click chart to enlarge
We are looking at the S&P 500 today because it has reached a level of significance that we wanted to reference. Since March of 2009 the S&P has moved in a distinct form from its 666.79 low. The first major high point we see as 956.23 made June 11. The subsequent correction low stopped at 869.32 on July 8. The market has now reached a level equaling the .618 Fibonacci extension of the first major move up added to the correction low of July 8. We like to refer to this .618 extension as the first target.
We are not saying that it stops here even now, or forever, but our experience has provided us with an understanding that pauses, however brief or lengthy, often come at this first target price prior to moving on to the next. Our experience has also provided us with enough instances where the second target is eventually made. In this case the .750 Fibonacci extension target is approximately 1086.00.
It is important to note too that this or any market does not have to do what it may have done in the past. Markets may fall short or exceed but we find the guidelines that the Fibonacci ratios present as another good tool for traders.
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The other charts we have posted today are of the NASDAQ 100 both weekly and monthly. The weekly chart shows extension target levels where the .618, as we interpret it here, has also been reached and somewhat exceeded. Using a starting point of the March 9 low of 1040.52 to its June 8 high of 1511.89 and the correction low on July 6 of 1394.87 we get the Fibonacci .618 extension target at approximately 1686.00 and the .750 extension at approx. 1748.00. The high of today, Tuesday Sept. 15 as we are preparing this has been 1700.33.
The monthly chart we use here is to illustrate some retracement levels that may become significant points of resistance. First of all using the October 2007 high of 2239.23 and the November 2008 low we get the .500 retracement of approx. 1629.00 and the .618 retracement of approx. 1773.00. As it can be seen the .500 retracement resistance level was penetrated leaving the .618 at approx. 1773.00 as the next Fibonacci retracement ratio of significance.
On a larger scale for the NASDAQ 100 are the retracement levels still remaining from the March 2000 high to the October 2002 low. The Oct. 2007 high did not quite reach even the .382 retracement level where the S&P 500 and Dow Jones Industrials exceeded their 2000 highs. This was the internet bubble inherent to the NASDAQ.
The retracement levels in the NASDAQ 100 using the March 2000 high of 4816.35 and the October 2002 low of 795.25 (yep that’s right) gives a .382 fib retracement value of approx. 2331.00, a .500 value of approx. 2805.00 and a .618 fib retracement value of approx. 3280.00.
We wanted to make note too of the uptrend line that is drawn using the October 2002 and July 2006 lows. After breaking through to the downside in September of 2008 on its way to its eventual low in November 2008 (retested in March 2009), this former uptrend line may be ripe for a retest before all is said and done. And finally notice that the 50 month moving average is currently hitting at approximately 1690.00.
We are not saying that any of these levels will be, have to or are going to be reached. We will say, though, that there are some traders that do find these Fibonacci ratios and tools such as these as beneficial to helping make trading decisions.
It is very often the management of trading positions that turns out to be what determines trading success in the long run. We hope this brief discussion has provided some value. If this sort of information and the use of it can help you and your trading plan send us an email or give us a call.
jmajer@mfglobal.com
312 261-7380
800 321-5810
Jeff Majer
Diego Pilar
CB&S Division
MF Global Inc.
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