Dow30 - Correction never exceeded 38.2% Fibo

FX:US30   US Government Bonds 30 YR
With US stocks flirting with record highs and charts showing no negative divergence, there is very little to comment on the direction of the stock markets.

In today's post we take note of the fact that since bottoming out in 2009, the corrective rallied have not exceeded the 38.2% Fibo retracement. Let us look at the details -

  • 2009 low - 2010 high (blue) - correction ended near 38.2% Fibo
  • 2009 low - 2011 high (black) - correction ended at 38.2% Fibo
  • 2011 low - 2015 high (pink) - correction ended at 38.2% Fibo
  • 2009 low - 2015 high (green) - correction ended around 23.6% Fibo

In each of these cases, prices bottomed out at 38.2% Fibo, except in the last case where prices briefly dipped below 23.6% Fibo and quickly recovered.

Also note in the first three cases, prices rebounded from 38.2% Fibo and went on to breach the top in the first attempt itself. Only this time (last case) prices have witnessed rebounded twice from 23.6% Fibo, but failed to take out the top. This may be because the correction ended at 23.6% Fibo.

Let us see if the index manages to take out 2015 high. Traders should note that a fresh corrective rally could target 23.6% Fibo or 38.2% Fibo. Scope for rebound exists as long as 38.2% Fibo isn't breached on monthly closing basis.

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