After successfully catching a falling knife and riding a “V” shaped rebound, the bulls’ celebration was short lived as the market weakened further to retest the “flash crash” lows. We’ve been chopping around the 1080 area on the S&P 500 with a ferocious battle between the longs and shorts.
I’ve spent considerable time going over the reasons for a short term rebound:
- Finding Capitulation With The McClellan Oscillator
- A Few Technical Reasons To Bounce Higher
- This Bleak Tape Hides Short Term Opportunity
- Another (Short Term) Technical Reason For Bounce
- Sentiment Overview: Week Of May 21st, 2010
- Predicting Volatility With Interest Rates
- Calling All Contrarian Investors!
- Inverted Hammer Candlestick Signals Trend Change
But even so, the market is a fickle mistress and does whatever it wants. Just in case the market doesn’t react to the oversold conditions, we should be making contingency plans for a significant decline. One guide is the Fibonacci levels which proved so prescient to mark the April top.
Here is a short video covering some important Fibonacci levels to watch for on the downside:
As Adam Hewison explains in the video, based on their proprietary signal, INO is now at a sell signal for the S&P 500 market with the Fibonacci levels as possible target areas. If you want further updates, you can sign up for free at the end of the video.
While a bit scary for anyone long, the 61.8% retracement, corresponds to 878 on the S&P 500. That area, interestingly enough, is also where the index found support after the correction last summer. But it would erase pretty much all the ground that we’ve gained since the October 2008 waterfall decline.
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