Anatomy of a Sell-Off and SP-500 Targets

The first chart is an anatomy of the failed Breakout and subsequent sell off in the SP-500. The market found support on a confluence of Fibonacci Fan Lines and positive Breadth divergences.


The SP-500 has now retraced now to the .618 Level of the sell-off. This area was also smack in the middle of the month long consolidation and base the market broke out of . Technically, since this base (support) has been broken, retracements up into it tend to act as resistance, and with the Fib confluence was a solid technical reason for todays down draft. Did I mention this was also the 50 Day SMA.

This price action also puts a possible head and shoulders pattern in place. However the neck line is still 50 points away and the Fib fan Lines that were previous support are looming well before the neckline. (Would need to break it to complete the pattern)

The second chart shows the basis for my first target on the short position I am presently holding. The Target is set at 1090.83 (3 points in front of the .236 Fibonacci extension drawn from the 1150.45 High down to the 1144.50 Low and hung from the 1112.42 High) If my target is hit I will switch from a hard stop to a trailing stop on the remainder of the position. I am cognizant and concerned that this area spent a month with out any significant follow thru in either direction. History could well repeat and I will take profits as they present themselves.


Good Trading
KW