Fun With Fibonacci And The Great Depression

Tyler Durden's picture

The Fib retracement from the highs to the lows in the cycle is now nearly 61.8 (at 1,228)

The retracement from the highs to the lows in the first wave of the Great Depression peaked just below 61.8.

Does history repeat itself, or come in tidy little Fibonacci packages? Are today's math Ph.D.'s even aware of retracements, or do they just know how to buy, buy, buy on ever declining volume? 1,228 is the magical number on the S&P. We'll find out soon enough.

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lsbumblebee's picture

You realize of course they only had slide rules back then.

Missing_Link's picture

I trust any other indicator more than I trust Fibonacci.

lsbumblebee's picture

Not me. I'll trust Fibonacci any day over a hedge fund algo goldamn sach of shit robot that does not compute.

Trading Nymph's picture

Heck, I watch fibo levels and fibo MA's...the Physic Majors have them so programmed in....you give me the first few minutes of each day and I can give you the resistance and support levels for the day...it's so predictable.

Village Idiot's picture

We all need a laugh - and sorry for the heist.

 

Dr. Strangelove: Sir! I have a plan!
[standing up from his wheelchair]
Dr. Strangelove: Mein Führer! I can walk!

[discussing the Doomsday machine]
President Merkin Muffley: How is it possible for this thing to be triggered automatically and at the same time impossible to untrigger?
Dr. Strangelove: Mr. President, it is not only possible, it is essential. That is the whole idea of this machine, you know. Deterrence is the art of producing in the mind of the enemy... the FEAR to attack. And so, because of the automated and irrevocable decision-making process which rules out human meddling, the Doomsday machine is terrifying and simple to understand... and completely credible and convincing.

[Strangelove's plan for post-nuclear war survival involves living underground with a 10:1 female-to-male ratio]
General "Buck" Turgidson: Doctor, you mentioned the ratio of ten women to each man. Now, wouldn't that necessitate the abandonment of the so-called monogamous sexual relationship, I mean, as far as men were concerned?
Dr. Strangelove: Regrettably, yes. But it is, you know, a sacrifice required for the future of the human race. I hasten to add that since each man will be required to do prodigious... service along these lines, the women will have to be selected for their sexual characteristics which will have to be of a highly stimulating nature.
Ambassador de Sadesky: I must confess, you have an astonishingly good idea there, Doctor.

Dr. Strangelove: Of course, the whole point of a Doomsday Machine is lost, if you *keep* it a *secret*! Why didn't you tell the world, EH?
Ambassador de Sadesky: It was to be announced at the Party Congress on Monday. As you know, the Premier loves surprises.

President Merkin Muffley: You mean people could actually stay down there for a hundred years?
Dr. Strangelove: It would not be difficult, Mein Führer. Nuclear reactors could - heh, I'm sorry, Mr. President - nuclear reactors could provide power almost indefinitely.

bugs_'s picture

"I wish we had one of them doomsday machines."

falak pema's picture

where would you aim it?

falak pema's picture

where would you aim it?

Trading Nymph's picture

omg...makes total sense...Copper hitting 8000 on LME and Ore and all times highs, at the sametime China has to pay people to buy toasters, cars and TV's...this is not going to end pretty.

curbyourrisk's picture

Trading nymph.  What an awesome name.....

Sam Clemons's picture

We definitely appear to be in the hyperbolic phase of at least this most recent three month cycle.  Just look at the Nasdaq or NYSE hour bars.

 

Oddly enough, the Great Depression wave peaked April 16th.

 

To the slide rule guy, the only reason technical analysis works (or to those who believe in it) is because it picks up on patterns that reflect human emotion which never changes in the markets.  Fear, hope, greed.

 

 

lsbumblebee's picture

Technical measures emotion? Emotion never changes?

Al Huxley's picture

News almost always conforms to the charts, not the other way around.  Its human nature to try and explain what just happened, and to extrapolate current trends linearly.

Sam Clemons's picture

Bad wording.  Emotion changes week to week, day to day, but the same emotional extremes are prevalent all through history in markets - Tulipmania, South Sea, Mississippi Scheme, etc.  Markets are human things, or were at one time.

 

I'd say that if something gets oversold according to some indicator, then that reflects fear.  Back in the old days, you didn't need the indicator to tell you there was fear.

Al Huxley's picture

Most of the market trades these technical indicators now, which to me means that either they're self-fulfilling (90% of the time) or in the case of the big plays where it really counts, the PTB can play the expectation, setup the entire market and then break the pattern.  So on the S&P, which will be the tell for the entire US market, I'm inclined to think the Fibonacci retracement will be a trap, not a predictor.

moneymutt's picture

my thoughts too... if you have special access to manipulate, you can gain leverage by knowing what many will take action on...let things work normal for a while, when some Newtons has figure out the formulas for motion and can predict when Apple will land, turn on the anti-gravity machine and hear the giant sucking of money out of folks pockets...and then when everyone is used to no gravity, let it natural physics resume...

GFORCE's picture

Fibonaaci is the mathematics of the world and can't be manipulated.

A lehman-esque event would see to that. Fib is not coincidence.

Mick C Pitlick's picture

Somewhere, in a deep cave, in Montana, 30 clean cut young men in khaki jump suits sit and watch monitor screens. Section Q is assigned the task of reading ZH, and its ilk. Section G are the TA team, who watch the momentum oscillators and support/resistance levels. A military man, General Fuckem, is in charge.
"Men, we are approaching 61.8% retracement, our oscillators are overbought. Today we're going to take the hill."  A murmur is heard, as the men gird themselves for battle. They know the enemy speculators are weak kneed, but overwhelming in their diffuse numbers and capable of guerilla-style movement.
Fuckem takes out a clip board with daily orders.
"Section F, sell, sell that piece of shit down to 1199. I want the enemy to add to their shorts, suck em in to our ambush area. Then we kill! Section B, at 1199, buy 1 billion contracts. We're going to blow those fairies to kingdom come. I want to see 1250 by noon."  

To be continued.

singsing's picture

WAR IS PEACE

FREEDOM IS SLAVERY

IGNORANCE IS STRENGTH

We can now add one more to the list:

LIQUIDITY IS PROSPERITY

moneymutt's picture

no, it should be: Debt is Prosperity....and what's wrong with that ;)

dumpster's picture

Fibonacci

 

the golden mean ,,,

Rider's picture

As far as I know, some algos have somekind of Fibs interconstructed. I dont think this Bubble will stop 'til QE5 2013, however maybe a small algo hicup or a buying oppotunity at fib 61.8.

 

 

ShankyS's picture

Look I'm not saying anything, BUT..

weekly 200ma 1224

61.8 fib - 1228

C=A (for you ewt fans) = 1215

Gap - 1210

Not to mention the A-E wedge ending here with price hanging above the weekly BB for the past 5 weeks.

Many indexes are popping over the top resistance line of the corrective. This would IMO indicate a throwover situation and not a breakout.

All that and the overbought indicators with divergences on the dailys and 60m makes for a tidy little bundle. By no means am I saying anything other than in a sane and fair market this technical set up would normally be one you should not ignore.

My key to this run being over with be the weekly RSI14 breaking the uptrend line. It will be late and not call the top, but it should give the final trend change to the next leg of the market.This one indicator has kept me on the right side of the trade since October.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3186525&cmd=...[s165701390]&disp=P

Since I am in the blogroll I guess it is OK for me to post this link. GL!

http://shankystechblog.blogspot.com/2010/04/i-think-you-have-to-get-read...

doublethink's picture

 

Thanks for the chart. You should post here more often!

 

Sam Clemons's picture

Nice.  I've been thinking the same is going to happen once everyone thinks the coast is clear.  Even if the coast is clear, nothing goes straight up or down, even with Obi-wan-bernanke's press.

 

Here's a good one I use for you.

http://stockcharts.com/h-sc/ui?s=$NYSI&p=D&yr=3&mn=0&dy=0&id=p74163259441

Check declining RSI levels, check MACD, check the appearance of a lower high than in mid-March.

andy55's picture

what doublethink said  :)

AbbeBrel's picture

Love that $CPC Put/Call ratio line-up with SPX!   What a great chart.  Looks like we are in for a Jan 2010  situation again Real Soon Now, at a minimum (or is that maximum!! :-). 

alien-IQ's picture

In the spirit of this post...how about some news from the time:

Market appears to be resisting bear pressure more firmly in recent sessions, in spite of many very poor Q1 earnings statements. While the averages declined steadily in the 3 weeks ended Saturday, many groups have held their own including chain stores, tobaccos, and coppers; in the meantime, volume has been shrinking and main offerings seem to be coming from short-sellers. This indicates technical strength and makes a "selling climax" less likely.

Market conditions seem ripe for technical rally; some traders have quietly been picking up leading stocks in anticipation, though they're protecting positions with stop-loss orders. Some brokers report recent heavy short selling by the public, despite their advice to the contrary; these new recruits have been putting out stocks while some of the old-time bears have been covering.

Wall Street Journal April 14, 1931

http://newsfrom1930.blogspot.com/

zerosum's picture

Problem is...everyone, including Goldman and the Fed trading desk, is looking at the same data. That's why literally dozens of bearish signals have failed in the past year. All signals are bullish now. 

Mick C Pitlick's picture

Ich bin ein Bull-inner. We are all Bulls now!

Kina's picture

So on the 16th April some workmen will accidentally sever the line between GS and the NYSE.

Bear's picture

Aren't they in the same offices?

Ras Bongo's picture

“Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.”

Ayn Rand


Mr Lennon Hendrix's picture

I am sure BS knows about this, he is an expert!

landho69's picture

How about this from the same date

Broad Street Gossip: Although business has been declining since the summer of 1929, well-managed corporations are as strong as ever in cash assets; shrinkage has been confined to earnings and market capitalization. This contrasts sharply with previous depressions, in which many cash-poor corporations were forced to borrow at 6% or more. Lending and "heavy investing in securities by corporations is something never witnessed in previous depressions." Despite the long economic downturn, public buying power is still large. NY State savings bank deposits continue to increase, now totaling $4.958B with 5.436M depositors. Floating supply of the stock of many corporations is at a record low, indicating public still has money to buy stocks. Public has also been absorbing $500M or more per month of new securities. Recent $275M issue of treasury certificates drew almost $1B of bids.

Uncanny!

hamurobby's picture

Very!  History does rhyme.

John Law's picture

Another interesting bit on those charts, both put in head and shoulders after the initial bounce and failed to break the neckline both times and then went into full melt-up mode.

And for those that doubt Fibo, it's very effective. Especially in the FX markets. I don't believe in the whole number sequence thing, I think it's just a self fulfilling prophecy thing. But if you trade you cannot ignore it. And 61.8% is a very big level in fibo.

Things seem to be stacking up now, you also have strong divergences in the PVT Stoch. and the Elliott waves here also. Wave two should be completing right now or very soon. Then comes the big one, wave 3 down to fresh new lows. The question is will the government allow it will elections coming up? (Should be well into the crash by election time if they do.) But, my guess is no way! At least not yet. The Fed will run QE 2.0, 3.0, 4.0 and send a $50,000 check to every man, woman and child if they have to, to stop the crash. But, in the end the markets and the dollar will find their true value, zero.

John Bull's picture

Ahhh, Mr. Law...very good. Only genuises dare (and are capable of) using the famous Elliott wave!

Orly's picture

Yeah, it should be obvious that we are entering the b-wave of III...oh, wait!  Did that come out of my mouth?

I meant the 3-wave of IIb...or is it the d-wave of V?

Elliott Waves are horseshit.

/:

FischerBlack's picture

Lawlz.

Truly, the best way to make money using Elliot Wave analysis is to publish books on Elliot Wave analysis.

John Law's picture

I don't use EW all that much. I have a friend who uses them big time. He was telling me this earlier this week. We will see if he gets lucky this time. I know all about the EW faliures. Especially EWI, according to them 1100 on the S&P was going to be the top.

nicktd's picture

Back then dollar digits weren't stored on magnetic strips and regurgiated thru silicon pnp junctions. Overcoming 61.8 is just a flip of transistors switches. I think humans will only intervine once we approach 76.4 during summertime, which forms a nice parabolic pattern. Beware of hal 36000!

John Bull's picture

Why nobody mentions the Elliott Wave? Or should we say the Elliott Tsunami?

AUD's picture

I dunno about the USA but here in Australia, credit spreads are falling but still mighty wide, compared to pre-crash levels. The market maker, the RBA (so in other words the government) is making little attempt to tighten spreads.

I don't see any immanent boom in the market but no immanent crash either. In fact I see more of the same, except for a continual rise in the gold price.

So just more of the same monetary disorder until the day gold 'takes no prisoners'.

GFORCE's picture

I believe Australian decision makers are being made to look more clever than they actually are. China imports and stimulus saved them from having to make any tough decisions..

The worst of the crisis is ahead of Australia, not behind.

Graphite's picture

If the Fed understood the magnitude of the deflation problem they'd already be sending out the checks, instead of talking about hiking the discount rate. They're already too late -- they've fallen behind the curve the same way they did in 2008, where every new bailout and liquidity facility just gave way to lower and lower prices.

The market's got them convinced the same way it does all the money managers coming on CNBC telling you to buy assets X, Y, and Z. But you can't wait until *after* the S&P slices through 800 and then start printing again; by then it will be too late.

ratava's picture

you are forgetting ben the marginal liquidity bernanke and his short banning ES gunning cabal, this aint turining until .80