When using Fibonacci studies, I tend to use the retracements 90% of the time, fan lines 9% of the time, and everything else about 1%. I just haven't found much use with arcs and the time series.
However, given the dramatic plunge and rally recently, I decided to see if anything interesting was happening with respect to arcs. This definitely turned out to be the case. Index after index after index looks something like this with respect to its arc:
The most astonishing thing to me about this pattern is how the arc (whose definition wouldn't even be made until March, 2009) bounced off again and again where those arrows are shown. The arc was acting as support, and when it started to seriously challenge this arc (yellow tint), the consequence for breaking it were severe.
The head and shoulders pattern we were all obsessed with early in July turned out to be bouncing off arc support as well, yet, as we know, that support was never broken. We are now all the way back to the 50% arc. Given how close we are to my oft-cited 1050 prediction (which I will hasten to add is at the low end of my 1050-1200 range of an ultimate countertrend top), we could be at an interesting inflection point here.
Just for fun, I decided to back far away from the graph and look at the arc extensions. That was just as eye-opening.
At each of the arcs, there's an interesting event. The magenta tint (where the prices cling to the arc fastidiously) shows the kickoff to the secular bull market, which lasted three decades. The arc at the green tint perfectly nails the crash of 1987 (!), and the blue tint kicks off the final parabolic ascent of the tech bubble (the frenetic 1995-2000 period where the angle was sharply higher).
I'll share one final item with you. I had breakfast with my boss, Tom Sosnoff, on Saturday, and we were talking about the markets. I always enjoy discussing the market with Tom, because even though our methods couldn't be more different, our conclusions are almost always the same.
He has taken on a big FAZ position, and he was looking at a graph of it on his laptop during his flight out here. The stewardess was coming up on the aisle, glanced at his screen, and said to him, "No, no. That's not the one you want. You want FAS!"
And that, my friends, is our Joe Kennedy Shoeshine Boy moment.
