SPY Enters Confluence Weekly Gap and Fibonacci Area

Oct 10, 2009: 2:44 PM CST

Going back to TA 101, let’s take a quick look at the SPY Weekly Chart and note a prior “gap zone” along with the 50% Fibonacci Retracement – both of which rest slightly above price currently.

Let’s first start with the gap.  During the “heart” of the financial crisis (and the downfall in the stock market), the weekly chart formed a rare ‘weekend’ gap which was frozen on the price chart as seen when October 2008 began.

Unfilled gaps have the tendency to act as “magnets” as price retraces back towards them, but they also can act as “resistance” as well.  Price is coming up into the highlighted gap zone which is also just beneath the 50% “bear market” Fibonacci retracement which currently rests at $112.31.

The low of the October 3, 2009 bar is $109.68 and the high of the October 10 bar is $107.15.  That places us just inside the gap zone with this Friday’s close.

Watch these price levels as we re-test them again.

Remember that the 50% retracement of the 1,576 high to the 667 low in the S&P 500 is 1,121 (for comparison).

Volume has also been diverging for almost the whole time price itself has been rising off the March lows – serving as a type of non-confirmation.

I would surmise that these confluence levels at the $110 level reflect the “Line in the Sand” between continued bullish and reversal bearish expectations.

It would be increasingly difficult to argue for a bearish case in the event price breaks cleanly, and remains above the $112 area in the SPY and the 1,120 area in the S&P 500.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

8 Comments

8 Responses to “SPY Enters Confluence Weekly Gap and Fibonacci Area”

  1. marc Says:

    Stockcharts has their data wrong. Use any other charting software and you will find the gap still open.
    Download the raw data from the Nasdaq website into an excel spreadsheet and graph it…not filled yet.

  2. Corey Rosenbloom, CMT Says:

    Marc,

    I was picking up on that in TradeStation, showing the gap unfilled. That's why I was specific to say “according to StockCharts.com”.

    That's one of the things that frustrates me the most – erroneous data.

    Thanks for the clarification.

  3. Corey Rosenbloom, CMT Says:

    I eliminated the StockCharts.com chart after checking with the exchanges and now am showing the TradeStation data.

    It appears StockCharts uses “dividend-adjusted” prices which account for dividends paid (adjusts the stock price accordingly). That will skew the data the further you look back.

  4. jeffjones2905 Says:

    Corey,

    Are you of the Eliottician Camp that says this is a W4 retracement and we are lining for a W5 decline that will break March 2009??

    If so, what's the line in the sand for this large W4 to go up to?? 1180-1200 on the SP?

    Jeff

  5. marc Says:

    Stockcharts has their data wrong. Use any other charting software and you will find the gap still open.
    Download the raw data from the Nasdaq website into an excel spreadsheet and graph it…not filled yet.

  6. Corey Rosenbloom, CMT Says:

    Marc,

    I was picking up on that in TradeStation, showing the gap unfilled. That's why I was specific to say “according to StockCharts.com”.

    That's one of the things that frustrates me the most – erroneous data.

    Thanks for the clarification.

  7. Corey Rosenbloom, CMT Says:

    I eliminated the StockCharts.com chart after checking with the exchanges and now am showing the TradeStation data.

    It appears StockCharts uses “dividend-adjusted” prices which account for dividends paid (adjusts the stock price accordingly). That will skew the data the further you look back.

  8. jeffjones2905 Says:

    Corey,

    Are you of the Eliottician Camp that says this is a W4 retracement and we are lining for a W5 decline that will break March 2009??

    If so, what's the line in the sand for this large W4 to go up to?? 1180-1200 on the SP?

    Jeff