, when one observes the heads of sunflowers, one notices two series of curves, one winding in one sense and one in another; the number of spirals not being the same in each sense. Why is the number of spirals in general either 21 and 34, either 34 and 55, either 55 and 89, or 89 and 144? The same for pinecones : why do they have either 8 spirals from one side and 13 from the other, or either 5 spirals from one side and 8 from the other? Finally, why is the number of diagonals of a pineapple also 8 in one direction and 13 in the other?


Are these numbers the product of chance? No! They all belong to the Fibonacci sequence: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. (where each number is obtained from the sum of the two preceding). A more abstract way of putting it is that the Fibonacci numbers fn are given by the formula f1 = 1, f2 = 2, f3 = 3, f4 = 5 and generally f n+2 = fn+1 + fn . For a long time, it had been noticed that these numbers were important in nature.


The Golden Ratio is a universal law in which is contained the ground-principle of all formative striving for beauty and completeness in the realms of both nature and art, and which permeates, as a paramount spiritual ideal, all structures, forms and proportions, whether cosmic or individual, organic or inorganic, acoustic or optical; which finds its fullest realization, however, in the human form.





NOW, OBSERVE THE MOVING AVERAGES :

TAKE TWO MOVING AVERAGES 21 AND 34, apply to the daily charts using 5 min charts or 15 min charts depending upon your trading style whether you trade for intraday or positional.

If you find crossovers of 21 crossing 34 from below, means a buy signal generated.

If you find crossovers of 34 crossing 21 from above, means a sell signal generated.

MOVING AVERAGES WORK BETTER IN TRENDING STOCKS OR INDICES.

TAKE SIMPLE MOVING AVERAGES, WORKOUT FOR CHARTS DAILY FOR A MONTH, THEN YOU WILL NOT NEED A TECHNICAL ANALYST OR A BROKER.  

YOU ARE THE MASTER OF STOCK MARKET , IF YOU FOLLOW IT RIGHT AWAY AND WITH A DISCIPLINED APPROACH.

PATIENCE IS NEEDED TO MAKE MONEY IN STOCK MARKETS, YOUR TRADE GOES WRONG, YOU WILL JUST GET OUT OF THE STOCK, BUT USE SOME COMMON SENSE AND APPLY THE ABOVE SAID INDICATORS THEN SEE THE RESULTS FOR YOURSELF.

THE END OF MAYAN CALENDER: