Interesting $SPX and $INDU Monthly Chart Showing 50% retracements

20. September 2009
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$SPX Monthly: In attempt to discover things that I may easily miss in a fast moving market, I am in the process of writing an "Auto-Fib" study that draws long and short Fibonacci pullbacks using past pivot levels where the 61.8% line is not broken.  In the process of testing the study in various markets and various timeframes, it is proving to do what it's intended. (I wish I had this study months ago!!!)

One thing I hadn't noticed before is that the March 2009 low lines up incredibly well with the 0.618 pullback from 8/1/1982 low to all time highs.  This is a situation where this bullish retracement remains valid until that 0.618 level is broken (which it hasn't).  (Of course, I say "bullish" in the context of 20+ years of data.)  See chart below.  This prompted me to have a closer look at the 50% level (839.15).  See second chart below...

An aside, notice the 50% short at the 1121.44 area.

 
 
$SPX Daily: The two levels mentioned above are placed below on the daily chart.  Notice the 50% level at 839.15.  On 10/10/2008 we hit this area for the first time and hit a low of 839.80!  Almost exact!  We then immediately rallied ~205 points to 1044.31.  The 0.618 level gave us our March low and, so far, has given us twice the bounce at ~408 points.  Hmm...
 
 
 

$INDU Monthly: Of course, this prompts me to look at the Dow and see if there was a similar reaction.  In the Dow's case, the measurement was from the 10/20/1987 low (bottom of the 1987 crash) to highs (20 years later, to the month, on 10/11/2007). The 50% and the 61.8% levels also marked significant levels  (however, not quite as exact as the S&P).  Scroll down for daily chart...

 
 
$INDU Daily: For completeness sake, here are the two levels mentioned above, drawn on the daily.  Yes sir, the market is just unpredictable randomness! ;]
 
 
 
 
 
 
Good Hunting Traders! 

 
 
 

 

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