The major market indices are all very close to satisfying certain targets for completion of wave 2. The levels to watch are:
Dow: 78% retracement - 10774
S&P: 50% retracement - 1161
Both the Dow and the S&P came close enough to these levels to satisfy the fibonacci relationships in the past two weeks, and both have faded since then. Whether the current downturn is a trend change we will have to wait and see. Yelnick still expects a relatively bouyant market - albeit one losing momentum - into Mar/Apr.
These fibonacci levels arise from the Wave Principle at major turning points, due to the 'mathematics' of group behavior in the market. One possible explanation is here. It is interesting that all three major indexes are approaching different fibonacci levels in parallel.
Yelnick had been most closely following the 61.8% retracement level for the Dow, of around Dow10K, but the Dow has blown past that level. Dow10K is interesting to watch since the Dow had previously shown resistance to breaching a 00 level: after hitting 100, it took another 16 years to pass it by, and when it hit 1000 in 1966 it faded, came back in '68, faded, came back again in '73, dropped again, and eventually took fully 16 years to successfully blow past it. This time around Dow10K seems to be less of a psychological barrier. It was coincidental that the 61.8% level happened to be so close to the 00 level.
Once past 61.8%, the next fibonacci level is its square root, or 78.6%. Normally wave 2's stop at a 50% or 61.8% retrace; this higher retrace is unusual, and although technically a wave 2 can go all the way to 99% retrace without violating the Wave Principle, usually when it passes 78.6% it keeps going past 100%. Hence this level should be it, unless something else is going on with the count. Yelnick has noted, however, that the Dow has already retraced at 78% in the two prior wave 2's on its way down from the peak. No surprise if it does the same one more time.
The S&P may be the better index to watch due to its broader base of stocks. The S&P also has more weighting of technology stocks (which is why it fell much more than the Dow), and since tech stocks are once again driving the market, the S&P will better reflect a trend change if tech were to falter again. The 50% level may prove a barrier, or the S&P may continue rallying towards a more normal 'high end' retrace of 61.8%. The Nasdaq is currently at around a 23.6% retrace, another fib level. It would need a sharp rally to approach a more normal low-end retrace of 38%. That rally would also drive the S&P to 61.8%.
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