Take a look at the Short-Term Fibonacci View on the Markets

Tom Gentile

Posted in
Daily Report

By: Tom Gentile
November 4th, 2022

3 mins read

Today was a rollercoaster day for the equities markets.  And by markets I mean the SPY, which is the ETF of the S&P 500 Index, which is what I analyze when trying to assess pending market direction for the equities markets.

The October jobs data came out pre market.  The markets gapped higher, dipped really quickly and then made a run to its intraday high of +500 or so points (on the Dow).

Mid-day things weren’t bullish at all as the major indexes were all slightly negative.  The Dow was up 500-points early in the day and by mid-day it gave up all that 500-points and a bit more.

From then on the market muscled their way back up to a respectable +400 points.

Take a look at the chart below on the SPY.  It has made a bullish move off the October low but ran into an old support level and it became a new resistance area.  This coincided with the Fed’s decision on interest rates being raised yet again.

Figure 1: 100-Day Candle Chart on SPY
Figure 1: 100-Day Candle Chart on SPY

One can call it coincidence, but I see it as market participants not wanting to take things any higher than that price point until they got the Fed’s decision and follow up commentary.

Now that the markets reacted in a ‘Sell the News’ fashion and dropped over the previous three trading days, the question to be answered is how far will it pull back?  OR even worse for the bulls, is this deemed bear market rally over and will we attack the October lows and or take them out.

Right now, that is still a possibility, but from a short-term technical view we slapped the Fibonacci Retracement tool on the SPY chart catching in the view of the chart the October closing low to closing high.

Yesterday it tested the 61.8% Fib retracement level intra day and bounced off that a bit.  Today, despite all the price volatility, it (SPY), closed up slightly for the day.

Figure 2: Fibonacci Retracement View on SPY
Figure 2: Fibonacci Retracement View on SPY

The Major indexes closed higher on the day, but down for the week.  This week broke a 4-week winning streak for the Dow and a 2-week streak for the NASDAQ and S&P 500.

What we are watching for now is continued upside to that previous peak or a break of it or a retracement to its recent pivot low 2 trading days ago.  If one wants to speculate which way the markets will go, and initiate options positions based on that so be it as that is between you and your broker.

A more conservative approach would be for either of those two price points to be broken and consider trading the momentum then.

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