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Friday, August 7, 2009

Fun With Fibs

I thought for sure 1008 was going to put up fierce resistance, and it sure looked like the indexes were weakening, but the unemploymnet report this morning, despite being only modestly "better", was enough to fuel another move up, and 1008 fell easily. The high today was 1018, and when we hit it we started selling off, but nothing dramatic. The overdue correction is just going to have to wait.

Since I have no real idea where the next resistance is going to be, I consulted Mr. Fibonacci (which sometimes seems about as useful as consulting Nostradamus, but I can't argue with results). What I found was jaw dropping. Not only did we hit the 38.2% retrace today (and passed it by 4 points), we close below it. This may be our next resistance level. What is really amazing is how perfectly it bounce off the 61.8% level last summer. That would be before anyone knew it would be the 61.8% level. Coincidence?

Here is the Nasdaq. Well, we've passed the 38.2% retrace, but notice how it stopped the first rise up. Now, it's not as perfect as the SPX, but the Nasdaq also bounced off the 61.8% level last year, not once, but twice.

The Dow industrial, like the SPX, are just below the 38.2% retrace level. Today's high? 9437.71. The 38.2% level? 9432. Notice only one bounce off the 61.8% level last year. Maybe just a coincidence.

The Russell 2000. 3 freakin bounces off the 61.8% retrace level, 2 of them almost to the penny.
The 38.2% level stopped the first uptrend, and we have plenty of room before hitting the 50% level.

I know a lot of technicians are firm believers in Fibonacci levels, and from what i have seen, I can't argue with them. Maybe it's a case of mass psychology, but the fact that these indexes bounced off the 61.8% level before it became the 61.8% level is just too bizarre for me. I think I need some time off to go see my palm reader.

I'll have the new highs update shortly.

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