Thursday, September 30, 2010

Why S&P 1170 Would be a Perfect Fit as an Ultimate High if You are a Fibonacci Fan

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As the market jumps over S&P 1150 on an "improvement" in Q2 GDP (of 0.1%) and "better than expected" jobless claims (of still recessionary >450K levels) you just have to sit back and clap.  The news has become just a sideshow and any news is being used as an excuse nowadays to gun this market.  Bad news = QE, and good news = good news.  It takes many swigs of Kool Aid to consider today's premarket data good news but it was enough for the 'urgent buyer' to swing in from the treetops and do his SPY futures buying to get the S&P 500 over a key technical level.  Which long time readers realize by now almost always happens in premarket when the trading is thinnest and we approach a difficult level the market cannot breach during normal trading hours... it has just become a bit amusing at this point to see it repeated countless times.

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I mentioned in this week's weekly summary, that if you are a proponent of Fibonacci levels, [Aug 4, 2010: Amazing Fibonacci] we can sort of reverse engineer an ultimate high in this move at S&P 1170.  For a quick overview, you measure the distance from the move's lows to its highs and apply 3 major retracement levels: 38.2%, 50%, and 61.8%.  We know the lows at S&P 1040, but the highs are the mystery.

There are two gaps in the S&P 500 chart (S&P 1090, and S&P 1110).  Generally those fill within 2-3 months from creation.   For the lowest of the two to fill (1090) the S&P would peak to 1170, and then do a 61.8% retracement.  This move in September has been so large the other two retracement levels (38.2%, and 50%) no longer come into play if S&P 1090 is going to be filled via Fibonacci.   S&P 1170ish also fits nicely as it coincides with May 2010 highs.

I've shown it in chart form rather than the raw numbers below - if none of this makes sense and sounds like gobligook, just ignore and buy stocks. ;)

[click to enlarge]


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