SP 500 declined a perfect 61.8% Fibonacci retracement of the summer rally
from the 1267 lows to the 1474 highs. In our work
we examine human behavioral patterns, sentiment, and Elliott Wave patterns to
help with clues on market direction. To be sure, there is no such thing as a
perfect technical analysis methodology, so we do our best to mix up a home
cooked recipe for assistance in getting as close as we can to calling the
pivots up and down.
the near term, we notice the market has rallied out about 45 points off the
1344 pivot lows last week to around 1390 today. This retracement marks a
normal 38.2% Fibonacci recovery of the most recent wave 3 decline to 1344.
Typically, this is a wave 4 mini-bullish pattern as washout lows get bought
and then shorts cover fueling the rally a bit higher. However, this is often
when another sledgehammer comes out of left field and knocks the market down
in what we would call a “Wave 5” decline to new lows on the
should watch both the 20 day moving average which is declining and around
1392 or so, and the 1388-1392 38% Fibonacci retracement areas for resistance.
Only a strong close over 1392 can eliminate the potential for one more leg
down to the 1316 areas on the SP 500 before the month of November comes to a
close. With that said, we expect a rally in December for the markets and hope
to see this barrier taken out soon, but would advise traders to tread with
caution until such time.
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