Monday, 6 April 2009

S&P 500 faces big challenge at 875

I believe that we are headed for a test on the S&P 500 Cash index (SPX) of the 875 area which I have been proposing as a key level over the last several weeks.

This level represents the 62% retracement level within the fibonacci grid that I have discussed with 1000 on the top and 666 on the bottom. It is a level at which one should expect some choppy behavior and a contest to emerge between those embracing "the generational bottom is in place hypothesis", who have been getting things their own way a lot recently, and those who are still convinced that we are witnessing a bear market rally, which admittedly has been quite dynamic as such rallies can be, but that at the 62% retracement level we would be at a technical chart level where the likelihood of another abrupt sell-off is increasing.

Even if 666 was a major turning point - and I am still not entirely convinced that it was - I do believe that the recovery from this economic crisis is going to be anemic. As such the risks are that the more progress that the bulls make without a real setback and challenge being mounted by short sellers the more precipitous will be the next correction when it comes.

1 comment:

  1. Question is have we already topped out?