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Currently, the broad market indexes are trapped in a contracting Fibonacci spiral (CFS), with the implications of the CFS between December 2012 and 2020. Figure 1 illustrates the importance that a currency has within a society. The method by which a currency is backed, be it by a gold standard or fiat declaration, affects mass psychology. Patterns of mass psychology form various cycles, which are linked to progression through longer-term durations. The stock market is the ultimate method of capturing human psychology ranging from greed to fear, and every combination in between.

FIGURE 1: ITEMS AFFECTED BY HIGHER-ORDER LEVELS OF IMPORTANCE. The method by which a currency is backed affects mass psychology.

In the 1930s, commodity-backed monetary policy tended to make people more honest, which was a direct reflection of this policy. As time went by, the economy became increasingly unstable, bringing high-order events closer and closer in the economy and markets. Every cycle has booms and busts, but the CFS has numerous tops that have occurred within 5% of set time posts, followed by corrections of at least 40% to 50%.

FIBONACCI SPIRAL LINKED TO THE MARKET
The universe is linked to phi (61.8%), also called the golden ratio. This ratio is based upon a numerical sequence deduced by the mathematician Fibonacci in the late 12th century, and which has the subsequent sum of a sequence totaling the last two numbers.

…Continued in the April issue of Technical Analysis ofStocks & Commodities

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