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.
Afraid to Trade.com
(Remember, this is for educational purposes only – exploring the readings of the Fibonacci tools)