Custom Search

A LOOK AHEAD

Now to the future. After the DJIA peaked in 1966, it tested the 1000 level in 1968 and again in 1973. (In 1973, the DJIA reached a theoretical high of 1076.2 and a closing high of 1051.70. To some, this may more closely represent the 987% increase in price from 1942.) The DJIA then saw one of its worst bear markets in history, declining 45% from January 1973 to December 1974. From here, we can begin to look at the next stage of growth. The DJIA theoretical low on December 9, 1974, was 570.01, with a closing low of 579.94. Here, we encounter a small problem.

The actual closing low on the DJIA in 1974 was on Friday, December 6, 1974, at 577.60, the trading day before. Therefore, we cannot be positive that the DJIA had a lower print low on December 9 than it did on December 6, although the theoretical low was lower (the December 6th theoretical low was 572.12). Here, we must defer to hourly readings on the DJIA, which were available in 1974, unlike the 1930s and 1940s. The hourly low on the

DJIA on December 9, 1974, was 572.20.

So we know the DJIA was at least that low (572.20) sometime during the trading day, although we do not know

the actual print low. From here, we begin the next phase or wave of growth in the DJIA. Using the Fibonacci sequence, we have seen growth of 377% from 1932 to 1937 and 987% from 1942 to 1966. The number following 987 in the Fibonacci sequence is the 17th number, 1597. Applying a percentage growth of 1,597% to the 1974 theoretical low of 570.01 projects a theoretical high of 9673 on the DJIA. On an hourly basis, it projects a high of 9710, and on a closing basis, 9842. This suggests that severe resistance may be seen in the DJIA in the 9600 to 9800 area. As of this writing in late April 1998, the DJIA had reached a print high of 9213.

If we apply the same calculation to the actual closing figures of 1932 to 1937 and 1942 to 1966, we come up with the following. The 1932-37 advance saw an increase of 371.6% on a closing basis (41.22 to 194.40). The 1942-66 advance saw an increase of 2.618 (1.618 multiplied by 1.618) times greater; 92.92 in 1942 to 995.15 in 1966.

If we now multiply 371.6% by 4.236, or (1.618)(1.618)(1618), we come up with an increase of 1,574%, just slightly less than the Fibonacci number 1,597. Multiplying the closing low of 577.60 on December 6, 1974, by 1,574% projects a closing high of 9669 on the DJIA.

TIME

Ralph Elliott also suggested that in the time duration of his waves, two of the three impulse or advancing waves tended to be equal in time. Much of this depends on how waves are counted and labeled. It is worth being aware,

however, that the time duration of the 1942-66 advance took nearly 24 years (23 years, nine months and 12 days, to be exact).

We are now coming into a period when the advances from 1942 to 1966 and from 1974 to the present are equal in time. It is not necessary, in my opinion, that advances be exactly equal, only that they approximate; I would expect any relationship to be a few months off.

However, if one were to look at this period off the December 1974 low and add 23 years, nine months and 12

days, it would project a high around September 21, 1998. In addition, the DJIA double-bottomed with the Standard &

Poor’s 500 index in late 1974, with the S&P 500 registering its print low on October 4 of that year. Adding 23 years, nine months and 12 days to the October 4, 1974, low would project a high of July 16, 1998. Moreover, if we were to look at the number of trading days between 1942 and 1966, it would be clear that they were greater than between 1974 and now because markets were open on Saturdays at that point. Therefore, this time relationship is only something to be aware of but does not necessarily have to be precise.