Date: Tue, 18 Jun 2013 05:39:56 +0200
I'm always surprised at the symmetry apparent in human group behavior--unlike the randomness of individuals.One example that keeps repeating is the uncanny consistency of trend retracements in the stock market. Trends will commonly retrace about 50% of their original move; a particularly strong trend maybe only 38%. A strong corrective move will see a retracement of about 61%. These retracement levels of 38.2, 50, and 61.8% are commonly referred to as Fibonnacci retracement levels (Fibonnacci, or Leonardo De Pisa was a 13th century Italian mathematician, who introduced an integer sequence in his book Liber Abaci). While traders continually debate the efficacy of the Fib sequence in stock trading it is a useful tool. Based on my experience, the odds tip in favor of the FIB retracement levels on big picture trends. So, the original move from Jan 2009 around SPX 667 ended in May 2011 about 1370. A 50% retracement would mean our current down trend will carry to 1019. If the decline is particularly strong, we will go to around 936. With all three of the long-term EMAs heading down, the downtrend is intact.