SPX Weekly Chart Long Term Trend Line Fibonacci Retracements QE Affects

The red line shows a long term trend line in place that supported markets from 2006 into the late 2008 crash. Then price respected the red line in early 2011 as well as this year, receiving a smack down as price tried to push up thru over the last couple months.  The blue lines show the negative divergence across all indicators that created this market spank down. The blue Fibonacci retracement lines for the rally from 1100 to 1420, October 2011 thru April, shows price sitting at the 38% retracement at 1297-ish. This creates strong support especially considering the 1292 SPX 12-month MA number in the same area. So if the bulls mount a come back bounce, this 1292-1297 area is an attractive recovery point.

The 50% Fib retracement is 1259-ish, exactly where the year started, so if 1292 fails, the starting year number is on tap. The orange Fibonacci lines show the retracement levels based on the long 3-year run from the 2009 lows to the April 2012 top. Interestingly, the 38% Fib lines up with the Fall 2011 bottom at the 1135-ish area. Additoinally this is where the 200-week MA is beginning to flat line. We may have a meeting with fate at this level some day forward.

The dots show the various quantitative easing bull runs.  The markets are simply responding to stimulus money pumps ever since the 2008 crash showing that free markets do not truly exist.  The green dots show the QE1 pump from March 2009 to April 2010; 13 months for 550 points. The teal dots show the QE2 pump from August 2010 to April 2011; 8 months for 375 points.  The purple dots show the additional Fed measures such as Operation Twist, along with, more importantly, LTRO1 and LTRO2 by the ECB in December 2011; 5 months for 300 points.

So the affects of quantitative easing are diminishing over time from 550 points, to 380 points, to 300 points, will the neon blue dots result in only a couple hundred handles? Likewise, the time duration where the money printing has a positive market affect is diminishing as well from 13 months, to 8 months, to 5 months, will the neon blue dots result in only a 2 to 4 month market pop? When QE3 is announced it may occur as a coordinated global effort where LTRO3 will occur at the same time and perhaps further help from China, Germany, Japan and the emerging markets as well.  But all this fire power may only result in a four month rally of 200 points, perhaps, as the neon blue dots show, a bounce from 1200-ish to 1400-ish maybe from June/July thru October 2012, to reach a creschendo just as the U.S. votes for President in early November. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.