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June 4, 1984 
The most exciting event of 1984 is the apparent resolution of the one-year decline in bond prices. 
Investors were cautioned to hold off buying until bonds reached the 59¾-60¼ level. On May 30, the 
day that level was achieved, rumors about Continental Illinois Bank were flying, the 1100 level on the 
Dow was smashed in the morning on -650 ticks, and the June bonds, amid panic selling, ticked briefly 
to as low as 59½, just touching the triangle support line drawn on the chart last month. It stopped cold 
right there and closed at 59 31/32, just 1/32 of a point from the exact center of our target zone. In the 
two and a half days following that low, bonds have rebounded two full points in a dramatic reversal. 
Figure B-16 
July 11, 1984 
The background of investor psychology is very suggestive of an important bond market low [see 
Figure B-18]. In fact, if this were the only measure I followed, it would appear that bonds are the buy of 
a lifetime. The news media, which all but ignored the rise in interest rates until May 1984, has been 
flooding the pages of the press with "higher interest rate" stories. Most of these came out, in typical 
fashion, after the May low, which was tested in June. During second waves, investors typically relive 
the fears that exited at the actual bottom, while the market demonstrates an understanding, by holding 
above the previous low, that the worst has passed. The last five weeks have demonstrated this 
phenomenon vividly. 

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Figure B-18 
On June 11, the Wall Street Journal headline read, "Fed Move to Tighten Credit is Expected During 
the Summer by Many Economists." On June 18, two full articles, including a front page feature, 
focused on the prospects for higher interest rates: "Cooler Economy Seen Failing to Stem Further 
Rise in Interest Rates This Year," and "Interest Rates Begin to Damp Economy; Many Analysts See 
Further Increases." On June 22, the WSJ featured an incredible five-page in-depth report entitled 
"World Debt in Crisis," complete with a picture of falling dominoes and quotes like these: from a 
congressman, "I don't think we're going to make it to the 1990s"; from a V.P. at Citicorp, "Let's be clear 
— nobody's debts are going to be repaid"; and from a former assistant Secretary of State for economic 
affairs, "We are living on borrowed time and borrowed money." On July 2, the WSJ reported, without 
saying so, that economists have panicked. Their forecasts for higher rates now extend halfway into 
next year! The headline read, "Higher Interest Rates Are Predicted for Rest of Year And Further Rises 
Are Seen for 1985's First Six Months." Says the article, "Some say it would take a miracle for rates to 
fall." The WSJ is not alone in taking the pulse of economists. Financial World magazine's June 27 poll 
listed the forecasts of 24 economists against their beginning-of-year predictions. Every single one of 
them has raised his forecast in a linear-logic reaction to the rise in rates that has already occurred. 
They are using the same type of thinking that led them to a "lower interest rates ahead" conclusion a 
year ago, at the bottom. This overwhelming consensus based on fundamental analysis is no 
guarantee that rates have peaked, but history shows that this type of analysis will rarely result in 
market success. I prefer to bet on an overlooked theory which recognizes that market patterns repeat 
themselves over and over again because people are people. 
____________end of quote____________ 
As further developments proved, that low marked the last buying opportunity prior to the start of a 
historical advance in bond prices. Fibonacci ratio analysis, applied with a knowledge of where such 
relationships are to be expected, forecasted the level of the low, which was then powerfully affirmed 
as it occurred. 
Next Lesson: Fibonacci Time Sequences