VIP SPEAKER: Fibonacci Growth in Long-Term Stock Market Cycles
An analysis of the 140-year history of the Australian equities market allows the identification of underlying cycles that define share price movements over different time frames. The average annual cycle shows little change in the market’s position in late October from where it was at the beginning of May. A ten-year cycle typically displays share price weakness early in each decade that precedes a period of strong price growth as the end of the decade then is approached. Another cycle shows the market to be advancing in discrete steps through a structured sequence of major support/resistance levels whose positioning is determined by the same recursive process that generates the Fibonacci number sequence. Such cycles mirror the twophase expansion-then-consolidation patterns that are observed in our natural environment, resulting in a pulsed form of growth. Their identification can provide a blueprint for the stock market’s normal volatility limits and its likely major turning points, thereby assisting the management of capital risk.