SPX Daily Chart Head and Shoulders Fibonacci Retracements

This daily chart shows a close up view of the Fibonacci retracements using the 1100 level as the base and 1420-ish as the peak.  Note how price is on top of the 38% Fib retracement now in this critical 1292-1298 area.  Thus, if a bounce occurs, this is the first logical place, Fibonacci-wise, that a bounce would occur. The neon green lines show the H&S pattern now in play head at 1420, neck at 1340, neck line failure occurred, so the lower target at 1260-ish is in play. Note that the 50% Fibonacci, the H&S target, as well as the starting SPX number for the year all form a confluence at 1258-ish. This confluence will likely act as a magnet as time moves forward.

The red rising wedge and thick red lines show the negative divergence that Keystone highlighted as the market top formed over the last three months. This negative divergence created the market smack down. Note the thin red lines for the indicators, falling lower as price falls lower (no sign of positive divergence). This hints that price will need to move lower as the days and weeks tick by but first a dead cat bounce is needed. The sentiment has grown much too bearish by late last week and the FB poor IPO showing did not help matters. The CPC put/call is at elevated levels showing numerically that fear is in the markets now.  Typically this equates to a market bounce. Also of import is that price never back tested the H&S neckline at 1340 so keep this in mind.

The markets may bounce from the 38% Fib now; from the sturdy 1292-1298 support area. SPX 1326 and 1340 would serve as upside targets. Then lower again to the 50% Fib confluence of support at 1258-ish. Note the 200-day MA in between the two Fib's at 1278.  The RUT, Trannies and Dow, as of last week, have all fallen thru the 200-day MA but the SPX and Nasdaq have not, so pay attention to this important moving average. 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.