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Financial Markets, Why We Are Headed to Where We Are Headed...

Stock-Markets / Financial Markets 2012 Feb 15, 2012 - 09:11 AM GMT

By: David_Petch


Best Financial Markets Analysis Article...(More on the Theory and Reasoning of the Contracting Fibonacci Spiral)

My old history teacher in high school once said that "It is amazing that we live in a period of time where access to historical records have been thoroughly documented so that humankind can learn from mistakes of former civilizations. Instead we as a society tend to choose the easy way out, make the same mistakes and never learn from history". Governments throughout history have attempted to manipulate the masses so that the upper elite can have access to greater control. This has been done through propaganda etc. with no consideration for the future or examination of historical consequences.

Propaganda, censored news, advertising with use of proven psychological tricks to entice buyers to purchase their products etc. are all pushed on everyone everyday who turns on the TV. This can create changes to subconscious behaviour that will cause people to be pre-programmed to act. Hitler did it and governments throughout the ages have done in a time with global communication available at the touch of a button, it is even easier to sway the masses, whether it be to try and sell a gizmo or the evening news.

The biggest problem with our society is that media outflow is controlled by 3 major syndicates in the United States. Canada receives US, British broadcasting and we do have our own CBC etc. But no one up here is immune to pushed views either. Media is a tool for business and business often gets support for their vision through a political party they financially contribute to. If by chance a majority government forms, they can then have their decisions made without any interference. The best sort of political environment is to have a minority government where all interests are met somewhere in the middle.

The tail end of the last sentence is the key to success in life..."somewhere in the middle". Moderation of everything in life is critical and when it comes to herd mentality, this middle ground is often lost and distorted. With a herd mentality, people tend to shift from one extreme to another, so many different people try to gauge "the middle ground" for investing...others will then use "this group" to form their opinions as "that group" may have a biased view for where the middle truly lies. No one individual will get the "middle ground" quite right without stripping the emotional aspect from their core. Unless one can be like a Vulcan, it truly is humanly impossible to avoid this scenario. Everyone will be feeling some emotion...the stock market is based on Greed and Fear and an infinite combination of the two. An entire population will have individual settings at a particular point in time for how they fall on this scale, but as a collective, the average for where this lies is the gauge to examine. With human behaviour, some noted cycles have been noted that indicate good times and bad times.

Tying into cycles is very important...Tim Wood does extensive cycle analysis as does Cliff Droke. Many think that cycles do not exist and are phooey. My answer is that these people are closed minded and do not have a brain to rationally think out anything. The Earth rotating the Sun as it spins once every 23:56 minutes is a cycle, the tides of the ocean are a cycle as is the circadian rhythm found in humans. Scientists some years ago connected many probes and examined many different regions of wave frequencies and spectrum's for potential signals from the body. They found heartbeats, blood pressure etc. and around 6-8 other signals for cycles they did not even know existed.

Discovery is based on the art of observation and knowledge base that allows for experimentation and trying out new ideas. This is the foundation for science and discovery. The Contracting Fibonacci Spiral )*) is a Cycle that the broad stock market indices have been following since 1932 is a discovery that has yet to have intricate details worked out. Every cycle will have its own unique rhythm...this one is Fibonacci based. When someone can crack what signal a cycle is based upon, it becomes crystal clear. One thing about thing about the CFS is that its roots are linked to currency manipulation which controls everything...even how gold and other commodities will be valued in the future. This cycle trumps all others and I invite anyone to study this and prove this hypothesis to be wrong.

Cycles are unemotional...they follow their own rhythm unless external forces cause them to shift or alter their pattern. Some cycles like Circadian rhythm are genetically locked in place, much like the Earth rotating the sun and would take a HUGE event to disrupt them. Other cycles like heart rates, blood pressure etc. are very subject to external factors (internal changes are linked to external changes i.e. diet, fight or flight, music). Elliott Wave analysis attempts to unlock patterns and cycles within the stock market and track its path in a quantitative manner...there still is a personal bias to everyone who does this form of analysis for the most part (or any other form of technical analysis) because everyone has an opinion. To try and remove this is nearly impossible unless many different items distracting everyone, including others personal opinions are blocked. This is mechanical and is very difficult to do. One way to help cycles have a basis is to have a statistical basis to a conclusion.

Statistical analysis is one of the great mathematical discoveries and is highly applicable in science to determine if a result is statistically significant or an aberration. The importance of field testing results is to have a large enough pool of data in order to have an average, or mean. From this mean one can determine the standard error, standard deviation and %CV (covariance of variance (standard deviation/mean*100). From this, t-tests, different forms of ANOVA's can be compared, factorial analysis (to examine multiple factors tested at many levels to determine responses that have interactions) etc can be used to further support or reject a hypothesis. The above sounds complicated and it is very complicated. The bottom line is that you need a data base in order to have access to that information that can provide a sound statistical basis for support or rejection of an idea.

Tim Wood originally is noted for being a DOW Theory Technician, which is based upon key criteria to determine whether or not a bull or bear market is in force. He integrated cycles work with a heavy statistical basis to determine when turning points occur and if they do not, it quickly allows for an appropriate change in an investment strategy. So, having access to data is good...the larger the data base the higher the probability and confidence that it supports or rejects the claim.

The Contracting Fibonacci Spiral is a time based cycle that only calls the market tops based upon Fibonacci theory. The problem with time is that it only moves in one direction and can never be repeated (If there are multiple realities we are only aware of the one we are in and can not tap to see "what could have happened if...") so unfortunately, the data base for this is rather sparse and there are no comparators that I have really found (or had the time to examine). We have 1966, 1987, 2000, 2008 and soon around early 2013 before the next supposed point in time as the only available reference data. The collective of core human emotions around late 2011 were much like that of fish head guy...going with the societal consensus rather than backing off and looking at things from a distance to see where things were actually heading.

All of the stochastics, Bollinger band analysis and Elliott Wave analysis I do pointed to 2012 being a good year, but finding something like the Contracting Fibonacci Spiral was something found outside of my normal was based upon examination of a very limited set of historical data and saw a pattern emerge. If I was unaware of Fibonacci theory, I would not have been aware of this pattern at all (It is important to always learn and build upon individual knowledge base already in place).

Although the ideal world would have many other examples to aid in quantification of this cycle, the data so far suggests it is quantifiable with the limited data set. Human beings have one extreme problem and that is the failure to realize that we are a part or nature rather than being unique created in the eyes of God. Since we are derived from nature, the emotional core of human beings has a mathematical basis, which is proven with the Contracting Fibonacci Spiral. Some scientists recently worked out the mathematical basis for human sight...everything has a mathematical basis, it just has to be discovered. Knowing and accepting that human behaviour is mathematically based is profound and could be hugely profitable.

By knowing what the bi product of the collective behaviour at a particular point in time is, one can ignore the short-term herd mentality and focus on what lies ahead. The collective of human behaviour, or herd mentality is very similar to looking at the rear view is no indication of what lies ahead, only of what was before. This is very important to grasp because removal of the background noise to obtain the true signal is the most important thing to do for obtaining any sort of result, whether it is electronically based, bias from a survey or attempting to profit from the stock market.

This turned out to be a longer piece than anticipated, but the take home message is to be open and aware of one's surroundings and that it is the collective behaviour that govern the path of the future, which by no surprise is linked to past events. When the Contracting Fibonacci Spiral reaches its point of Singularity sometime in 2020-2021, what happens after is up for discussion. If the pattern continues to behave as anticipated, then we will have the continued stagflationary environment (inflation and deflation existing at the same time), not the deflationista view that Mish expresses (deflation deflation deflation)'. After 2020-2021, we likely will experience very sharp inflation that will carry the DOW to 200,000 as per Glenn Neely's wave count put forth in 1988 (Truly one of the greatest market technicians of our time).

Remember, the things that I hypothesize about what will happen within this Contracting Fibonacci Spiral are extrapolations of what has happened...each point of the cycle will have events happen at an accelerated pace. In theory, we should have huge market rallies followed by huge declines. Gold and silver should rise in price and experience sharp declines, but overall put in higher lows. Things should continue to go well until the expected dates (sorry, that is for subscribers only) and then fall apart. Remember that 1987 was a point on the Contracting Fibonacci was a very sharp and painful correction that was brief and quickly bounced back for a continued 13 year advance until 2000. What does the early 2013 top mean?

The next top after that is in 2016 (again, I can not share this information) so the 2013 correction will either be brief like 1987 or last longer, followed by a rebound within this 3 year time frame. The important thing to note is that this 3 year period will see a very sharp decline followed by a very sharp rally. After 2016, a two year period of the same, then 1 year, one more year and then singularity...this is when things blow up and go bad. Everyone is talking about 2015 being the year... Martin Armstrong's work is suggestive that 2015.75 is when things fall apart and Jim Sinclair also states this point in time. The Contracting Fibonacci Spiral is suggestive that it will last longer than anyone suspects. This is a higher order operative cycle that is underway and has extremely powerful implications but what if it became derailed?

Derailment of this cycle would occur if government seized control over the stock market and every aspect of business with control measures...this would remove the human collective psychology from the equation and stop it in its tracks...implications of this would be massive riots unknown to our era that would be a deep tragedy. As stated earlier in the article, humankind tends to take the most difficult route which is often perceived as the easy way out. So with my understanding of humans, we are going to continue to embark on the current path for another 8 extremely difficult years. The best thing to do is go with the flow...don't go against the current, don't go against the wind. The Contracting Fibonacci Spiral cycle can be used to profit and flourish or ignored and face financial peril. Continuing to build a personal knowledge base will keep mental acuity long into old age (look at Richard Russell) and allow for better decisions to be made. Let the world of knowledge be your personal lab for experimentation and ye shall find. Some topics of the article may seem to be out of place or not have purpose, but elements of government was required up front in the article to bring full circle to what could derail this cycle and what drives even more so now the collective psychology of the populous.

I really hope that tying in many different elements of this article help to paint a picture with a higher pixel base to clearly see where I am coming from and why I think this cycle is important. There is some personal bias in this cycle that I will have obviously, but it will work until it doesn't work.

Have a great day.

By David Petch

I generally try to write at least one editorial per week, although typically not as long as this one. At , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

With the above being just one example of how we go about identifying value for investors, if this is the kind of analysis you are looking for we invite you to visit our site and discover more about how our service can further aid in achieving your financial goals. In this regard, whether it's top down macro-analysis designed to assist in opinion shaping and investment policy, or analysis on specific opportunities in the precious metals and energy sectors believed to possess exceptional value, like mindedly at Treasure Chests we in turn strive to provide the best value possible. So again, pay us a visit and discover why a small investment on your part could pay you handsome rewards in the not too distant future.

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Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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15 Feb 12, 16:22
Cycles in nature

Great article David. To me your argument linking market activity with naturally occuring cycles is bang on. Although I haven't explored this myself, it seems logical that an entity as complex as the stock market should follow the same rules as other natural phenomenon... for everything exits within the context of nature, to believe that human beings and their society is external to nature is sheer arrogance. Obviously the rythms driving such a complex system will be incredibly hard to understand, so this is a very interesting area of research. Well done

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