-- Posted Sunday, 12 December 2010 | | Source: GoldSeek.com
By David Knox Barker
The Long Wave Dynamics approach to Fibonacci drill-down price grids in any market index such as the S&P 500 and European S&P 100 generates extraordinary actionable market intelligence for investors and traders. Creation of the drill-down Fibonacci grid approach to market analysis is the result of decades of market cycle research and studying the market timing of a number of cycle masters. The goal was a formula timing plan for buying low and selling high based on cycles that works for both investors and traders.
Fibonacci Dynamic Web methods demonstrate how every Fibonacci price grid is driven by three ranges, 1) Solitude 0%-38.2%, 2) Normal 38.2%-61.8%, and 3) the Frenzy range of 61.8%-100% of any Fibonacci price grid. Prices often turn exactly on the golden and inverse golden targets in the Fibonacci price grids.
Working with major indexes such as the S&P 500, the 1982 intraday low and the 2007 intraday high provide the perfect Level 1 grid range to begin the Fibonacci grid drill-down process. Other major markets do not offer as much history, but they provide enough for a solid Level 1 price grid. However, the gold market has been making all time highs on a regular basis, so a clear Level 1 price high is not available.
This is where things get interesting in terms of very recent gold market price action. In order to generate a Level 1 price high to begin the Fibonacci grid drill-down process, you have to use a past major move as a key move in a full grid move that remains in the future. Yes, what I am suggesting is that you must look into the future and see an important top in the price of gold.
It often takes extensive price move testing to find a “hot” price grid. For the continuous gold contract, I tested a number of price moves. Matching important moves against various Fibonacci ratios allow you to check and see if recent price moves to new highs are respecting any future Level 1 drill down grid. No “hot” grid was located and efforts were getting frustrating until testing the move from the 1999 low at $252.50 and the 2008 high of $1033.90 as 38.2% of a move to come in the future. Recall that following this particular top in 2008 was the largest correction in gold since the rally began in 1999.
The Level 1 grid generated when this major $781.40 move in gold is used as the 38.2% of a future move produced clusters of hits from recent gold price action. In essence, a “hot” grid was discovered with $2,298.04 as the Level 1 high target in the grid. This Fibonacci drill-down grid produced in this exercise and a chart that demonstrates the move used is below.
Note that the 50% target is not used for generation of the Level 2 grid example below. Although 50% is a Fibonacci target it comes at the beginning of the Fibonacci sequence and is not one of the sequential ratios generated from further out in the sequence. The 50% target often turns the market and tracking it is useful, but do not use it to generate the drill down grids.
The Level 1 Fibonacci grid target prices often produce major resistance for markets. However, to recognize the power of this method you must drill down into Fibonacci grids to observe detailed intraday market action. Presented below are two cases of where this process is relevant to gold investors and traders.
Why did the gold market recoil as if it touched a hot griddle at $1430 on December 9? The charts and grids below provide the answers. In fact, you could say it did touch a hot griddle in the form of the golden ratio in the Level 3 grid. Derived from a Level 1 grid where $2,298 is the top of the Fibonacci grid.
Why did the gold turn around at the August low of 1155.90? Maybe the fact that 1155.63 is the inverse golden 38.2% in the Level 4 grid was pure coincidence. However, the gold market and every other financial market around the world are producing this sort of deep Fibonacci grid price action every trading day of the week. Such detailed market action is not necessarily relevant to all investors and traders.
The closer you get in the Fibonacci grids to Level 1 the more powerful the Magnetic support and resistance forces the Fibonacci price targets exert on market action. The Fibonacci targets provide actionable market intelligence to investors and traders. Based on market action observed recently in these drill-down grids, the Level 1 golden ratio target of $1516.64 will prove to be major resistance. It will potentially be the most important resistance since the gold rally began at $252.50 in 1999.
The $1516.64 target represents the line of demarcation between the Normal range and the Frenzy range in the Level 1 grid presented with $2298 as the Level 1 high. It will provide the most resistance for the market since $1033.89, and likely even more. That price is only $86.04 away from the intraday high on December 9, 2010.
Of course, there are other possible Level 1 Fibonacci grids. The $781.40 move from 1999 to 2008 could be another Fibonacci percentage, so regularly checking the grids for price activity is advisable. However, to date I have not found a Fibonacci price grid that is producing more matches on recent gold market turns than the Level 1 grid presented.
The gold support prices are just as important as the resistance prices. Notice that the gold correction in November was stopped at $1330, just below the golden ratio in the Level 2 grid. Once the gold market reversed back over that golden ratio target, it was off to the races. The golden ratio had a double meaning on that reversal. This sort of market action is going on in every market in the world.
Based on subscriber feedback, investors and traders around the world are amazed, even shocked, to discover the predictable and actionable Fibonacci grid price activity that has been going on right under their noses for years. Only the Fibonacci drill-down grid method uncovers this price activity. If Fibonacci price action surprises you, just wait until you see Fibonacci grids at work in the cycles for date forecasting. Markets turning on a target price is one thing, turning on price and date targets together will change you view of market forecasting forever.
One subscriber wrote to say they were initially “frightened” observing the live markets results of the Long Wave Dynamics methods of tracking market cycles in price and time. Now they are simply “dazzled and amazed” at the methods that can be applied to any market in price and time.
About David Knox Barker—Barker is the founder of LongWaveDynamics.com, and the publisher of The Long Wave Dynamics Letter. Barker is one of the world’s foremost experts on the economic long wave and stock market cycles. He is the author of Jubilee on Wall Street (2009), published earlier as The K Wave (1995) by McGraw-Hill. The last edition sold out as readers found Barkers predictions were spot on. He is a writer, inventor, technical market analyst and world-systems analyst. He has researched stock market cycles and written on the impact of the long wave on international financial markets and the international political economy for over twenty-five years. Barker expanded the original research of the legendary market analyst PQ Wall and discovered the Theory 144 method of technical analysis. Barker founded and served as CEO for a successful life sciences research and marketing services company, serving a majority of the top 20 global life science companies. He has a bachelor’s degree in finance from Appalachian State University and a master’s degree in political science from University of Central Florida where his thesis research explored the international political economy from the long wave perspective.
-- Posted Sunday, 12 December 2010 | Digg This Article
| Source: GoldSeek.com
