Equities markets move toward Fibonacci numbers

Just to keep an eye on the bigger picture in equities, the S&P 500 has gotten closer to $1122 which would be its 50% retracement to its $1576 peak of 2007. This as the Dow Jones Industrial Average rises over its 50% retrace level of $10,334, and the QQQQ over its .618 retrace of $43.30. Does going above the Fibonacci level mean an index will push higher? Not necessarily - price can resonate around the number, including somewhat above, without guaranteeing that it makes that level into support. Think of it as being a bit like some static as price jostles around the number. What's important is to see whether or not a reversal pattern materializes around the number. Obviously it's too soon to say, right now. So the presumption remains with the long side, but the rubber band is getting stretched thinner.

What does my reference to rubber band mean? Well, we're working with the idea that this is a bear-market rally that will top out at some point. One logical place for that point may well certainly be at these major Fibonacci levels. Good idea to keep this in mind as we wend our way around these levels! If the rally does top out after testing these levels, then we'll start looking for the levels like SPX 982, maybe 960-ish, before another bounce (which might make only a lower low before going down to test the $860's). Later on down the road we can examine whether the context becomes more bullish - but there'll be plenty of time for that debate. For now, we'll stay focused on what's directly ahead.

What would a reversal pattern look like? The basic elements are making a new swing low on higher volume, followed by a lower high reflex back up on lighter volume, then a trigger day down that closes under prior day high (that would be the classic swing trade sell, as a trading pattern).

Given the size of the patterns as shown on the weekly charts, below, it's smart to stay relaxed about how the action shapes up over the coming days. Yes, I'm more defensive now that the indices are more solidly doing these important Fibonacci tests. And I'm aware of the time-price ratios being worked out for the Dow assuming it gets to $10,495/10,500 soon - oh, say, tomorrow (November 17, isn't that what they're saying?!). So we'll see. If you want to wait for confirmation first, that's okay. We've sounded the alarm before ... and as I've noted, picking tops can be just as "stinky" as "picking bottoms"! On the other hand, on those occasions when it works, sure it's fun. So .... we'll see!