SPY Fibonacci Levels and Other Thoughts

Click on the above chart to enlarge it. It shows the Fibonacci levels drawn from the October 08 top to the March lows.

What is about to follow is my own unscientific musings coupled with some proprietary edge stuff. Consider yourself warned as that is the recipe for a dangerous concoction.

It is my opinion that the SPY has climbed far enough and fast enough that the potential short-term upside is now about equal to the potential short-term downside, should a pullback EVER happen. I do not expect much upside above the 200 day, in the short-term, and I expect the 50 day moving average to be tested.

The 200 day moving average is, and has always been, a very obvious target. This average is also a very obvious place for a pullback to occur, as I would expect resistance to be strong. However, the QQQQ blasted right through the 200 day without looking back, so there might not be as much resistance there I as think. A rally to the 200 day over the next week will show the SPY gaining ~30% from the March intraday low.

The Fibonacci levels show the 38.2% retracement at $101.64, or about 10 points higher than today’s close. Should the SPY reach this level, it will have gained 34% from the March intraday low.

While I do not expect this to happen soon, I would not be surprised to see the market attempt to retrace all the way to the 50% level, or $112.31. This is just above the October Armageddon gap-down. A run to the 50% retrace would put the SPY 40% higher than its March intraday low.

Volume, relative to the last six months and the 50 day moving average, is low. However, compared to April 08, volume is slightly elevated. Frankly, it is the price action that has me more concerned than the lower volume.

Cryin’ won’t help you, prayin’ won’t do you no good,
Now, cryin’ wont help you, prayin’ won’t do you no good,
When the levee breaks, mama, you got to move.

So the question is, how much farther can the rubber band be stretched before it snaps back? I am positioning for the snap-back to begin soon. It may take a major moving average or Fibonacci level to initiate the pull-back, or traders may anticipate that these levels will provide resistance, which means the pullback may come before price hits the targets.

What is confusing me is that a proprietary abnormal market filter will stop me out of my impending SPY short before the 200 day is reached. To be clear, this proprietary measure is signaling that the market is on the verge of going parabolic, and I do not want to be short if/when that happens (does that mean the rubber band breaks?), but I also believe that a pullback is imminent.

Either way, when the levee breaks, you got to move.

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