One of the questions that is often asked is
whether or not Fibonacci time and price
analysis works on all time frames. The answer is YES.
I have worked on monthly, weekly, daily and intraday charts, all the way down to
a two-minute chart! This method has value no matter what time frame it is
applied to. In most of my recent commentaries on the website, I have been
focusing on shorter-term setups that are calculated using 60-minute, 15-minute
or five-minute charts. I've been asked to take a look at the bigger picture and
to show you how this same methodology applies. Let's take a look at one of your
favorite markets...the Nasdaq 100 (NDX | Quote | Chart | News | PowerRating) cash index!
First, let's look at some price work that was set
up on the Nasdaq 100 (NDX1 | Quote | Chart | News | PowerRating) weekly chart. Here
I ran all of the possible retracements, price
extensions and price projections on this chart. There were quite
a few "price clusters" that
resulted from this analysis, and then also some less obvious projections that
did actually produce a healthy "turn"
or "reversal" in this market. The
arrows in the chart below indicate where a cluster zone or price relationship
was tested and illustrates the following results.
One cluster zone put in a low at 2897
which was followed by a rally to 4147 in 14
weeks!
Another cluster put in a low at 2426
which was followed by a rally to 2990
in two weeks!
A third key zone put in a low at
2087 which was followed by a rally to 2771
in three weeks!
A fourth zone did not produce any meaningful
results. (See question mark.)
A single projection of a prior swing down (1343)
fell just ticks off the most recent low made on April 4
(1348).
What about timing
in the bigger picture??
Running my time cycles from key
prior highs and lows has helped me to identify key
intermediate changes in trend in this market and others. For
example, let's take a look at what helped me determine that the September
1, 2000, high in Nasdaq was important.
In the chart below, the "time
lines" illustrate the coincidence of time cycles that were
coming due between August 30, 2000, to September 1,
2000. The following cycles came due, from top to bottom, on the
chart:
1.618
3/24 high to the 5/24 low
1.618 7/16 high to the 8/3 low
.618 5/1 high to the 7/17 high
.382 5/24 low to the 8/3 low
As the Nasdaq 100 was rallying into
this "time window," these cycles
told us to watch for a potential high and downside reversal. (Refer
to Lesson #3 on timing cycles.) Coincidentally, we
were also facing some key price resistance parameters at the same time
(4083-4137) as we were moving into our time cycle decision!!
The result of this
time-cycle setup was a high made just slightly above two key price relationships
at the 4147 level on September
1!! This cycle high was followed by a rather
dramatic decline, as you can see on the chart below, and the September 1 high
remains intact to this date!!
So now what????
What can we look at in the bigger picture in Nasdaq??
As of the writing of this lesson, we
currently have a pivotal low in place in the Nasdaq 100 with the April
4 low. If, however, the decline resumes in this market (as
many fear), we are looking at a healthy cluster of timing
relationships in the bigger picture from Mid-May 2001 to early June!! (see
time-line projections on daily chart below between May 15-June 12) This
is something to keep in mind IF the decline in the Nasdaq resumes! As
most of these time projections are made with a "directional
bias," I am only paying attention to these particular cycles
if we are trading lower into them. This is when I would start looking for a
potentially important low and upside reversal. If something like
this sets up, chances are, you will read about it in one of my upcoming columns!
The potential timing scenario above
may or may not happen. Just know that as the market continues to unfold, I
continually update and revise both my time and price projections in the market
in order to make some well-educated trading decisions where both myself and my
clients have the edge. I have been doing this work for over
10 years, and it has not failed me yet.
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