Remember Remember the Fibonaccis in November

Nov 5, 2010: 2:20 PM CST

Borrowing a phrase from the Guy Fawkes Day chant “Remember, Remember the 5th of November” (popular in the United Kingdom), I thought it was fitting to take a look at the “Fibonaccis in November,” namely the Dow, NASDAQ, and S&P 500 61.8% large-scale Fibonacci retracements – which are playing a role in the current market environment.

Let’s start with the Dow Jones:

All charts start with the respective October 2007 market peak and end at the March 2009 market low.

The resulting 38.2%, 50.0%, and currently important 61.8% Fibonacci retracements appear in the charts – let’s just focus on the 61.8% line.

In the Dow, it’s already broken this week – the retracement is 11,245, which was the prior 2010 peak.

As long as the Dow Jones remains over 11,245, then it is a confirmation of the bull market in place and an argument that higher prices are yet likely – having shattered not just the 2010 prior peak, but the large-scale 61.8% retracement.

Opinion aside, this is as objective as it gets.  Either it’s above or not.  And for the moment, it’s above the line.

S&P 500:

Now, the S&P 500 bumped up against the all-important level this morning, and it will be key to watch in the week ahead.

In fact, I spend a lot more time focusing on the S&P 500, so to me this is a far more important price level that traders are watching.

It’s 1,228 on the S&P 500, and though we’re above the prior 2010 peak at 1,219, we’re not yet (officially) above the key 1,228 level.  A break beyond 1,230 firmly places the S&P 500 in the bull market camp.

Watch this level like a hawk – the market will.  Bull market above.

Finally, the ‘powerful’ NASDAQ:

While the Dow and the S&P 500 flirt with the 61.8% Fibonacci retracement, the NASDAQ looks back and laughs.

That’s because the NASDAQ pierced above this level at the start of 2010 and remained above the 2,251 level for most of 2010.   It supported strongly on the 50% retracement as shown in June.

Though it’s not labeled, the Fibonacci Level that the NASDAQ is flirting with currently is the 78.6% retracement, which happens to be at 2,520.  The prior high resisted against this level, though price is currently above them both.

Strongly worded bearish arguments lose validity as long as price objectively remains above these levels – particularly the 61.8% levels in the Dow and S&P and the 78.6% level in the NASDAQ.

As the next week begins, write down these index levels, memorize them, and take notice as to what happens – specifically whether price continues its rally up through them (bull market) or pauses and reverses here at these key levels.

Remember, Remember, the Fibonaccis in November.

Corey Rosenbloom, CMT
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8 Responses to “Remember Remember the Fibonaccis in November”

  1. Juin Says:

    Hi Corey,

    Thanks for the informative technical analysis. I've bookmarked this page for future reference.

  2. Babblegander Says:

    “Remember remember the fifth of November” continues with …”Gunpowder, treason and plot”.

    Are the indexes going to explode? or just be manipulated?

  3. Corey Rosenbloom, CMT Says:

    Haha I was worried it would be too controversial if I included the whole quote and context.

    I could have easily carried the analogy further but we'll leave it at that.

    I think a lot of it is the QE2 and the purposeful inflation as a result – driving asset prices higher. We'll see how long it lasts but for the moment, it (rising prices) is a reality.

  4. Terlyn12001 Says:

    Sure seems like the “manipulators” wait until the end of the day to swoop down and buy.

  5. shawn Says:

    The 38.2% retracement from the all time high of the NASDAQ is 2646.

  6. Corey Rosenbloom, CMT Says:

    That's true! Thanks for sharing, Shawn.

    I thought I was going back pretty far in the charts above but you're right – definitely can go back to the 2000 peak. Good call!

  7. Corey Rosenbloom, CMT Says:

    Whatever's going on, it's interesting.

  8. stat arb Says:

    Who says the dealers aren't going to be watching those very levels, waiting for the suckers and popping their stops?