Sunday, June 9, 2013

SPX Weekly Chart Upward-Sloping Channel Fibonacci Retracements

The rising red wedge, overbot conditions and negative divergence (red lines) all identified the top and pending smack down. Price failed the upward-sloping channel but then recovered back up inside to end the week, with a hammer candlestick. The hammer indicates a trend change, in this case higher, but a follow-through candlestick to the upside is needed this week to confirm the hammer.  The 1626-1627 support below is important and 1649-1650 resistance above.

The Fibonacci retracements are shown in blue.  For those of you new to technical analysis, The Fibonacci percentage levels are levels that price tend to migrate to, and possibly reverse from.  Once price moves in strongly up, with a rally, or strongly down, with a sell-off, the move back the other day will tend to migrate towards and perhaps reverse again from, the 38%, 50% and 62% levels. If price comes all the way back down to 1343 (in the example above, the bottom was 1343, then the top was 1687) price would perform a 100% retracement coming all the way back from where it started in November 2012.  But, obviously, that is a long way from happening right now with price only off a paltry amount from the 1687 top and did not even venture into the neighborhood of the 38% Fib at 1560.

Out of respect for the retracements, price should, at a minimum, come down to explore the 38% Fib. Many times, beautiful symmetries and patterns may develop in charts. Note how the 38% Fib retracement at 1560 is at key horizontal support, ditto the 50% Fib at 1515, ditto the 62% Fib which matches the S/R level at 1475-ish. This behavior provides credibility to the Fib retracements and a need for price to resolve these levels to determine a path forward. The large volume candle during April's sell off should be tested and this corresponds to the 1530-1580 area. Projection is for price to move lower to test the 38% Fib, at a minimum, at 1560, in the weeks forward. The negative divergence should continue to cast a pall over the markets and roll price over to the downside moving forward. 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.

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