Fibonacci Calculations

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A lot of information exists at Fibonacci-Stocks.com, but I want to talk about Fibonacci calculations today.  Trends occur frequently in the stock market where the S&P 500 or another index might go in an upward direction without any significant drawback for a long period of time.  When a peak occurs which is followed by large correction, you can then analyze the pattern that just occurred.



For example, the S&P 500 fell to 666 in 2009 at the close of the last bear market.  From a low of 666, the S&P 500 went to a value of 1219 in 2010 almost uninterrupted.  A downtrend occurred from 1219 which ended the previous uptrend.  So, 100% of the uptrend happened between 666 and 1219.  The stock market in 2010 continued the downtrend until it reached 1010, and this happened to be a 38.2% retracement of the previous uptrend.  Since the market reversed to another uptrend at 1010, the retracement cycle was completed at that point.  The lesson that we can learn from this is that a 38% retracement is a buying opportunity if we are not in a bear market.  Interest was also low in 2010, and stocks will grow when interest is low.