Many people don’t realize that Fibonacci extensions or expansions are one of the best tools for projecting the end of an important trend. There are 2 important ways of measuring these extensions. First we take all or part of the last leg of the old trend and project it into the future. Some of the most important ones are the 2.618 extension of the last leg of the 1966 drop that topped near 95 on the SPX. The October 1990 crisis low during the first Gulf War buildup ended in a 1.618 extension of the leg from May 1990 to the summer high. That also completed in 61 days down. Getting to distant history, the May 1942 bottom materialized as a result of the last leg up of the bear rally in the summer of 1039 and B wave up in 1940. Other extensions materialized in 1947, 1952 and the 1960 bottom. There are many more. The 1987 top came as a result of the 6.84 extension of the 1976-78 pullback.

So history is full of important examples and if you want more information on that I cover this topic extensively in my DVD called Harnessing Explosive Market Turns. But for today I want to show you a couple of current examples.

This week, I’m one of the speakers for ICE FUTURES US at the Las Vegas Traders Expo. That being said, here is a long term chart of Cocoa which has one of the better long term extensions you’ll ever see. Recently, we’ve had a good pullback in Cocoa. We have 2 big extensions working. The first one is a smaller one from the last leg down of the old bear market from 97-98 to the 2000 bottom. That one already gave us an important high at 1.618 of that last leg down for the 2003 high. The 2.618 of that leg is just above at about 3531 which we have not hit yet. One that we did hit in teh 1.27 extension of the much larger leg down from 1984. Think these markets don’t have a memory? Think again. Not only do long term cycles kick in, so do important calculations, even on a continuation chart.

With that in mind, check out this important long term silver chart. Last year’s top is a very close 2.618 approximation of the move from the 1987 high down to the end of the bear market in 1996. We are now within a couple of hundred points of retesting this landmark top. After you take a serious look at this chart I’m sure you’ll realize the long term implications not only to the metals, but the US Dollar and ultimately all equity markets.

I’ve come to realize extensions are a much better tool for longer term targets although they do work on a daily and weekly as well. I’m sure I’ll stir a little controversy when I suggest they are less effective on intraday charts. For intraday charts, I find that our price and time square formula as well as median lines work much better. Since I am appearing at the show this week, we do have show special pricing on our newsletters and training program until midnight on Sunday, November 22. If you are coming to Las Vegas, I’ll be speaking at 2:30 on Friday.

What we are presenting here isn’t rocket science but I know is new to some of you. It’s important to realize the same calculations that worked on the Russell 2000 chart I showed you in the webinar worked almost 30 years before that on the Silver charts I showed you last week. But I know old habits die hard and some of you still may not be convinced. Perhaps I got lucky. I’ve been accused by a well known “FUNDAMENTALIST” who already poo-poohs Fibonacci numbers of CURVE FITTING THE DATA. What that means is I’ve picked important news events and found something that works. That argument really doesn’t hold water because the numbers are what they are. The Russell was down 60% from the top, 55% from the bear market rally of 2008 and 33.99% from that last 4th wave pivot. All you had to do was look. Same thing with the Silver chart.

So this week, let’s look at a couple of examples from history. We are going back to the Great Depression and WWII eras for these. After you see these charts there should be no doubt. If you aren’t familiar with these, the bear market rally of 38-39 was a double top. It basically retraced 61% in terms of pricea and didn’t stop falling off for good until Hitler invaded Poland. But what we have here is a move that had a 62.9% gain followed by an ultimate 61.8% high as the second high just missed taking out that 1938 high. For good measure that last little C leg up was a perfect 31.5% (geometric 315) as it clustered with 61.8. The point is when you see symmetry line up like this it is very significant and should get your conviction gene warmed up!

Here’s a pattern that isn’t tied to any news event at all. Its the pattern for the Great Depression. In terms of the weeks, we have a good approximation at 148.5 weeks for an average drop of 2.326 points per week and overall the whole move was a Fibonacci 89% drop.

So by the time we got to the bottom we had dropped 2.33 points a week at 89% down. So am I really curve fitting the data? Truth be told, these calculation do not line up like this everyday. But they do at important turns! How often do we have important turns? Luckily not too often. But what you should be on the lookout for are these kinds of readings on smaller degrees of time as those tend to happen all of the time. If you look carefully, you’ll find something lining up like these once a week at least on chart that you do follow and certainly on charts you may not be aware of. It’s already November and that means its time for the convention. I’m going to be part of a panel discussion this Wednesday at 11:00 Central time at the DTI web site. All of the ICE speakers will be talking about our Las Vegas presentations. So if you are still sitting on the fence as to whether you want to go, perhaps our discussion will help you make up your mind.

http://www.dtitrader.com/trading_education_theICETrack_Vegas09_Jeff.htm

[email protected]

THE SILVER STANDARD FOR PIVOTS

November 2, 2009

If you missed the webinar, we are going to edit it today and it will be available soon on the Futuresmag.com website for the next 6 months. In that seminar we discussed what may be the GOLD STANDARD for pivots. The following pivot in this Silver chart is not far off the mark. This sequence off the old bull market top held for nearly a decade. Why is that? How do you recognize a pivot that will hold for a long time? You know they don’t ring a bell at the turn. If you really want to know what is going on, you are going to have to look under the hood. The following sequence is one of the best I’ve ever seen. Most don’t measure up but every so often one does. As we covered in the webinar, this is how you do it as demonstrated by these 3 charts. These also exhibit under the radar uses of the Fibonacci sequence.

The first one is on a monthly so you can see the whole progression. This data comes off a monthly continuation chart. We have a top at 5036 with successive lows at 1080 and 478. The first drop is 78.55% (rounded to Fibo 78.6) and the whole drop is a Gann 90.50%. So you can see the whole move works exactly the way we expect to work.

But here’s where it starts to really get interesting. When we scale down to the weekly chart we have a whole move in exactly 127 weeks. In this move we have a square relationship of 35.889 which when we move the decimal point we have a derivative of 359 which just misses our Gann 360 degree circle.

When we scale down to the daily chart that first leg at 78.55% is really an 88 day move of 3956 points for a 44.95 square which rounds to Gann 45. What I couldn’t fit on the screen is the daily for the whole move which actually completes in 610.5 days! Keep in mind that 610 day move is the same 127 week 359 square. By the way that is a low that held for 9 years.

Here’s what you should take from this study. No two patterns are ever going to be the same. I’m not going to say the calculations at the low are rare because we see calculations such as these to a lesser degree all the time on the charts we work with. The only difference is we see them on hourly charts almost every day. That’s part of the value of our newsletters.

It’s a matter of how much you want to dig, how much you seek the truth and how much of an edge do you really want. There aren’t likely many people that are aware of these calculations and even fewer who are capable of looking. But the treasure is hidden in the small details.

Of course, we don’t see setups like this all the time because we don’t get to see multiyear bottoms form very often. But this is what it takes to get one of them. To the degree you get things lining up, the longer the pivot is going to hold. What that should do for you is allow conviction to develop when you trade.

What we do at Lucas Wave International is timeless. The stuff we are doing today worked 30 years and 80 years ago. While no 2 patterns are ever alike, like snowflakes, the tendencies repeat all the time. Those of you will be good students of market history will always do well.

Some of you may not have opened your email for a couple of days so we’ve extended the sale on the new TRAINING PROGRAM at $497 until midnight Mountain time on November 5. On the 6^th it will be $697. Now everyone has had a fair shot and the pricing for the subscriber services will also change on the 6^th.

One of the most important things we do is squaring of price and time. For those of you who’ve read my book, we only touch on it there but the best pivots come with a balance of price and time. If we want to know how strong one of our turn windows is going to be, all we need to do is see if it validates with a good ratio of price and time. If the numbers are more heavily weighted to time, it can and will still turn, but the results won’t be long lasting.

Why is price and time so important? Because Gann told us that when price and time square, the pattern changes. Since Gann didn’t have to deal with a myriad of intraday charts, I’ll add that the direction of the pattern changes. We may or may not get a reversal, but the direction will change. Depending on how the numbers line up will determine the degree of the change.

Gann only had to deal with daily, weekly and monthly charts. It was a simpler time as he did not have to deal with hourly or 5 minute charts the way we do. Gann also kept perfect precision by scaling and drawing charts by hand. It would be totally impractical to do that on any intraday chart. So how do we know we are right? The numbers don’t lie; the markets speak to us in a language of numbers and cycles. When they start to line up, important things happen. Keep this as a reference, it’s a good start. By no means is it complete as we’ll add to it over time.

Fibonacci – 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987 etc.

Lucas – 7, 11, 18, 29, 47, 76, 123, 199, 322, 521, 843 etc.

Golden spiral, sq roots – .618, 1.618, 2.618, 4.23, 6.84, .382, .786, 1.12, 1.27, 2.05, .236

Important Gann 45, 90, 180, 270, 360

Geometric/Gann - 22.5, 67.5, 135, 225,315

Sacred Geometry – 1.414, 1.732, 2.236, 1.90, 1.1755, 3.14

Multiples of 144 – 288, 432, 576, 720 etc.

Astronomic 88, 177, 182, 188, 241, 365, 414, 615

The LucasWaveInternational.com Blog is a place where we will discuss all things Fibonacci, Elliott, cycles, symmetries, price and time squares and anything else we do on this site. We’ll have tutorials and market perspectives. Our goal is to post every Monday and Wednesday. This blog is dedicated to the Lucas Wave Mission of educating you on the most cutting edge timing methods in the industry. Current subscribers will find helpful information here they can use as a reference and those of you who are new to the methodology, a good introduction. Even as an introduction, the information is advanced and beyond what you will find in most places as we focus on the underlying structure of financial markets as news events and fundamentals are secondary to this structure. The crowd is finally catching up to the world of Fibonacci and Elliott, what used to be the exclusive domain of elite traders is no longer cutting edge anymore.

Check back for even more information soon!