So, the market broke through critical resistance this past week when it rallied above the 1485 level. 1485 was an important area of resistance as calculated by two methods of Fibonacci ratio analysis. Our new challenge is the identification of the next area for resistance. We can use these same methods again to determine the probable location.
The current wave up began from the low of 1412.84 made on March 30. If we assume that this rally will assume a length proportional to the initial wave that formed between March 14 and March 23, then we can use Fibonacci ratios to project its length. The first Fibonacci projection point would be at a location 1.38 times the length of the initial rally, which was 74.91 points. This would give the formation up from March 30 a length of 103.38 points, and suggest that the next level of resistance will be at 1515.91.
An alternate method of calculating the next potential area of resistance would be to assume that the wave up from March 14 to March 23 represents a proportional amount of the total wave length. Had this initial wave been 62% of the entire length, then the S&P 500 would have topped out at 1484.80. This did not happen, so the next degree of proportionality would assume that the initial wave 74.91 point rally represents 50% of the total wave length. This would mean that the total length of this rally would be 149.52 points higher than the low of 1363.95, and suggests that the next level of resistance will be at 1513.80.
This give us two methods of Fibonacci analysis that point to the 1513- 1515 area as potential resistance on the S&P 500 index.
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