June 27 Market Internals and Fibonacci Check for SP500 and Dow Jones

Jun 27, 2013: 9:38 AM CST

With the sharp rally over the last three trading sessions, let’s take a quick look at the current Fibonacci Confluence reference area along with an update of Breadth (market internals) on the rally.

We’ll start with the SP500:

SP500 SPX Fibonacci Retracement Confluence and Market Internal Breadth

This is meant to be a quick update so we’ll focus first on the two short-term (intraday) Fibonacci Retracement grids and then focus on Internals (Breadth).

For the SP500, there was a tight confluence into the 1,608 index level (38.2% of the full retracement; 50% of the recent 1,650 high) which broke during this morning’s opening gap.

The market surged to the next loose confluence into the 1,618 and 1,623 area (highlighted) which aligns with the 1,620 index level.  That’s where we’ll focus our attention at the moment.

A stall/retracement here targets the 1,610 confluence for intraday traders while a clean breakthrough above the 1,620 then 1,623 level suggests buyers – and a short-squeeze from sellers – could propel the market through the “Open Air” spaee toward 1,640 again.

In terms of Internals (Breadth), we have visual strength with the three day rally – Breadth traded above the 2,100 level again.  Reference prior times Breadth reached this level and the divergences that developed ahead of short-term reversals of the intraday trend.

Dow Jones Industrial Average (Fibonacci and Breadth):

Dow Jones Industrials INDU DJIA Fibonacci Retracement Confluence and Market Internal Breadth

Perhaps more interestingly, the Dow Jones currently trades into the tight confluence of the 50% (full retracement) and 61.8% (15,350 high) Fibonacci levels at the 15,040 level.

Another key factor to note with both indexes is the breakthrough above the “obvious” Round-Number level 1,600 in the SP500 and 15,000 in the Dow Jones.

We’ll be on guard for any “Bull Trap” action on an initial peak above this level that results in a breakdown back under the level.

For short-term/intraday planning, a stall/reversal from the 15,030 level suggests a movement back through 15,000 toward the 14,950 tight confluence.

Otherwise, like the SP500, a breakthrough higher here suggests buyers again dominate sellers (and sellers will buy-back to cover) which sets an initial upside target toward 15,160.  Any movement above that targets the prior high 15,350.

Continue monitoring the strength in Internals on the rally (look for signs of weakness/divergences) with respect to the short-term Fibonacci Confluences highlighted above.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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