Fibonacci channel with zero line stretching from 1942 low to 1974 low, and 100% at December 1961 high. The chart is in logarithmic scale.
A few interesting things to point out:
1. Price only surpasses the 100% level during the dot com bubble and 2021-22 when the Fed's money printer was running wild (another bubble).
2. Price between the 78.6% and 100% level seems to coincide with low to moderate unemployment and average to above average GDP growth, however this is a generalization. There are instances where price remains above the 78.6% level during mild recessions (1960), and there are unexplained events like the "Kennedy Slide" where price dropped close to the 61.8% level even though unemployment was moderate and GDP growth was well above average. But in general, if price is below the 50% level, it's during tough economic times, like the 1970's. When the economy is in at least decent shape, we tend to stay above 61.8% at least.
3. Price almost reaches 100% level again in 1965. In 1997 it tests it before breaking through it in '98. In 2007, 100% level was reached, right before the Great Recession.
4. When the dot com bubble burst, price fell to the 61.8% level. March 2020 COVID low fell to the 50% level. 2022 low fell to the 78.6% level.
At a minimum, the channel provides me a way to better visualize the long term trend.
Be sure to zoom in.
Do you believe we'll fall below the 78.6% level in 2023? Let me know your thoughts.
A few interesting things to point out:
1. Price only surpasses the 100% level during the dot com bubble and 2021-22 when the Fed's money printer was running wild (another bubble).
2. Price between the 78.6% and 100% level seems to coincide with low to moderate unemployment and average to above average GDP growth, however this is a generalization. There are instances where price remains above the 78.6% level during mild recessions (1960), and there are unexplained events like the "Kennedy Slide" where price dropped close to the 61.8% level even though unemployment was moderate and GDP growth was well above average. But in general, if price is below the 50% level, it's during tough economic times, like the 1970's. When the economy is in at least decent shape, we tend to stay above 61.8% at least.
3. Price almost reaches 100% level again in 1965. In 1997 it tests it before breaking through it in '98. In 2007, 100% level was reached, right before the Great Recession.
4. When the dot com bubble burst, price fell to the 61.8% level. March 2020 COVID low fell to the 50% level. 2022 low fell to the 78.6% level.
At a minimum, the channel provides me a way to better visualize the long term trend.
Be sure to zoom in.
Do you believe we'll fall below the 78.6% level in 2023? Let me know your thoughts.