SPY Enters Confluence Weekly Gap and Fibonacci Area
Courtesy of Corey at Afraid to Trade
Going back to TA 101, let’s take a quick look at the SPY Weekly Chart and note a prior “gap zone” along with the 50% Fibonacci Retracement – both of which rest slightly above price currently.
Let’s first start with the gap. During the “heart” of the financial crisis (and the downfall in the stock market), the weekly chart formed a rare ‘weekend’ gap which was frozen on the price chart as seen when October 2008 began.
Unfilled gaps have the tendency to act as “magnets” as price retraces back towards them, but they also can act as “resistance” as well. Price is coming up into the highlighted gap zone which is also just beneath the 50% “bear market” Fibonacci retracement which currently rests at $112.31.
The low of the October 3, 2009 bar is $109.68 and the high of the October 10 bar is $107.15. That places us just inside the gap zone with this Friday’s close.
Watch these price levels as we re-test them again.
Remember that the 50% retracement of the 1,576 high to the 667 low in the S&P 500 is 1,121 (for comparison).
Volume has also been diverging for almost the whole time price itself has been rising off the March lows – serving as a type of non-confirmation.
I would surmise that these confluence levels at the $110 level reflect the “Line in the Sand” between continued bullish and reversal bearish expectations.
It would be increasingly difficult to argue for a bearish case in the event price breaks cleanly, and remains above the $112 area in the SPY and the 1,120 area in the S&P 500.
Corey Rosenbloom, CMT
Afraid to Trade.com
