In early 2018 I forecasted that the SPX had major Fibonacci resistance at 3047.30. Fibonacci support/resistance levels are not equal in importance. The further away in time from the original coordinates the more powerful the supposed support/resistance. The 3047.30 target is derived from coordinates over ten years ago, potentially very powerful. With any Fibonacci support/resistance allow for leeway around the target. Leeway will vary depending on how far a market/stock has traveled and how much time is involved. There are not exact parameters for leeway, it is subjective for each analyst. From my experience, based on how long and far the SPX has travelled - 3047.30 plus or minus 20 points is appropriate leeway. Also note that on the Log scale chart there is a long term trend line connecting the SPX march 2000 top with the February and September 2018 peaks. Allow for leeway with trend lines. The SPX on 7/26/19 hit this trendline. There are four market dimensions; Price, Time, Momentum, and Sentiment.
Fibonacci levels and trend lines are within the Price dimension.
Within the Momentum dimension there are some bearish divergences. On the chart weekly RSI has a bearish divergence. NYSE new 52 - week highs also have a bearish divergence. There are other momentum divergences which if necessary will be discussed in a future post.
So far there are no strong bullish or bearish signals from the Sentiment dimension.
The Time dimension is bullish as US stocks seasonally rally until at least late August.
The message from the four dimensions is mixed. Is the major resistance zone impenetrable? No, a powerful force could break through. Think in terms of how much force is required to break through a wood door vs. a steel door. If I had no news data and was just relying on price and indicators from the US stock market I would be thinking that something big was about to happen. Either a very important top forming or on the verge of a powerful acceleration of the current rally. However, I do have access to news, 07/31/19 is the next FOMC announcement which has the potential to be the single biggest event for US stocks in 2019.
A major trading rules is to never initiate a new position just prior to an important announcement/event, guessing what could happen is just gambling - not informed speculation. Wait until after the FOMC announcement to place a trade.
Based upon bullish seasonal patterns I am leaning bullish. If however, there is a top in the 3067 to 3028 zone followed by a sharp and deep one or two week SPX decline after the FOMC announcement I could change to a bearish opinion.
Mark
Commento
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ERROR ON CHART. MISTAKENLY HAD FIB EXTENSION AS 1.618 X 909.30. THIS SHOUD BE 909.30 X 2.618 = 2380.50 SORRY FOR ANY CONFUSION.
so we are really far off that Fibo, and then it's not a confluence with the upper trend line resistance!!!
that changes much indeed!
markrivest
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@chocotraders,
Hi
No it does not change the Fib resistance level. The correct Fib extension is 2.618 times the SPX decline of 909.30 points of the SPX 2007 to 2009 bear market.
I mistakenly put the Fib extension of 1.618 instead of the correct 2.618. 909.30 x 2.618 = 2380.50 which I have listed on the chart. 2380.50 added to the SPX March 2009 bottom of 666.80 targets 3047.30.
Mark
LotusTrading20
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@markrivest, oh, of course! Thank you for clarifying. I mistakenly read 3380.50!
therefore the chances of @ least a minor pullback are fairly increased ahead of FOMC.
TheSwinger
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Hi Mark,
In the diagram, I think you intended to write 909.30 x 2.618 = 2380.55.
Yes thanks for the catch it should be 2.618 extension.
gvmrb0040
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@markrivest, Mark, there is descending right angled triangle wedge forming short term which should breakout in the areas you identified. It is also noticeable the last wave down didn't get to the downside trendline(2956-2730) but reversed(bullish sign). Looking at long term Elliott waves, the fifth wave started at 2335 which can potentially be 1500 points. The late cycle rate cuts combined with a possible intervention from US Treasury to weaken US dollar(in case fed stimulus is not enough) would propel the stock market to those highs I think by next year. Sentiment has been very bearish with bears jumping in bouts with slightest pullback.
Hi thanks for the analysis, the next few trading days could be the most important of the year for US stocks.
Mark
LotusTrading20
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Just like that I would be leaning bullish too. Of course that will depend on how market reacts to Fed (more than actually what the Fed "does"), so I do incline towards bullish resumption... One idea is since we almost reach target and have the very long term trend line, perhaps we see a small pullback to somewhere between 2960/94 monday and tuesday ahead of FOMC on wednesday.
Paul