Wednesday, February 15, 2012

Fibonacci SPX

Last April I wrote an article titled Fibonacci Gold and to tell you the truth, I have always been very proud of that analysis and particularly so regarding the beauty and elegance of the charts. Today's post - Fibonacci SPX - will not compare with my previous inspiration, but I do think it has a relevant message that should give one something to think about. Even better if it helps my reader be prepared for investing/trading a stock market that I suspect is about to change rather dramatically.

Before we get to the Fibonacci stuff, how about we take a simple look at the SP-500 daily chart and observe the report being given from the True Strength Index (TSI) indicator. 

Click on any chart to ENLARGE

This chart goes back about a year and a half and details the major TSI sell signals in that time period. Of particular note is the trend line break SELL signal that was generated just today. Generally speaking, the most statistically favorable sell signals generated by a trend line break occur at or very near the ZERO crossover. Today the SPX daily TSI closed at +0.18 and while not entirely ideal, it is a clear warning to SELL or be very cautious with long positions, at the least.

The US Dollar Index has been rallying for days now off what appears to have become an intermediate cycle bottom. Why it has taken the stock market this many days to start falling apart, in reciprocal fashion, is a bit of a mystery to me.....but anyway, we had all kinds of news today, including a read of the FED previous meeting minutes, so perhaps that is what the market was waiting to hear. Who knows?

My point of view at this point is that the long anticipated stock market, gold and precious metals correction should be on the verge of beginning (or already has).

Now, onto Fibonacci SPX.

This chart is a weekly going back to March 2009 when the SPX bottomed at 666. The data I notated on the chart below was actually derived from a daily chart (yielding accurate measurements) then transferred to this less 'busy' weekly chart.

My research was to discover whether there is a Fibonacci time relationship between the significant peaks and valleys of the past 3 years, and if so, can we see any evidence that our current time frame possibly implicates a significant top as being ready to occur right now.

I found it challenging to present this material so that it was easily understandable. Sometimes a significant price low is followed by a significant Fibonacci measurement that targets a significant price high, and visa versa. My best solution, for now, uses a line to identify the length of the 0 - 100% time frame then identify the Fibonacci measurement (%) corresponding to the significant high or low that can be seen vertically above. 

If nothing else the interesting discovery for me was to observe how truly intertwined the movement of the S&P 500 price is to Fibonacci measurement in terms of time. Perhaps another day I can do a study of the Fibonacci relationships of price itself, as opposed to time.

Also, the very beginning of the S&P's 666 low is directly Fibonacci time related to price this week (bottom red line). Also, the March 2010 intermediate cycle low (Japan tsunami time frame) and the major intermediate cycle low this past October are correlated to price this week (purple line). And finally, the recent October high, November low and December low are in Fibonacci relationship with this week (light blue line).

As I have often mentioned, there are NO CERTAINTIES in the stock market, only probabilities. For myself, anyway, I regard today's TSI trend line break SELL signal and the Fibonacci time measurements targeting this week as favorably supporting the probability that the SPX top is in. 

Wishing you good trading!



  1. Gold miner:another outstanding observation,John.U should benefit most of it.

  2. Many Thanks John! When I am confused, I read John. SPX, SPY - Uptrend - medium term, long term. I think now 137,00, then correction.

  3. thanks John. I check for the updates every day and appreciate all you do here! Last april call was a big money maker for sure. Since then i have incorporated TSI into my trading heavily and its been helping a lot in identifying key turning points and overall direction. Thanks again.-AM

  4. How do you count/see the dollar cycle at an intermediate bottom?....the weekly chart?

    ..looks great about the monthly forming a "swing high"?....this is certainly a 'make or break' time for the dollar.

    I favor a deep correction in risk/stocks here...but it ever taking its time.

  5. John if this is the top, where do you think the retrace is heading to? and if the market is heading down...who low are you expecting gold to come down, do you see a lower low than dec 28th? thanks

  6. Anon - I took a look at the monthly DXY0 on freestockcharts using the TSI, but also
    the Worden Stochastics indicator. Very interesting and not particularly comforting
    for the longer term prospects of our currency.

  7. Stelepass - I think a lower than Dec 28th is possible if gold follows its 2008 model performance. The thing that is so difficult to quantify is the massive market manipulation of the central banks. This 'ain't' 2008 anymore - it is degrees worse than then - or so it seems to me. The degree to which central banks are printing and loaning to each other and making arrangement to trade in currencies other than the US Dollar is stuff I read about but have difficulty putting in sensible context.

  8. Looks like yesterday and today was just another one of those break throughs that ended up just being a bounce off of the trendline. But at the same time it has formed a better trendline