Why 1976 Is Relevant On The S&P 500 Index | Seeking Alpha

Why 1976 Is Relevant On The S&P 500 Index | Seeking Alpha



Chris Ciovacco has written another great article about how to understand the stock market.  He did a very good job in explaining how Fibonacci retracement levels work.  Chris presented an excellent chart of the S&P 500 and how Fibonacci numbers relate to possible stock market rally points.  This matters significantly because trading computers make decisions often based on these numbers.



Currently SPY, the S&P 500 ETF, is at $199, and this is more than a 38% retracement between the recent S&P high compared to the October 2014 low.  Chris thinks the S&P could drop to the 50% mark which would be 1976.  Since the stock market cannot stop on a dime, it is possible we could have a rally from here since we are near the 38.2 % retracement level.  If the market does keep falling, we are also near the 50% level of the Fibonacci chart.  So, the odds are we will get a rebound very soon.



As the author mentioned, the economy is doing okay, and this means we are not headed for a bear market.  We will simply get corrections.  This means that we can reliably buy at various Fibonacci retracement points because the market is not falling apart, and big institutions will most likely be buying stocks based on the Fibonacci numbers.  So, we should be willing to buy stocks under the current conditions.  However, profits should be taken when the Dow gets near 18,000 again because the economy is only mediocre, and the Dow will have trouble blasting past 18,000.