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Sunday, April 19, 2009

881 is the .236 retrace spot

I apologize if someone already posted this somewhere I haven't seen it mentioned. But I hadn't realized the market was coming up on its .236 retrace spot. .236 is a Fibonacci ratio table number. It lies between .382 and .1458. .236 is often considered the acceptable minimum retrace spot for a wave of any degree big or micro. The 875.63 mark on Friday was exactly .230. 881 would be .236.

So what we have on this rally so far is this: Primary wave 2 has traced a valid ABC correction and has retraced the acceptable "minimum" Fibonacci sequence number. For you bears out there who feel the market will collapse to new lows from this spot, this will be your smoking gun evidence.

I however don't see that happening at this time. Nothing is guaranteed of course, but I'll play the odds that the market wants to revisit some higher numbers eventually. This trend change needs much more time to shake out.

I do however see this spot as a good spot for a nice pullback filling at least some of those lower gaps. 810 is a spot I am eyeing for starters. It may not be a massive bear wave like we are used to. So if it does pull back, it definitely might be a good spot to go long a bit.

As a guideline, ending diagonals retrace the entire move up from whence they started. That was 779 in this case. Even if this is a "leading diagonal" in a wave 3 position (not even sure if that is allowed at this point in the structure) they also retrace deeply but not back to 779.


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