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On Wall Street, there’s a cult of technical analysts who follow the Elliott Wave. If you’re not familiar with it, here’s Wikipedia’s description:

The Elliott wave theory is the basis of a technical analysis technique for predicting the behavior of the stock market, invented by R. N. Elliott in 1939. It is based on the belief that markets exhibit well-defined wave patterns that can be used to predict market direction.

The Elliott wave theory hypothesizes that stock prices are governed by cycles which adhere to the Fibonacci sequence 0, 1, 1, 2, 3, 5, 8, 13, 21,....

According to the Elliott wave theory, markets move in a predetermined number of waves up and down. Specifically, markets move in five waves up and three waves down and price charts have a self-similar fractal geometry. This is true for bull markets. Waves 1, 3, and 5 are called impulse waves, and subdivide 1, 2, 3, 4, 5. Waves 2 and 4 are corrections, and subdivide a, b, c. In a bear market, the pattern is reversed, five waves down and three up.

Personally, I think this is Wall Street’s version of Nostradamus, but there are lots of folks who take it seriously. Very seriously.

So if you’re a believer, you’ll be happy to know that we’re at two Fibonacci numbers. Yesterday was the 987th day from the March 2003 low, and the Dow is closing in on 10,946.

I have no idea what it means, but I thought I’d pass it along. After that, you’re on your own.

Posted by edelfenbein at November 23, 2005 1:11 PM