Within the time dimension there are several methods to determine market turn points. Seasonality and periodic time cycles are two of the more common ways, however they lack precision.
Fibonacci time cycles, while unknown to many market analysts, can at times be incredibly accurate. R.N Elliott discoverer of the Wave theory also found that markets moves can be tied to the Fibonacci sequence which is; ( 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 – to infinity).
Elliott discovered that the Dow Jones Industrial Average (DJIA) 1932 to 1937 bull market and the subsequent 1937 to 1942 bear market lasted five years – a Fibonacci number. The DJIA 1929 to 1932 bear market was thirty-four months. The DJIA 1929 top to the 1942 bear market bottom was thirteen years.
In his 2003 book “Beautiful Pictures”, Robert Prechter noted dozens of Fibonacci time relationships for the DJIA and S&P 500. For example, thirty-four years from the 1942 bottom to the 1966 top. After the 1974 bear market the DJIA had a thirteen-year secular bull market into the 1987 peak.
After the year 2000, the US stock market continued to move in Fibonacci increments. The DJIA January 2000 to October 2002 bear market was thirty-four months. Followed by an almost exact five-year bull market which topped in October 2007. There’s a high probability the US stock market will continue along the Fibonacci sequence.
The monthly DJIA chart illustrates Fibonacci coordinates from four major DJIA turning points converging on the year 2021. If this forecast is correct there could be a major US stock market turn sometime that year. This method forecasts turns, not tops, or bottoms, you would not be able to determine if the turn is a top or a bottom until a market is near the time zone.
Yearly coordinates are used for this forecast, and the possible turn could occur anytime during 2021. My next blog will explore other methodologies that will narrow the zone, and aid in determining if the turn could be top or bottom.