Fibonacci Analysis: Finding Equity Market Trend Turns

By: Robert McHugh | Sun, Mar 26, 2006
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Since January 14th, 2000, when the Dow Industrials hit its closing all-time high -- over six years ago, we have noted that every major subsequent top or bottom has occurred in a Fibonacci .618/.382 ratio number of trading days with another top or bottom and January 14th, 2000. In many cases, even minor tops or bottoms have occurred in a phi ratio with another top or bottom. We call these pairs Fibonacci phi mates. Further, because this has been occurring with uncanny regularity, we have been able to successfully identify future trend turn dates within +/- 3 days by applying the same phi mate analysis into the future.

What we are not able to predict is whether the turn will be major or minor, and whether it will be a top or bottom. However, in every instance, a trend turn has occurred. For those of you unfamiliar with Fibonacci numbers, they are a unique sequence where each subsequent number in the sequence is the sum of the immediate prior two. Thus the sequence goes like this: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc... For example, 8 equals the sum of the prior two number, 3 and 5. 89 is the sum of 34 plus 55. Interestingly, the ratio of the two addends to its sum is .382 and .618. For example, 34/89 = .382, and 55/89 = .618. phi is the ratio .618; and .382 + .618 = 1.00.

The above chart chronicles the Fibonacci phi mate turn dates that occurred over the past twelve months that we predicted months in advance, by applying the amazing phi mate analysis formula. Every phi mate turn date was followed by a trend change. Some were more significant than others. There were some minor trends that were not picked up, but every turn date identified beforehand did in fact result in a trend change.

The detail of each of these turn dates, their partners, and measured subsequent move are as follows:

March 4th, 2005 was a top that was 1,291 trading days from 1/14/00, and had a phi mate relationship with 3/21/03's top. 3/21/03 was 799 trading days from 1/14/00. 799 / 1,291 = .618. This top was followed by a 928.19 point decline, or 8.48 percent, to April 20th, 2005.

April 20th, 2005 was a bottom that was 1,323 trading days from 1/14/00, and had a phi mate relationship with 1/29/02's low. 1/29/02 was 511 trading days from 1/14/00. 511 / 1,323 = .386. This bottom was followed by a 693.19 point rally, or 6.92 percent, to July 28th, 2005.

July 28th, 2005 was a top that was 1,392 trading days from 1/14/00, and had a phi mate relationship with 6/17/03's top. 6/17/03 was 859 trading days from 1/14/00. 859 / 1,392 = .617. This top was followed by a 308.26 point decline, or 2.88 percent, to August 26th, 2005.

September 12th, 2005 was a top that was 1,423 trading days from 1/14/00, and had a phi mate of 3/19/02's top, which was 545 trading days from 1/14/00. 545 / 1,423 = .382. This top was followed by a 467.72 point decline, or 4.38 percent, to October 21st, 2005.

October 21st, 2005's bottom. We missed this one as it came an odd -- but still valid -- Fibonacci ratio of .375 (3/8ths). It was 1,452 trading days from 1/14/00, and had a phi mate of 3/19/2002's top, which was 545 trading days from 1/14/00. 545 / 1,452 = .375. This bottom was followed by a 716.40 point rally, or 7.01 percent.

December 30th, 2005 was a bottom that came 1,500 trading days from 1/14/00. It had a phi mate of 4/29/02, which was 573 trading days from 1/14/00. 573 / 1,500 = .382. It was followed by a 325.94 point rally, or 3.04 percent, to January 11th, 2006's top.

January 11th, 2006 was a top that came 1,507 trading days from 1/14/00, and was a phi mate of 9/30/03, which was 932 trading days from 1/14/00. 932 / 1,507 = .618. Following this top was a 376.05 point decline, or 3.41 percent, to January 20th, 2006's bottom.

February 7th, 2006 was a bottom that came 1,525 trading days from 1/14/00, and had a phi mate of 10/14/03's top, which was 942 trading days from 1/14/00. 942 / 1,525 = .6177. Following this bottom, was a 387.41 point rally, or 3.60 percent, to 2/22/06's top.

February 22nd, 2006 was a top that came 1,535 trading days from 1/14/00's top, and had a phi mate of 5/17/02, which was 587 trading days from 1/14/00. 587 / 1,535 = .382. Following this top was a 178.58 point decline, or 1.60 percent, to March 6th, 2006's bottom.

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Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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