Classic Fibonacci Clusters in the SP500 Index

Jan 19, 2009: 3:43 PM CST

Let’s take a moment to use traditional Fibonacci retracement methods to find potential price clusters off the November lows as an exercies in multi-level Fibonacci Confluence.

S&P 500 Weekly Chart:

Sometimes you can get more insight from  “Clusters” of Fibonacci Retracements than you can single retracement grids.

I’m using the ‘classic’ method of Fibonacci which has you draw from absolute price highs to absolute price lows.  This is not the way I would do Fibonacci cluster analysis – I use a variation of this method (mainly using key swing highs instead of spike highs) but it is important to know the ‘common’ or ‘classic’ zones as they stand currently (moreso to see what others are seeing).

I the termination low is the Novmeber 741 low and I have drawn four Fibonacci retracement grids to this zone from key swing highs.

The resulting grid gives us the areas of key resistance overhead from these price lows – do not look at any Fibonacci data on this chart before the November price lows – we are asking “Where will price find resistance” or “What key confluence zones are overhead to serve as key resistance?”

Notice that since the November low, price has not even made it up to the smallest level 38.2% retracement – that which would come off the August 2008 swing high.  If price does head lower from here, it would say a lot about the character of the market – that of underlying weakness that buyers could not push us up even to test this area and that bears have a firmer grasp on the market than it seems.

Of course, should price break 950, we would see significant Fibonacci confluence between 1,000 and 1,050.

It may be that this is the only retracement we get (from 741 to just shy of 950) and if so, we could be set to break the November lows with force.

Do your own Fibonacci cluster work to see if you can glean additional insights from the data.

Corey Rosenbloom
Afraid to Trade.com

5 Comments

5 Responses to “Classic Fibonacci Clusters in the SP500 Index”

  1. toad37 Says:

    love it Corey, thanks!

  2. Chris Says:

    Corey,

    A good trader sent me this Live Virtual Online Expo for traders. It’s this coming week. Quite a few agenda topics covered. Since I do not have your direct email address had to post this in your BLOG.

    http://www.tradersworld.com/conference/

  3. Reggie Perrin Says:

    Correct – you must not be too rigid re Fib levels

    Often the larger traders (due to liquidity and their systems) are forced to trade off the cash CLOSE /confirmation
    ….. therefore the intra-day test of these levels create excellent opportunities….

  4. Rajandran Says:

    US market movements are more complex than any other
    markets. Your fibonacci post is the best example how
    complex the Dow Market Movements.

    Thanks a lot for your explainations

  5. Fibonacci Projection & Fibonacci Study. Forex | Forex Robot Review, Forex Robot Trading, Best Forex Robot Review, Forex Robots, Forex Trading Software, Forex Pips Says:

    […] 13, 2011Lesson 3: Fibonacci LevelsAutomatic Opening Range and Fibonacci Levels for Think or SwimClassic Fibonacci Clusters in the SP500 Index div.socialicons{float:left;display:block;margin-right: 10px;}div.socialicons p{margin-bottom: […]