PHILOSOPHY: The stock market does not follow random patterns, but an orderly process which is linked to universal rhythms. It is moved by immutable forces that cannot be altered by economic or geopolitical events. In fact, it would appear that these events are part of a natural rhythm as well, and that they either coincide with or lag market moves.

R.N. Elliott shared this view. In the 1920s and 30s, R.N. Elliott observed an orderly, repetitive, fractal process in the stock market which was governed by Fibonacci relationships, and in 1938, The Wave Principle was published. The basic premise of the theory is that The universe is ruled by law and The stock market exhibits the wave impulse common to all social-economic activity It has its law, just as is true of all other things in the universe.

This law or universal principle manifests itself essentially in two ways which can be readily observed in the stock market as well as throughout the physical universe The first is cyclic repetitions of various time spans. Edward R. Dewey was President of the Foundation for the Study of Cycles. He wrote a book which was published in 1971 entitled Cycles, The Mysterious Forces that Trigger Events. Dewey suggests and demonstrates that cycles exist in just about every aspect of the universe.

Elliott's contribution was to show that the stock market operates on a fractal principle which is regulated by Fibonacci ratios. Fractals and Fibonacci relationships also appear to be part of the fabric of the universe.

What all this means is that man cannot oppose these universal forces and, being himself part of the universe, he is subject to them as well and will therefore behave in a predictable manner.

The stock market has a logic of its own. It represents the collective decision making process of millions of investors throughout the world acting as individuals with their own reasons, agendas, and motivations for buying or selling securities. Every minute of the day all this information is distilled and converted in an up-to-the-minute final price value. Consequently, we usually ignore most fundamental economic and geopolitical developments and concentrate our attention strictly on the technical aspect of the stock market in order to assess its current position and to predict its future direction.

To find out how we go about this, click on STRATEGY