Large Scale Fibonacci Price Projections in the SP500

Dec 17, 2008: 10:55 AM CST

A reader asked me to look at Fibonacci Price Extensions as part of the price wave structure, and this post represents the major Fibonacci Extensions/Projections for the S&P 500 as a guideline for price possibilities going forward.  Let’s use this as a reference going forward of the possibilities – though not certainties – ahead.

Standard Fibonacci Price Projection Grid for the S&P 500:

You can click on the chart for a larger image. I’m taking the S&P high 1,576 and then projecting a Fibonacci Extension grid down to three swing lows (the March low in blue; the July lowin red, and the October low in purple).  I took off the 0% (origin) and 100% (projection point) off the grid for clarity.

One highly interesting note is that the 261.8% projection off the “Wave 1” lows near 1,250 actually was the major support level for the most recent November price lows at 750 – I find that fascinating.  The remaining projections for the “Wave 1″ decline are literally ‘off the chart.”

That takes us to the second price projection swing off of the July lows at 1,200.  W’eve already achieved the 161.8% retracement at 970 with nary a respect for this level, however the 261.8% projection is at 595, which is an area that serves in confluence with other Elliott Wave projections towards the 600 level.  I would hint that this would be a major area of support in the future.

However, there’s one final projection to discuss – one in which squeamish readers might not want to view.

The 161.8% Fibonacci extension off the October price lows rests at 389.58, which is just beneath the 400 Index level.  The more aggressive Elliott counts (stating that we are still in large-scale Wave 3 down) actually do have price projection targets near this level… but keep in mind such a move – were we to get it – would drop the S&P over 50% from where it is currently – that’s sure to get major attention and headlines if that projection were to be achieved.

The main idea is that the 595 level would be an initial Fibonacci extension target, while the 389 level would be a sort of ‘last-ditch effort’ or aggressive target in price structure.

I took the same grid and projected two more extensions off the May to July swing and then the September to November price swing.  I think there’s something highly interesting you might want to see.

Again, the only things I’ve added here is a small swing projection from May to July (red hash-lines) and then the large-scale swing from 1,300 to 750 (green hash-line which appears at the bottom right of the chart).

I don’t want to go into too much detail other than to state the following:

The 261.8% projection off the small-scale swing actually served as support for the October lows and the 423.6% projection (sort of an ‘ultra’ target) rests at 432.

Here’s where things get interesting.

The 161.8% projection of the 1,300 to 750 swing is actually 390.26.  This is exactly the same level as the large-scale ‘purple’ swing from 1,550 to 850 which is projected at 389.58.  That was literally chilling to me when those numbers flashed on the screen.  I’m NOT saying we’re going to get there (yet), but I am saying it is a strange and potentially significant coincidence (perhaps).

Combine this with the 432 value projection (the 423.6% retracement of the smaller 1,400 to 1,200 swing) and we have major Fibonacci Price Projection/Extension Confluence about the 400 level.

Again, I’m not saying we reach these levels – I’m only saying it’s quite fascinating at the price convergence at these levels.

Let’s continue to watch price play out and keep these levels in mind (even skeptically) in the event things in the market take yet another … turn for the worse.

Corey Rosenbloom
Afraid to Trade.com

(Remember, this is for educational purposes only – exploring the readings of the Fibonacci tools)

10 Comments

10 Responses to “Large Scale Fibonacci Price Projections in the SP500”

  1. toad37 Says:

    Corey,
    This is another high quality post. Thanks for all you do.
    Toad

  2. Vasu Says:

    The point and figure target on S&P 500 is at 600..I don’t how this helps or enervates our thinking…. but I’ve see the P&F targets always realise.

  3. Vasu Says:

    Cory
    Could you please put together your elliot wave analysis on the financials please?
    thanking you

  4. Corey Rosenbloom Says:

    Vasu,

    I’m constantly looking for sources of price confluence through non-correlated methods. My thinking is that if we can find a significant price cluster through various methodologies – P&F, Gann, Elliott, Fibonacci, patterns – then it distinctly adds to the probabilities of success, or of price reaching or finding support/resistance at those confluence levels.

    Clearly, knowing P&F targets adds to the value of a certain level – I’d love to hear more on P&F targets and logic. That was one area of the CMT that I studied, memorized, and then didn’t apply it much and I need to start doing that.

  5. Corey Rosenbloom Says:

    Vasu,

    I’ll have it by the end of the day! Thanks for the suggestion.

  6. Andrew Stanton Says:

    That 600 level on the S&P also appeared in an article recently projecting a P/E of 15 and earnings of $40 next year.

  7. LP Says:

    I see Andrew got the Mauldin report. But yeah 600 – 625 seems to have some very good support. It would also force everyone to capitulate and give up on the stock market. This might be the launching point of the new “bull market”.

  8. AMA Says:

    Thanks for your efforts, If you look at the fibo retractment on weekly and monthly scales you could see more in sight in the movements and supports. If I recall correctly the 7400 level in the DJI is the 61% on the monthly.

  9. Andrew Stanton Says:

    If we assume the 2000 top was the end of the bull market and the 2007 top was the end of a B wave we can take the A wave of 758.55 points and multiply it by 1.272 and 1.618 then subtract those from the B wave top getting respective targets for C of 591.03 and (gulp) 328.57.

  10. dacian Says:

    Hi, very nice Andrew. I saw both of those calls already (600 by Mish and 400 by several deflationists). I saw also a call with the 5th wave playing out like 9 subwaves. Does that even exists somewhere in EW theory? Did we have that in 1930 actually (9 subwaves)?