pre holiday

SPY opened right on top of a 50% retracement today, as measured from Monday's high to yesterday's low.  I've included the pre-market in this chart below to illustrate how price used this midpoint as a pivot prior to the open.  Also included is a set of Fibs measured off of the PDH to PDL (yellow 50% line), also giving the pre-market a nice S/R pivot to work off of:

While on the Open, using a set of Fibs to measure the PDC to today's Open, price quickly achieved a 100% extension off of today's momentum gap:

RIMM median line failure

A quick look at RIMM following Friday's sell-off (seems a theme following their earnings announcement). Yet another way in which the Andrew's Median Line can clue you in to the strength (or weakness) of a rally (in this case, the momentum thrusts starting in February, ending at the $75 mark).
Using 3 pivots; November lows, December highs and January's higher low, we can construct the Andrew's pitchfork.
The fact that price was unable to reach the Median Line (dash middle red line) was a good indicator that strength in the rallies was lackluster.A fluke you say? Well, if you don't want to take Andrew's word for it, take a look at what Fibonacci was saying;
The dash yellow line on the chart below is a Fibonacci Extension line.
The dash white line is a Fibonacci Retracement grid.
We can see how, in February, price resisted the previous December swing highs that corresponded with a 61.8% Fib. Extension and came close, but couldn't quite tag the Andrew's Median Line. Price, however, consolidated at those highs (sign of strength) before pushing higher. Price again fell short, not only of the Andrew's Median Line target, but the Fib. -38.2% retracement and the 100% Fib. Extension, screaming weakness (that shooting star doji was the last straw 4-days ago).

back forth testing

These past two days in the SPY gave nice, clear cycles as explained in the Stevenson Price & Time concept. Starting with the nice arching Regular Cycle from yesterday, this morning's Inverted Cycle quickly achieved it's upside PTT, while the next Regular Cycle came awfully close to tagging it's price and time target (this sort of cycle analysis isn't meant as a stand alone strategy, so if you're short on the last half of this RC a better profit target may be the day's Open). Later in the day we got some smaller time frame cycles interspersed so the symmetry began to fade.
Interesting setup we have on the Daily SPY chart, with a confluence of resistance points.
- We have price sitting in the sweet spot of a Bearish Wolfe Wave where the time objective comes around tomorrow.
- A blatant momentum sell divergence
- 161.8% Fibonacci Retracement level
- 100% Fibonacci Extension level
All as volume has increased these last two days.

now what

Where do we go from here? The bears were squeezed yet again, bringing price back to the January 21 selloff point. If only I had the courage of my convictions, I would have been a lot better off after this last month, remember this chart? and this one? Anyway, lesson learned. You have to be quick and play off of what you see, not what you think.
There was a day back in September of last year (see this post) that has haunted me ever since sitting through it. It was a stark reminder that anything can happen in these markets, regardless of what the news is, how the economy is performing, or how strong the dollar may be. It was also a lesson in watching stops get taken out while seeing fresh orders come in for fear of missing out.
There comes a time when price retraces after a momentum impulse where that retracement soon becomes something more than just counter trend behavior. So, when price sells off (like it did on a large scale in the fall of '08, and as it did in January of this year) you expect some form of profit taking by those that are short, usually in the 38% retracement level. If stops are close enough overhead (say at the 40% level) they get taken out and price starts to work higher. The higher prices begin to drift as a result of short covering, the faster things begin to move counter to the selloff, much like it did in that chart from September '09.
So, here we are, two markets (SPY & DIA) having retraced over 50% of their Oct.'08 momentum selloff, and another two markets (Q's & IWM) having retraced over 62% off those March lows. While the Russell certainly looked impressive this week, the Nasdaq is one of those charts where I'm left thinking, "could this thing go all the way!?" After all, it is a mere 15% off of it's 11/07 highs! And it doesn't seem to me like the "retail crowd" has been fully participating in this market for quite some time, so what happens if they start jumping aboard in fear of missing out? They are the last to arrive after all.
On all the charts below I have marked the following; (1) the gap range left from Sept. '08. (2) A Fibonacci Retracement, beginning at the swing high of '07 and down to the swing low of March '09. (3) A Fibonacci 3-point Price Extension (beginning at the March '09 lows, to the top of the first impulse move and projected off of that flags' low, where the next impulse move began.
While the Q's look very impressive, the other broad markets still have a lot to prove. The IWM, for instance, has an overhead gap above at the $70 level, but having made it through $65 seems as though it may want to spend some time back in this early 2008 consolidation level.
While the laggard DIA, and to a lesser extent the SPY have some hurdles to overcome.
The DIA at around $112 has the 61.8% retracement and a gap, with previous support directly above (Support becomes Resistance). Similar setup on SPY. The faster price makes a move for the $120 level, the more climactic things will become, and remember the adage; Trends always end in a climax.

Resistance approach

A price extension off of our SPY Feb. lows gives a 61.8% extension right beneath previous support, with a 100% extension at higher highs in the $116 level. This corresponds to an external Fibonacci Retracement of 27.2%.IWM is curious here, being 0.95% off of it's Dec. highs, the $65 level seems bound to get hit here soonbut that $65 level is a strong level of resistance:
So, important levels to watch; $113.50 on the SPY, the $65 level on IWM, and up to $46 for the Qs.

steep retracements

The 78.6% Fib. retracement held as SPY support today. The chart below measures the distance between the most recent swing low (the "Dubai gap") and swing high (tested on 12/04). This level also happened to be a confluence level from a 100% Fib. Extension (measured from the 12/04 high and corrective move low and projected off of the following corrective move highs). On top of it all, today's test of the lows happened on a momentum divergence.
Just another bounce on range-bound support. The last three times we bounced from this level we put in a new high on the very next day! Tomorrow should give us a reasonable clue to determine the "pace" of buying interest.Here's another look at the 78.6% retracement level from this morning in the SPY on a fast time frame. As measured between their most recent swing highs to lows in the opening hour:And then, when price was testing the lows of the day price made two steep retracements and turned around on strong volume (not shown):
SPY with Up/Down Volume today:

A closer look...

....into POT's opening price behavior. A lot can be learned by observing areas where price pivots to make a higher high or lower high.
This morning price gaped up (higher low) above the previous swing high (higher high), and above the previous day's range.
- Draw a Fibonacci Retracement from the previous day's close to the open. Can price hold above the 50% level? Volume on a price reversal tells you it can...back to test highs.
Price puts in a higher high, but retraces sharply.- Draw a Fib. Rtr from the most recent swing low to high. Can price hold above the 78.6% retracement? Price reversal and volume tell you it can...Test the highs.
We now we have a series of higher highs (2) and higher lows (2), giving traders support for buying into a potential breakout of the Opening Range High (ORH). Of course there are those that may be fading the highs that early in the morning as well (of course there could be scalpers as well, just playing off of the 78.6% retracement and targeting the previous High).
If we're looking to get in on a breakout then we need to have some sort of profit objectives.
- Draw some 3-point Fibonacci Price extensions and look for confluence areas, where price could either turn around or consolidate within. They can also highlight swing lows to trail stops off of.
The two extensions drawn here are both projected off of the same swing low (the most recent one), but one is a measurement taken between the PDC and the Opening High, while the other is the most recent low to high range.
Those 78.6% retracement levels always seem too steep to rally off of, but it often acts as a key pivot.

Price extensions

Here's a quick tip in projecting potential support/resistance levels off of previous swing lows/highs. On Tradestation we have a drawing tool known as Price Extension Lines (under the set of Fibonacci Drawing tools). This is a tool which uses 3 data points in it's projection (in this case we'll use a swing low drawn to a swing high and projected from the following swing low). Essentially, you're taking the difference between two data points (highs to lows, or lows to highs) multiplying by your Fibonacci ratio and adding (or subtracting) that result to your third data point.
So, with the default settings at 61.8%, 100%, and 161.8% we first click on the most recent swing low (Nov. 2nd), extend it to the highest high before a meaningful correction occurred, and project that off of the meaningful swing low, like so:Next, you can add another extension, going from swing low, to swing high, and projecting from a swing low, like so:Here's an example where I used 4 sets of extensions on the most recent swing down in the SPY ranging from 10/21 - 11/2And here's an example from the most recent leg up in the daily chart going back to July:
Finally, I'll throw in a visual explanation of how the procedure is calculated:And here's a link for further guidance, and an explanation regarding confluence zones with this tool.