Since the Dow Jones Industrial Average (DJI) major peak in January 2000 the two subsequent bear and bull markets have had Fibonacci time ratio relationships. Assuming the January 2022 DJI top holds, these Fibonacci ratio relationships could project when the current bear market ends.
The Fibonacci sequence is as follows (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, —– to infinity).
Some of the main Fibonacci ratios are 1/1 = 1.00 equality, 1/2 = .50, 34/55= .618, 34/89 = .382.
The monthly DJI chart courtesy of Trading View illustrates the Fibonacci time relationships.
The nearly 3 – year bear market from January 2000 to October 2002 was almost a Fibonacci 34 – months. The actual time length of 33 – months multiplied by .50 equals 16.5 months close to the 17 months of the October 2007 to March 2009 bear market.
The subsequent bull market was to the day an exact Fibonacci 5 – years! This precision over a multi-year span is amazing. The next bull market from March 2009 to January 2022 came close to a Fibonacci 13 – years. When measured by months its 60/154 or .389 close to the Fibonacci ratio of .382.
Measured from year to year the major DJI bear markets since 1929 are as follows.
1929 + 3- years = 1932
1937 + 5 – years = 1942
1968 + 2 – years = 1970
1973 + 1- year = 1974
2000 + 2- years = 2002
2007 + 2 years = 2009
2022 + ?
One of the guidelines in Elliott wave theory is alternation – expect something different. The prior two DJI bear markets measured from year to year were “2” if we expect something different then the current bear market probably won’t be ending in 2024.
What about ending in 2023 a 1 -year bear market? In 2008/2009 the US government spent its way out of the economic crisis. They got the money to spend by issuing US government bonds. They did the same thing 2020/2021 to combat the Coronavirus crisis. The US government now has an enormous amount of debt on its balance sheet, and they are now forced to raise interest rates to combat inflation. If interest rates continue to rise it increases the costs of servicing the debt payments. Its doubtful the US government will be able “spend” its way out of the current economic crisis and that could mean a prolonged bear market for US stocks.
How long is prolonged? How about a 5-year bear market which hasn’t happened in the US for 80-years. It would certainly be something different.
The price forecast for a major bear market bottom is rough estimate. A future blog will examine the possibility of an intermediate bottom forming later in 2022.
Four Dimension Trading 