Some Fibonacci Ratios to Consider

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The chart directly above is the S&P 500 cash ($SPX). Most of the notes on the chart I have mentioned at some point in prior posts, but I thought I'd bring them all together.

The most important thing I wanted to point out is that the advance from the July lows to today is an almost perfect golden ratio relative to the March to June advance. For those who don't track Fibonacci relationships much or have never seen them "work" this won't mean anything. I have looked at so many charts and seen so many "harmonic" relationships in corrections, that I have no doubt what so ever that these ratios show up in various ways in stock prices. The especially interesting thing here is that the perfect 0.618 relationship of the March-June advance projected up from the July low, almost pinpoints the top of the gap down on 10/6/08. It is at times amazing how the relative sizes of various moves relate to create Fibonacci relationships between key psychological points in the market. Even more amazing is that a basically exact 161.8% (inverse of 0.618) extension of the January closing high to the March closing low coincides exactly at the level of that gap down as well (see chart below).

This really struck home this February when I saw a somewhat similar thing occur. Without going into the details, there were gaps in the decline last November that were at precise locations dividing the decline into Fibonacci based sections. Then the exact middle of that leg down became the apex of a contracting type pattern at 875.75ish on the S&P. I was then able to use the projection of the % decline of that November leg down, down from the apex in conjunction with another specific type of harmonic pattern to project 650-670 as the next likely bottoming range for the S&P. It bottomed at 666 and I posted a blog trade on the day of the low. The point of this is that when these things start to come together, it is possible to go on trading runs like shooting fish in a barrel, which was basically how it went from January through March of this year.

So, this all could be a waste of time and the market could go up forever or just make a muck out of anything I've talked about, but the Fibonacci ratios relative to the position of the gap are a fact regardless of what happens here, because it is all based on past price data. There is also an interesting breakdown of the July-present advance if a top happens here. I have basically put the info on the chart, but won't go into much on that, because I am just speculating on a top here.

In any case, I feel that the market is talking Fibonacci language and I'm listening.

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