The S&P hit 1074 yesterday before stalling and closing at 1065.49. Futures were down in the overnight and have since risen back up to yesterday's closing level, indicating a flat to slightly higher opening. Today is a big options expiration day ("Quadruple witching") so the possibility exists that the price action today could be quite volitile - keep the seatbelts handy.
I want to revisist something I wrote last week - that once the S&P moved past the 1044 area resistance, that things would be clear sailing until the Oct 07 - Mar 09 Fibonacci 50.0% Retracement area up around 1115.
I looked at yesterday's intraday chart last night - and there was a definite pivot at 1074 that ended the strong upward move from the 1050s. Here's the chart:
S&P 500 - 15 Minute Chart - 3 Days
You can see how price bumped twice yesterday morning before declining - so resistance of some sort was hit. So what's going on? No recent price action in that area to look at for clues. Prices are above all the moving averages, so that wouldn't have been an issue. And I rechecked my Fibonacci numbers - nothing until 1115.
So, just sort of noodling around I thought I would play around some with the last big trend before the decline from Oct 2007 through Mar 2009 that I've been using for my Fib numbers. That last big trend would have been the big bull market measured from the October 2002 low through to the Oct 2007 high - what would happen if I drew Fib lines based on those points - would they still be relvelent today?
S&P 500 - Weekly Chart - 6 1/2 Years Ending July 24, 2008
Here's a chart where I show the 2002-2007 uptrend that I used to generate the Fib series - I colored this particular Fib series in red to distinguish it from the Oct 07 - Mar 09 series that I've been using that has a grey color. See how that first rebound from the decline that began after the Oct 07 top reversed at the 38.2 Fib line? When the market shows that it respects Fib lines, that we're supposedly on the right track. You know where I'm going with this - check out the level of the 61.8 Retracement line.
Now lets update the chart and zoom in a bit to show more recent price action:
S&P 500 - Daily Chart - 3 Months
And - W00t! There it is! - it turns out that the 68.1 Retracement of the Oct 02 - Oct 07 uptrend comes out to 1077.08- suspiciously close to yesterday's 1074 pivot point. Who knew???
To me this says that yesterday's pivot wasn't necessarily just a random turn, but was based upon a real resistance point. Doesn't mean that 1074 is a top - this resistance point can be overcome the same as the 1014 Fib line was overcome. However, rather than blithely assuming that the way upward to 1100 would be resistance free, it turns out that there is some decent resistance right there.
I don't know enough about Fibonacci theory to know how far back we would have to go to determine at what point Fib lines drawn on a trend from years and years ago wouldn't matter any more - but it does appear that the market is still respecting this older one. I would like to think that the more recent Fib holds more weight and that the S&P will get up above 1100 and interact with the next Fib lines in that series - but for the moment, I will count this particular 1074 resistance from the older Fib as still active and give it the respect it deserves rather than treating 1074 as just a random point.
So there ya go.
Good luck!