S&P 500 Fibonacci Retracement Levels to Watch

It’s been a few months since we’ve had to concern ourselves with the large-scale Fibonacci Retracement Levels of the entire bear market phase, but today brings in the 50% retracement back to the forefront.

Will it hold?  And if not, where is the lower level?  Let’s review our long-term Fibonacci Grid:

Starting with the October 2007 high (peak) and drawing to the March 2009 low (bottom), the respective Fibonacci Retracements to the upside become:

38.2%:  1,014
50.0%:  1,121
61.8%:  1,228

#-ad_banner-#These are levels that have been important to the market in the past, as they’ve held as critical support or resistance (turning points) since they became in effect from mid-2009 to the breakaway in 2011.

As I showed in this morning’s post on long-term reference levels, the key short-term price levels converge about the 1,140 to 1,040 range which is the 2010 consolidation period and the zone between the 38.2% and 50% upward retracement Fibonacci levels.

Fibonacci retracements are not magic, but sometimes they result in feedback loops of buying or selling that develop from self-fulfilling prophecies (traders buy at a Fibonacci level because they expect it to hold, and the aggregate act of buying at the level actually results in a rally).

We’ll see if that develops this week, but in the event that the 1,121 level fails (which was slammed just a few minutes ago/Monday), this opens up the market for a potential fall to the price and Fibonacci confluence at 1,010/1,040.

These are only guides for potential self-fulfilling/self-referential movement and are perhaps best used by short-term traders looking to play a rally up off this level, or to short a breakdown from these levels depending on actual market performance (outcome) at a test of a higher timeframe reference level.