SPX Daily Chart Fibonacci Retracements Potential Island Reversal Pattern

The chart shows Fibonacci retracements for the big rally move from the mid-October bottom to the early December top. Two Fib retracement paths are provided the blue one based on the closing prices and the pink based on the intraday market low and intraday market high. Price is at the critical 2001-2003 support level that encompasses the 50-day MA at 2001 so a bounce or die decision is required come Monday. If the 2001 fails, the door is open to the 38% Fib retracements at 1992 and 1980 identifying a 1980-1992 landing zone for price. If that level fails, the 50% Fib for the blue line at 1966 is in play. Next is the cluster of the 62% blue Fib and the 50% pink Fib at 1940-1950.

At a minimum, since the drop off the top has created damage, the first 38% Fib at 1992 should be tested. Price stopped exactly above the gap at 1995-2000. Thus, an island reversal pattern is in play where price may collapse from 2000-2001 to 1995 and lower in a gap down move in a heartbeat creating an island reversal. The other option is for price to simply drift lower and fill the gap. The bulls must bounce price from the 2001-2003 strong support first thing Monday morning or further mayhem will result. The Sunday evening futures will provide insight and the futures will likely react to the Japan snap elections. 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.