Taking a breather at the 61.8% retracement level. A ramp like this can reverse fast, especially if it’s wave 2 of a 3rd wave down.
Prophet.net
Ramp update
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Tag Archives: Fibonacci
After all that worrying, is that all the bounce we get?
This might have been as simple as an A-B-C countertrend rise to the 50% retracement of the Wed-Fri decline:
Prophet.net
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For an across the board deflation-style sell-off that started with such powerful internals, it would be odd for the move down from January 19 to end with the 10-day average equity put:call ratio not even breaching the mean:
Indexindicators.com
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Treasuries are well-bid and commodities are looking weak. Not much in the way of animal spirits today, though Greece enjoyed a little bounce from its extreme oversold condition. I’d consider buying a Greek ETF if there were one.
Nasdaq at major resistance
Look at how important this level is for the Nasdaq 100 . It has been both resistance and support and seen breakaways and breakdowns. It also happens to be the 61.8% Fibonnacci retracement of the ’07-’09 decline.
Source: Prophet.net
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Levels like this are not voodoo. When there has been a lot of activity at a certain price, there is much emotional weight attached to it. In this case, those who went long the Nasdaq and its components at this price must be delighted to be breaking even here. Those who decide to count their blessings and sell provide supply, as do the other longs and short sellers who recognise the importance of the level. If there is more eagerness from buyers than sellers here, that supply will be absorbed and prices can move higher, as people get more confident that the bear market levels are behind us. Of course you could say that for any level, but levels that have previously lead to multiple reversals or accelerations have extra importance.
A breakthrough here will mean a lot more if the S&P500 and Dow follow suit. As noted before, in ’07 and ’08 the NDX had a habit of coasting higher just as things deteriorated. The Dow and SPX of course are still under their highs so far.
Bubblicious
The Indian stock market since 1990:
Source: http://www.nseindia.com/
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I suspect that this market will end up back at 2002-2003 levels. Manias like this tend to be completely retraced, like the oil bubble from ’04 to ’08, which sports a similar chart to the above, complete with a big B-wave bounce that should be peaking soon, though by looking at this chart alone I wouldn’t rule out $80:
Source: http://futures.tradingcharts.com
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Thought I’d take a look at some other wild markets:
Russia’s RTS:
Source: http://www.rts.ru
Russia hasn’t made much of a retracement, only about 25%, but if the US markets fall from here you can bet it will join them.
Shanghai is ready to rumble (about a Fibonacci 38% retracement, just like the S&P 500):
Yahoo! Finance
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Brazil’s Bovespa – about a Fibonacci 62% bounce:
Bloomberg.com
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Why not check out the Swiss? Ok, they’re not so wild — just a 33% retracement here, but a remarkably similar pattern to the S&P 500. Also, it is worth noting that the Franc went from roughly $0.83 to $0.93 over this period, so this was a much larger rally when priced in dollars, like many of the other foreign markets.
Bloomberg.com
WIth foreign markets sporting high valuations and high exchange rates, it looks to me like the US dollar is going to be where it’s at going forward. Shorts that capture the exchange rate movement along with stock moves would be attractive.
Scaredy bears
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Well, we’ve hit the first common Fibonacci retracement level (38.1%). We’ve now rallied 350 S&P points after a 904 point fall (1570 to 666). This is the best shorting opportunity since 12 months ago, IMO.
Source: Interactive Brokers
Nasdaq is nicely lagging, and the dollar is looking good. China could have topped already. The chatter on the boards is of scared bears and confident momentum chasers.
Next week could be nasty, maybe a drop to 950 before a rally to test 1000 again soon thereafter. Or maybe we slowly roll over and don’t break 950 til almost Labor Day (first week of Sept — when summer vacation ends in the US).
If this really is wave 3 down, it should be another 5 wave move, like wave 1. During the first wave, and even the second, most won’t believe the top is really in. Wave 1 could start from right here, since the momentum guys would be buying in on the decline and there would be few shorts to drive a squeeze to new highs. It would be seen as a “healthy correction.”
