62 percent retracement of the melt-down of our generation

  • Posted on: April 12, 2010

In the week of October 12, 2007 The Dow Jones Cash posted a high tick at 14,198. We posted a low of the move the week of March 6, 2009 at 6,469. Only 7,729 points of an elevator shaft down.
Correspondingly, here are the figures for the broader index, the S&P500 cash index;
For the week of October 12, 2007, a high at 1,576.09. For the week of March 6, 2009 the low was the mark of the beast, 666.79. Again, only a 909.3 handle plunge.

Since then, we have rallied higher despite the weeping and gnashing of teeth. Today watching CNBC, I could have sworn they were going to start playing the Beatles “Here comes the Sun”… That being said, like always, I am suspicious and wary of the sentiment of the majority of those loosely defined as ‘investors’.

The point to this entry is this. Both the S&P and Dow Cash indexes are approaching major 62% Fibonacci retracements of their respective major down moves.

The targets for those retracements are 1,228.44 in the S&P cash and 11,238 for the Dow Jones Cash index.

Both of these levels will be met with resistance the first time there. They are too important a technical barrier for us not to pause there.

Will they be the end of the rally? I am not sure. My gut says no. However, they certainly will be selling opportunities the first 2 or 3 times we print there.

Longer term, I am still looking for a print at 11,469 in the Dow. Only because it would mark a 5,000 point rally.

The general public is still bearish. My guess is, they’ll switch to bullish right about the highs. Other wise, they wouldn’t be the general public.

Good Trading