Benner-Fibonacci Time Cycles...

For those people who practice Elliott Wave Theory, one of the most important resources on the subject is "The Elliott Wave Principle" by Frost and Prechter. Most people focus on the practice of wave counting and calculation of Fibonacci retracements. Not so many people focus on the concept of time cycles. This is a shame because time cycles can be of great importance.

One concept discussed by Frost and Prechter is the Benner-Fibonacci Theory of Cyclicality. This is a theory born out of the work of Samuel Benner, who attempted to predict the fluctuation in prices of pig iron during the nineteenth century. A.J. Frost later combined this work with Fibonacci cycles and published it in the "Bank Credit Analyst" in 1967. When published in "The Elliott Wave Principle", this method was noted for its accuracy in predicting tops throughout the twentieth century. Unfortunately, the chart included in the book stopped in 1987, when it predicted a major trough would occur. Several years ago, I took the liberty of extending this chart through the beginning of the twenty-first century.

You can see that the Benner-Fibonacci Theory of Cyclicality accurately predicted the high of 2000 and the low of 2003. I think it is important to reiterate that this was a theory originally published in 1967, and that these peaks and troughs were the result of simply extending the predictions published in 1978. I originally published the above chart prior to the low of 2003. My point is that these highs and lows have not been adjusted or doctored to reflect recent history.

From the perspective of this particular theory, the low set in 2003 was a major trough. The next significant peak for the stock market will take place in 2010. This could be interpreted to conclude that we are now four years into a new bull market cycle that will eventually end in three more years. Such an assumption would be consistent with my interpretation that we are currently in Wave 3 of a 5-wave formation that began in March of 2003.