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Fibonacci Retracement Levels
By: Almanac Trader | May 19, 2022

S&P 500 rallied 114% from the March 2020 pandemic low to the January 4, 2022, all-time-high. Fibonacci retracement sequence shows S&P tracing out the 38.2% retracement at 3800. The 50% retracement around 3500 sits near the top of that fall-2020 swing bottom and the 61.8% retracement level around 3200 is near the pre-pandemic highs.



Where it bottoms is anyone’s guess. We have relayed some of ours. Bottoms are not necessarily a technical level on chart or fundamental valuation, they are a perception, an exhaustion of selling. There are still too many bottom callers out there. When we start hearing, “should I sell, should I sell,” that’s more likely the bottom. Perhaps it’s when somebody big blows up or goes bankrupt. When the market harpoons a big whale. Maybe a crypto guy, a hedge fund like Long Term Capital Management or big public company like Enron or investment bank like Lehman.

Remember we are currently in the midst of the weakest two quarters of the 4-Year Cycle, Q2-Q3 of the Midterm Year, but this sets up the “Sweet Spot,” which runs from Q4 of the Midterm Year through Q2 of the Pre-Election Year, averaging gains of 19.3% for DJIA and 20.0% for S&P 500 since 1949, and 29.3% for NASDAQ since 1971.

Whatever it is that creates or signals the bottom we still expect a classic midterm bottom over the next several months. It could be here in May like 1970 or it could come in June like 1962 or October like 1974 and so many others or somewhere in between. Either way, patience and fortitude are in order. Stick to the system. Our April 7 MACD Sell Signal was fortuitous, and our stops took care of most of the rest. For now, cash is still king as we wait for that fatter pitch.

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