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Fun with Fibonacci



October 11, 2011 – Comments (0)

The S&P 500 has rallied over 9% in the past week and it is likely that we may see a short term pullback. Since the move has approximated 1100 to 1200, now is a good time to look at the key Fib retracement levels of 23.6%, 38.2%, 50% and 61.8%.

A 23.6% retracement would position us at 1176.40.

A 38.2% retracement would position us at 1161.80.

A 50% retracement would position us at 1150.

A 61.8% retracement would position us at 1138.20.

 If you are bullish on the market, you could buy into any test of these levels. Personally, I expect a re-test of the 50% retracement in the next week at 1150, if not sooner. At that time, we may have more specifics on the ECB recapitalization plans like how much it will cost. We will also have guidance on 4th quarter earnings projections and can hopefully make a better assessment of if the market should be bought. For now I still say sit on the sidelines even in the face of this rally.

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