U.S. Markets closed

61.8% Retracements are Very Common in Bull markets


61.8% Retracements are Very Common in Bull markets. The decline in the SPX from the 1474.52 high of 9/14/12 to last Friday’s low of 1348.08 represents a 61.8% retracement of the move from the 06/05/12 low of 1373.61 to the 1474.52 high.

The previous retracement from the 04/03/12 1418.80 high to 06/05/12 1273.61 from the 11/23/11 bottom was also 61.8%.

History repeats itself over and over again with 61.8% retracements from high points in the SPX.

The 04/03/12 to 06/05/12 retracement was caused by worries that Europe is unravelling. The most recent retracement is caused by worries about the US fiscal cliff. As a technical trader, I don’t get paid to think but in this case I think the European situation is far worse than the political battle brewing in the US.

If we can rebound from the 06/05/12 lows and add 200 points to the SPX, I am confident we can rebound 35 points from Friday’s lows to retrace at least to the 20 day EMA of 1395 which coincidently is also an important Fibonacci level.

The Level 3 Data Quant Report’s selling pressure exhaustion hits new highs. These off-the-chart measurements indicate a buy signal for SPY, DIA, IWM, DVY and a sell signal for long government bonds TLT. Our measurements of selling pressure exhaustion signals that this should happen very soon.

Friday November 15th: “Selling Pressure Hits New Highs” Friday I posted Buy Stocks and Sell Bonds. We are buyers of dips.

“Highs and Lows were Tagged” The SPX high of the day was 1361.93. Our resistance level was 1361.10. The SPX low of the day was 1343.34 vs. our support level of 1343.89. These support and resistance levels work time and time again. See the November 16 post of pivot points and commentary.

Today Monday November 19th: SPX S&P 500 Index:

The SPX futures traded 10 points higher overnight. The 200 EMA value for the SPX is 1377.60. We should touch this level this week but will initially prove to be tough resistance.

Key resistance level for S&P 500 (SPX) today November 19th – 1377.60, 1380.02

Key support level for S&P 500 (SPX) today November 19th – 1362.61, 1360.23

UP 1372.15 1376.1 1377.60 1380.02 1385
DOWN 1369.75 1365.07 1362.61 1360.23 1354.25 1344

SPY – S&P 500 ETF: Level 3 Data Quant Report Buy Signal 11/08: SPY at $138.04 with an exit target at the 0-line of $141.79. The new exit target is $139.79. The 11/08 Selling Pressure Exhaustion carried over last week as Level 3 Data Selling Pressure levels went off the charts. The SPY had two small bounces from the exhaustion signal but they have not held. The bulls did not hold $137.50 and this important level will act as the first level of resistance going back up. The first step is to gain $137.50 then punch back to the 0-line at $139.79. Real-time SPY chart

The following commentary has been here for a few weeks. “The most likely trading scenario is that we have seen the highs of the year of $148.11 and that we should rebound off our current levels back into the $142 range, then print a lower high less than $145.00, trade sideways and down to $140, break through to print a lower low in the $138.00 level.” It has played out exactly as anticipated. We are now at $136.83 and it is time to bounce back into the $141 level.

SPY 1 Day Data

TLT – Long Term Bonds: Level 3 Data Quant Report Sell Signal 11/08: TLT at $125.84 with an exit target at the 0-line of $123.09. The new target is $124.42. The TLT is a mirror image of the SPY. The TLT closed 11/14 at $126.73. This sell signal indicates Buying Pressure Exhaustion. We are back in a condition of Buying Pressure Exhaustion and price being overbought. The TLT bears must now push the price back below the 0-line at $124.42 which is now acting as support.

TLT 1 Day Data