Posted in
Technical Analysis
By: Tom Gentile
on May 4th, 2023
It is very likely everyone paying attention to the markets knows the Federal Open Market Committee (FOMC) raised interest rates a 1/4 of a basis point yesterday. They also intimated they may be taking a pause on another rate hike for the foreseeable future.
This news didn’t do anything to bolster investor/trader confidence as the markets sold off and closed at or near their lows. The selling has continued today with the SPY trading lower 2.88-points at the time of this writing.
This article is going to point out the recent pivot low that SPY needs to hold above otherwise it will have the SPY at risk of trading even lower.
More important than that, in our view, is where the price of SPY may end up should it not only break the recent pivot low, but close below it.
The above chart shows the 100-day Japanese Candlestick Chart on the SPY.
The green horizontal line highlights the lows of the recent pivot point which is a pull back that happened while SPY made its march towards the previous high in the ballpark of 116.
Fibonacci Retracement Levels on SPY 2023-05-04
That price level has become a resistance, where one can see what’s called a double top formation.
IF you look at the last, very far right, candle on the SPY chart you can see it is another red, bearish candle, meaning it is a bearish trading day today so far.
Hat figure 2 is showing is the current chart on SPY where we have the Fibonacci Retracement Tool plotted on the chart.
We are taking the recent up leg in SPY and use Fibonacci Retracement analysis to gauge where the 38.2%, 50% and 61.8% retracement levels are of that recent up leg.
SPY is testing the38.2% retracement level is already touched today.
The thing to watch at this point is will this price level, fib retracement level hold as support. Will it bounce from here or not.
If it does not hold at this price and instead closes lower on the day and below the 38.2% fib level, the SPY is at risk of further decline.
SPY at a Key Price Level
False breakouts or breakdowns can occur.
What this means is to say, the SPY may close below the 38.2% retracement level. If SPY bounces back and trades higher tomorrow and the next subsequent days that will result in a day that may close lower than the price right now is /was a false breakdown.
If SPY closes below this price level. One can watch the next day to see if follow through to the downside happens.
If it does Figure 2 is a means to assess price levels based on Fibonacci of that last up leg where SPY could trade to and find support.
For market bulls, it would be nice if this 38.2% (current) pull back holds as support and even maybe bounces off of by end of day.
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