Four US Equity Index Support and Fibonacci Target Planning Update

Jun 7, 2013: 8:45 AM CST

As a follow-up to Wednesday’s similar “Daily Chart Support Target” post, let’s update the four US Equity Indexes on the Daily Chart to highlight the immediate inflection or key support zone along with broader Fibonacci Retracement levels to watch.

We’ll start with the SP500 which reversed in stunning fashion sharply at the ‘obvious’ 1,600 support target:

Just like the prior post, we’ll focus our attention on the horizontal support or inflection targets for use in game-planning or trade development both from the intraday level (opportunities that develop as price moves AWAY FROM these levels) and swing trader perspective (these are support zones that may lead to self-fulfilling prophecies).

For the SP500, the prior update showed two levels to watch closely – the 1,607 (50d EMA) then 1,600 “Round Number” support.

After stalling at support on the intraday frame yesterday at 1,607, price broke support and then ‘collapsed’ straight down to the next lower “make or break” inflection level at 1,600.

From there, buyers rushed into the market as short-sellers (particularly swing traders) covered positions for profits at the 1,600 “Round Number” inflection target.

The combination of buyers buying (to catch a falling knife at support) and sellers covering (to take profits either at the 1,607 or final 1,600 target) helped fuel a strong upside impulse of one-sided buying activity.

The logic will be the same in the other indexes as seen below.

I also drew a “Low to High” Fibonacci Retracement grid from the November 2012 to the May 2013 high.

What we’ll be focusing on is the potential for the indexes to rally through the “Bull Zone” or green zone on the chart (continuing the uptrend) or else breakdown targets to the next support confluence which tends to be the 38.2% Fibonacci Retracement with the early 2013 consolidation.

Dow Jones Industrial Average:

As I highlighted previously, the Dow Jones had its “Round Number” at 15,000 and the 50d EMA into 14,920.

Assuming this zone (particularly 14,800) fails as support, the next downside “swing” target to play for is the 14,400 confluence.

NASDAQ:

The NASDAQ had a rough index confluence from the opening gap high and the 50d EMA at 3,368/3,370.  So far, the market did reverse higher off this level, locking in its importance as a key Bull/Bear Inflection level.

Assuming this level suddenly fails as support, the next downside confluence target rests at 3,250.

Russell 2000:

The Russell 2000 had a loose confluence into the 960 index level, stemming from the rising 50d EMA (960) and resistance/polarity level from 950.

So far the buyers have defended this level and the market resumes the uptrend at the moment.

A failure here opens a downside game-planning target toward 920.

In all these markets, we’re assessing odds of Pro-Trend Continuity which – as unbelievable as it may be – extends a target above the recent 2013 highs.

A minimum target would be a movement back at least to test or challenge the highs should the strong ‘creeping’ trends continue as they have since November 2012’s inflection low.

As traders, know these key ‘obvious’ inflection levels and adapt in real time to each day’s new price activity relative (toward or away from) these levels.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

1 Comment

One Response to “Four US Equity Index Support and Fibonacci Target Planning Update”

  1. chidimma Says:

    Interesting!

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