Apr

17

 When will US markets begin to fall long-term? My answer is simple. This week - 16th to 20th of April 2007.

Why? Two reasons.

(1) Because the panic spasm of Tuesday, 27th February 2007 led to nothing and markets have recovered. This is the moment of maximum complacency!

(2) The UK FTSE index is acting as a giant signpost!

The intra-day all-time high on the FTSE was 6950.6 on the morning of 30th December, 1999. From there it fell to a low point-again intraday-of 3287 on 12th March 2003. Calculate the difference between those two figures, multiply it by 0.876, a well-known Fibonacci ratio, and add it to 3287. The result is almost exactly 6480. Last Friday, 13th April 2007, the FTSE closed at 6462.7, a 6-year high point. There will be some opening buying tomorrow. I'm writing this at 9 in the evening, British Summer Time on Sunday, 15th April. Based on a good Wall Street close on Friday it should push that index up even higher, to about 6480.

So why won't FTSE rise above 6480? Both because of the important Fibonacci ratio point and because something in the real world (and the statistically most likely reason is the US market falling!), it will cause FTSE to move back down from 6480.

Technical analysis and fundamental analysis are both true, but there is something very deep philosophically which follows from this. Simply this, cycles and technical analysis patterns and Fibonacci ratios "know" future history! In other words, the technical analysis/cycle patterns point to a future market high or low point at some future date. Then an event in the real world (fundamental analysis) comes along to give this high or low point a reason/excuse to happen.

At first sight that sounds crazy. But I can remember, some time in July 1990, putting a very large number of FTSE prices into a cycle analysis program. The program accurately forecast a low point for mid-January 1991, and that low point did indeed happen as a result of market fears just before the start of the Gulf War, which happened as a result of Saddam Hussein's invasion of Kuwait on 2nd August 1990, some weeks after the mid-January 1991 low forecast.

The debate about whether technical analysis or fundamental analysis is true is not just like the debate between theologians about whether pre-destination or free will is true. It is directly related to it. In other words, in cycles (technical analysis) we have the patterns of predestination. In the real world of spontaneous events (fundamental analysis) we have the events which give those mathematically predictable cycles the "excuse" which they need to become true.

In fact, free will and predestination only appear incompatible because I am looking at the problem as a creature inside space-time. To the Creator looking at the so-called "problem" from outside space-time, there is no problem. His creatures, although their free will is utterly real, must bring about His unchangeable predestination. That, to me, appears incompatible, irreconcilable nonsense. But that's only because I am a limited creature in space-time and not God!!

I hope your readers find both my market forecast and my link between market analysis philosophies and theology of some interest.

Victor Niederhoffer replies:

The philosophies in this submission, which rely heavily on the persistence and predictability of untested seasonal patterns, are examples of the bearish stick-to-itiveness and durability exemplified by the writing of the duo of the Keech cult.

Much more to the point would be a numerical workout of the movement of prices in the April 15th period forward, beginning April 15th as liquidity returns to the system. Also useful would be the tested tendencies of the market in the period's subsequent period to extraordinarily momentous rises of a magnitude similar to that witnessed in the last two weeks.


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