One thing I've learned about wave theory is from Moe. And that is, fibonacci is useless without understanding elliotwave. They work together. The reason why is because obviously you don't get a retracement without a completion of a wave. And because patterns repeat over and over, wave lengths and patterns also do.
The reason so many got beaten this last 6 months is because although now in hindsight you see those wave patterns clearly and they do conform pretty well to all wave rules, it's the magnatude of them that has thrown everyone off. No one thought the market would fall as far and as fast as it did and therefore many bought at higher fibo levels thinking those were the bounce points, yet the projections contintued.
The biggest reason for the large selloffs (again, now in hindsight) is because of a market mechanic thing that has nothing to do with fundamentals. When the fed let Lehman and Bear Stearns go, what they obviously didn't understand was that a large part of their bizs' was as market makers and specialists. What a market maker does is 'make a market' in a stock. In order to do that, they have to have stock to sell to buyers. Therefore, they take 'inventory' of a ton of stock in order to make a market. Well, if they go bust, they then have to dump all that stock. Hence, you get a selloff of massive porportions. That then leads to the false impression of a crash and then that leads to everyone piling on on the selling. Combine that with no uptick rule for shorting and it just gets worse.
So, had they let LEH and BS remain in some capacity, then we probably wouldn't have seen the level of the selling we did and probably wouldn't be here today at these levels. Much of the S&P's earnings levels are directly due to the pshycology of investors out there. It just piles on. So PE ratio levels on the SPX are really bogus now because it's an anomoly. Normalized earnings are what's important to focus on and that's probably more around +$70 a share, not $50ish now.
That said, LOOK AT THAT RUSSELL OUTSIDE DAY KEY REVERSAL FOR THE WEEK! NICE! ANY pullbacks are buy opps now.
