Chart Of The Day: The Fibonacci Fade And January 22

Tyler Durden's picture

For the Fibonacci fans out there, here is something rather stunning from Newedge's Brad Wishak. In the chart below, the strategist looks at the duration in days of each stock rally leg since the 2009 bottom. What is rather amazing is follow through between one rally and the next in terms of, you guessed it, the Fib 61.8% retracement. As Wishak comments: "obvious is the diminishing marginal utility of each bath of QE manifesting itself in shorter and shorter rallies. Less obvious is the underlying rhythm of the start and stopping points. Applying the 61.8% retrace to time, called the the most recent September stock highs within 4 days. And projecting this pattern forward, we're now just around the corner from the next 61.8% top, which hits on January 22." Because if in a centrally-planned world DeMark indicators still have any relevance, then certainly so does Fibonacci.

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spastic_colon's picture

goldman can put a stop to this!

gold-is-not-dead's picture

seems like the QE10 will be on a daily basis with this rate... exponential function is a bitch...

economics9698's picture

Looks like a inverted M-2 velocity graph.

Racer's picture

Witching this Friday so that's near enough the 22nd as maybe.

But do those HFTs bother with Fibs now? Thought they just faked any move they fancied

Cognitive Dissonance's picture

Scotty, I need more power.

I'm giving you all she's got Ben. She's breaking up, she's break.......

Racer's picture

They are sending some Apples over

AccreditedEYE's picture

The old rules are gone. Crashing up! BTFD

buzzsaw99's picture

It seems like it is mostly slosh now. Some stuff goes up while other stuff goes down. imo the days of everything rising together are about over.

Cognitive Dissonance's picture

Almost time for another planned re-set of the stock market (a la 2008/09) to flush out some more greater fools.

<In retrospect GS's huge "beat" will be seen as the tell.>

DeadFred's picture

My guess based on this incredibly artificial looking chart has been for a top about a week and a half from now at about 1490-1495. There might be room for one more wave before it collapses in on itself but I doubt it. If the market breaks downward it could be epic. Get your options ready. When the market catches on support for a couple days put some small sums into far out of the money short-term puts. Some of them could have payouts that you'll be able to reminisce about for decades. Accumulating good stories is one of the primary goals of life.

q99x2's picture

When it get to be less than a day day-traders can come back into the markets.

YC2's picture

Well, early april should get interesting then.

27 days after 1/22 is 2/18

17 days later is 3/6

10 days later is 3/17 (start swing trading!)

6 days later is 3/23, then 3/27, 3/30, 3/31, 4/1

then 4 "crashes" on 4/2 and millions on 4/3, just taking the fibo thing to the absurd (but who knows with super HFT)

Al Huxley's picture

Don't forget to allow some time between for corrections.  But in any case, nice extrapolation - September October would probably work out as a pretty good target for the 'millions of crashes per day' singularity.

PUD's picture

There is no such thing as any viable t/a. You are welcome to try and find any independent study that shows that there will not find it. it does not exist for if it did everyone would cue on it and its predictive powers would become moot. It (t/a) is gibberish and superstitious nonesense in the same way are tea leaves, crystal balls and all other conventions to predict an unpredictable future.

Orly's picture

Your comments are straight-up silly. Look at the chart.

Hello?  Are you just blind or prefer not to see?


PUD's picture

Charts do not predict. Charts are historical documentation of what was not what will be. If a chart could foretell the future then everyone should be rich right?

retiringteach's picture

charts are a part-fairly small- of technical analysis-learn that, get rich--fool

Orly's picture


Charts demonstrate patterns of human behaviour and allow traders to come to a conclusion of what the most likely outcome of the situation is to be.  It's called an edge.

If your theory held any weight, monkeys would be rich and all the streaming chart data in the world would be useless to millions and millions of traders across the globe.  How did Bloomberg get rich, exactly?

You seriously think that millions of people would waste their time if there were no value to it at all?  Tell me that when the USDJPY pair retraces to 88.613 by the end of the week.

DCFusor's picture

TA works because people believe it and use it - it's self-fulfilling.  And it looks for patterns determined by human nature, which doesn't seem to have changed over my rather long life.  Even the computers - programmed and controlled by humans.  It works for me at any rate.

If, due to TA, everyone thinks the market is going to go down, they all start selling to be the first defector in the prisoner's dillema.  Therefore the market goes down due to selling pressure, since only non-TA believers are willing to bid, and they are a minority.  And the Vice is Versa.

Make more sense now?  Try studying the behavior of any herd if it doesn't.  A stampede is a stampede whether it is cattle or humans.


Totentänzerlied's picture

T/A is divination by charts and numbers - it cannot be entirely disproven, and the people who use it have decided the opportunity cost to potential reward ratio is acceptable. Like reading tarot cards. Technical analysis is not behavioral analysis or heuristics, which is what you are describing. Some - like you - say it is a derivative, or abstraction, of the underlying behavior. It's more like a transcript whose content has been translated back and forth through 10 languages, written down by hand, and xeroxed a few times.

MeelionDollerBogus's picture

By back-testing the claimed assertions, most of technical analysis can be disproven. The charts are not the technicals though - they are data - and the data itself continues to hold the patterns needed for prediction, once someone comes along with actual math & actual testing to ensure reliable long-term results.

goldpricemodel 2013 projection

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goldpricemodel 2011-3-30 silver price model parameters based on Adrian Douglas scatterplot (this is the one calling for the April spike that brought silver up to 49)

MeelionDollerBogus's picture

"technical" analysis, quoting patterns like "head and shoulders" or "cup and handle" never works no matter who believes it - the HFT algo's certainly never use it.

I never use it.

I use actual math.

adr's picture

I would say because the market has completely divirced itself from the fundamentals of business and trades on pure emotion and one-upmanship, charts work becuase traders make them work. A self fulfilling prophecy.

Short squeeze rally because some other big name goes long, 10% drops on rumors folowed by 20% gains on refutation of the rumor. Then you have the whole movng average nonsense that makes a stock a buy or sell because it crossed some threshold in a certain amount of time.

In terms of actual business, I can never find a reason why most stocks trade the way they do. But true business isn't why stocks trade. The entire market is a con game to sell to a greater fool. Charts serve as a timetable for those who manipulate the game, to know when to move their pieces. It is impossible to follow the actual business of thousandsof corporations, and imagine if you had to wait until they actually tell you what they made to see moves in the stock prices. Stocks would only move four times a year. How could Goldman make money on that?

So the traders make moves on emotions, headlines, and group corproations together that really have nothing in common. If aluminum goes up in price Chipotle stock should go down because they wrap the burritos in foil.

Its all such fucking bullshit.

fuu's picture

Form fit.

Why are some peaks and troughs ignored?

Why does the low around june 2010 get skipped? It appears to be lower than the low used in Sep 2010.

Why ignore the peak in Sep 2011 and the following trough in Dec 2011?


DeadFred's picture

If you were trading at the time you might remember June through September was a time of crazy uncertainty. After September was clearly rally time because the central banks started propping things up. Perhaps Ben has a 'thing' for Fibonacci because most of these moves were centrally planned.

fuu's picture

Since it was crazy uncertain it is ok to leave the moves out of the TA?

I'm looking at the chart, it says "...rally lasts 172 days...61.8% of that is 106". Yet the rally looks to have started in July and faltered a bit in August where the counting begins.

So the previous 30-45 days of rally don't count?

DeadFred's picture

Just saying that at the time I didn't consider that to be a rally, just a consolidation before the next selloff. When the Fed jumped in in September it was clear it would be a rally and all bears should get out of the water. I didn't but that was a painful lesson and another story. Your point is taken that the exact boundaries of the rallies are ill-defined, especially at the time. To me what is more important is the upper and lower bounds of the market ramp job, straight lines heading upward to a point real soon. Before it hits the point the market has to break above or below and history says it will be a big move, more often down than up. (minus Fed considerations) If you look over the charts from the past you can see other examples of wedges like this breaking, 2007 2008 and 2010 com to mind.
You can also look at other indicators such as the VIX to see that I was not alone in thinking that wild (2-4%/day) sidewards market was not a rally.

SheepDog-One's picture

Out of gas, this shit is going nowhere. Dip buyers, have at it you're going to get taken in the end.

StoleYourMoney's picture

Charts don't matter in 2013

PUD's picture

Charts never mattered. Charts are historical accounts of past price movements and have no bearing on future price movements. More superstitious non-sense.

Orly's picture

Human behaviour hasn't changed in over one hundred thousand years.

MeelionDollerBogus's picture

Nothing from the future happens without a seed in the past. Using charts & other data sources & representations of fact, one accounts completely for both at the same time. It's merely transitions from one state to another that we're then seeking & that's not so hard given both tendencies (likely) and what is impossible (ruled out).

chistletoe's picture

"Human behaviour hasn't changed in over one hundred thousand years."


prophets have been around for at least that long .... people who

confidently assert that they can see the future

and anyone who does not believe them is a fool ....


seen any good raptures lately???????

Orly's picture

Oh, oh, okay.  I get it it.  You gentlemen wouldn't know a marubozo or harami if it came up and slapped you upside the head.  That's not our fault.  Why don't you pick up a book?

Freddie's picture

Harami? Is that the 8th Japanese Finance Minister in the past 2 years?  ;-)

Orly's picture

No.  Harami means "pregnant woman."  Next time you see a chart in a downtrend, there will be a long down candle and the next candle, a small up candle is her "baby-bump."  The chart trades long from there.

Happens thousand and thousands of times a day.


Marubozo, on the other hand, means, "bald-headed little man."  It is one of the most powerful candles there is.  At the end of an up-trend, there will be a candle next door, a small, innocuous little candle that has no hair ("wick" or "shadow"...).  That means the chart trades down from there, usually pretty quickly, too.


And that is just the TA of Japanese Candlesticks.  Then there's trendlines, equidistant channels, Nison, Gann, Wilder, Bollinger, DeMark, Elliott and on and on.  Would all these really talented people waste their time on voodoo or "nonsense" their entire lives?  Doubtful.


DeadFred's picture

You're welcome to continue our free education any time you wish :)

Orly's picture

Thanks, Fred.  You seem to be a very nice person.  Nice to know you.

Actually, that is pretty much all you need.  Long-term Fibonacci levels and some sense of what the candles are doing and what they mean.

Put a Fibonacci graph on a Weekly or even Monthly chart of any stock, bond, currency pair, gold, whatever.  I don't mean Fibo time-frames (as in the chart above.  Truth is, those aren't very accurate.  :0) but Fibo "retracement levels."  It is quite eerie how the chart keeps coming back to the same levels, rising and falling toward or being pushed away from it.  It's fascinating.

Does that mean the the people who traded IBM knew me or that I would be looking at the chart seventy years later? No, of course not.  The only explanation is that people return to the same patterns over and over and they do it to the tune of the Universe, which is expressed in ratios brought out of Arabia to the West by a Pisan named Fibonacci.

Golden ratios.  It's what's for dinner.


rqb1's picture

i have some ta for you orly, 31.20 buy signal for ag, closed above it yesterday, not convincing but above.  i am weary on au though short term as you are.  i think we could have a divergence where ag and au move in different directions this year.

Orly's picture

Hmmm.  I don't know.  Yesterday, it reached to the second resistance level on the Weekly pivots at $31.50.  It is pushing against the 28 Week moving average and trying to break through resistance at the same time.  The trade seems strained.

If it does break through, it won't go much higher than the third resistance level @$32.06.  Good luck, though!  I hope it works out for you.


Panafrican Funktron Robot's picture

"Would all these really talented people waste their time on voodoo or "nonsense" their entire lives?"

One could argue that the entire industry is based on total bullshit, and said industry has made a lot of people very, very rich.  

So yeah, I could see a lot of really talented people baffling other, less talented people with bullshit, in exchange for FRNs.  

Consider the very base concepts of what we do as traders:

1.  We deposit digital representations of FRNs with a broker, from our bank.

2.  We buy and sell "stocks", "bonds", and "options", all of which are again simply digital entries.  We do not hold any physical representation of anything.

3.  We hope that the activity in 2. results in more digital representations of FRNs.

4.  We hope that when we try to move the digital representations from the broker to our bank, which in turn are utilized to purchase real goods and services, it actually works, and we aren't Corzined.


And you, Orly, have the audacity to represent this activity as something of value to humanity?  Being frank and honest here, but fuck you for even suggesting this, fuck you for defending any aspect of this activity, and fuck you for activity participating in it (and fuck me for doing this too).  It's 100% bullshit.

Totentänzerlied's picture

You are equivocating with the definition of nonsense. From a reality perspective, it is something no one can claim to understand, I would venture to say the mathematics needed to describe it properly has not even been discovered yet. From a "can I exploit it to make some money" perspective, it is golden. Talent has nothing to do with intellect and neither have any correlation to honesty, integrity, or virtue. Economic competition favors whatever works, not what is true, right, good, proper, fun, intelligent, etc., and just because something works, that alone does not mean it works well, merely that it works better than the current alternatives.

People used to be literally awestruck when astrologers correctly forecasted astronomical events, simply because the mechanics of the system in question were known so little and understood to such a low degree. This is a universal behavioral paradigm of humans; we can only compare what we see to what we have seen. If you think technical analysis works well, it is only because you cannot fathom something better, or that technical analysis has made you rich, and two other universal behavioral paradigms are in play: rationalization of things that make us feel good, and apologetics for same.

coolpajim's picture

Great reasoning. Because something prophesied has not happened means it never will? Peter said there would be scoffers and you are one. The Rapture is coming and all best be ready for the following judgment.

Everybodys All American's picture

One thing is one will be given any warning when the rug gets pulled.

Burr&#039;s 2nd Shot's picture

Any more warning, you mean. I think everyone has already been warned, they just don't know when.

orangegeek's picture

And the fall will happen at 3am - if you are caught long the day before, it's gonna hurt.

adr's picture

Exactly, I've been trying to find any fundamental reason for the stock market going up for four years, other than Bennie Bux and accounting fraud. I can't find any other reason.

The corporate cash hoard is a mirage, made up with funny math just like the 1990s government surplus. The majority of the EPS beats over the past four years have been due to the dollar declining, allowing a really nice addition to profits on the ledger from foriegn sales. The probelm is the extra profit only exists on paper.

Then you have forward booked profit, intradivisional sales, cross promotional sales, inventory booked as assets one month and liabilities the next. Fiscal years that don't line up for different sectors of the economy. Like fiscal year ends for retailers being different than suppliers, made that way for the purpose of transferring inventory back and forth to use as writeoffs for tax purposes.

The scams are so blatant and so easy to spot by anyone that actually works in real supply side commerce. Lulu Lemon is a total inventory stuffing scam. Along with any publicly traded corproation that has its own stores. The way the corporations are set up, they can book product shipped to the stores as sold. Y/Y comp gains are total fabricated bullshit, like BLS job reports.

Nobody seems to care that the whole thing isn't real. Just like any good scam artist, they are making money off it hand over fist. If the scam is exposed, it goes poof and they disappear. Trying to blend into the angry crowd, "You stole my money, give it back."

orangegeek's picture