Playing Ping Pong Between Short Term Fibonacci Levels

Jul 30, 2010: 5:24 PM CST

If you’re feeling as though the market is bouncing aimlessly up and down, you might be right – but in these times, it’s often helpful to draw classic Fibonacci retracement grids to help you determine what levels the market might “ping-pong” off of.

Here – let’s take a look at the dominant short-term Fibonacci retracement levels currently in the S&P 500:

I started the Fibonacci Grid at the 2010 price high on April 26 at 1,219 and ended the grid with the July 1 low of 1,010.

From that, we see the respective 23.60% (a lesser-known number), 38.2%, 50%, and 61.8% retracement – all of which are standard in most charting platforms.

Does that help us make sense of the ping-pong?  Or at least, does it at least tell us where the walls are in the game?

Sort of – Fibonacci is not magic, but price does tend to react time to time from these levels.

Not to the penny, of course, but enough to give us a reference where we can monitor our lower timeframe charts, so we can see if there are any divergences or other signals that appear at one of the key price levels.

For now, the market is literally ping-ponging between the key 1,115 price and 1,090 level – both important Fibonacci retracements.

A pong above 1,120 likely pings the market to 1,140, just as a ping under 1,090 pongs the market to 1,060.

That was my attempt at ping-pong humor.

I suggest keeping these price levels handy in the week ahead.

(The chart above is also included in tonight’s Idealized Trades report for members).

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

7 Comments

7 Responses to “Playing Ping Pong Between Short Term Fibonacci Levels”

  1. Mpmaxwell Says:

    Nice job on the ping-pong humor!

  2. Corey Rosenbloom, CMT Says:

    Thanks!

    If I try too hard, it comes off as cheesy.

  3. SW6 Says:

    Cory, ping-pong humor aside, this market is starting to feel urgent and serious. At the close, I thought, “let's see if the S&P can close above 1105 (also Fibonacci number from the April 26 top, if i'm not mistaken). Rather, the S&P ponged off 1105 to the downside. Could this ping-pong action be topping action?

  4. Corey Rosenbloom, CMT Says:

    I'm picking up on that too – urgency is a good word. But it's from the bears – confused as to why this market is not cracking off to new 2010 lows. If bulls are absorbing the bears' selling, and push above 1,130, we could see a quick rush to the exits from some of the bears, breaking the market out to the upside.

  5. amethyst Says:

    Corey, I read your post everyday and learn a lot.
    I see diamonds in daily, weekly and the 30 min chart above.It broke out around July 22.
    I believe you can give us a very good analysis on that too.
    Thanks

  6. SW6 Says:

    Corey, is there a way to determine or gain a confident sense as to whether there are GTC buy orders beneath the market. Is it possible to tell from the look of a daily candle? The strong rally from 1010spx really took a lot of people by surprise. I imagine quite a few traders were also thrown for a loop on today's recovery from the morning lows. Pre-planned GTC orders might be a significant part of these rallies?

  7. SW6 Says:

    Corey,

    1105 on the S&P this week was even more interesting than I first thought! Please take a look at a 5 min chart of the S&P for Wednesday July 28 to Friday July 30. There is a pattern there, with 1105 acting it appears as a pivot point.

    On Wednesday the S&P travels from 1115 down just beneath 1105 and then curls back up to meet 1105. On Thursday at the open the S&P spikes back to 1115 but then moves decisively downward until a double bottom is formed at approx 1093. Thursday finishes by gently overshooting 1105 and falling back to 1105. Then Friday is the mirror of Thursday. A gap down instead of a gap up. And a decisive move up from around 1090 that went gently over 1105 and then curled back toward 1105, ending so far at 1101.

    Corey, do you have any thoughts on this 'mirror move' that took place in the latter part of the week?