Watch for 50% retracement in the S&P

[madmaxer]

Quote from jem:

this in my opinion is a great answer,,, a trader with a plan.

But is this trading what is happening or trading what you think will happen?

This is merely what I think will happen.
Here are my reasoning.

1- Right now traders mind set is this:

a:..... this is one of the strongest bull
market we have seen, So there will be a lot of people think they missed it and want to get in at the pull backs
b:..... the other group thinks that this sucker has gone up so much and needs a retracement.

the fight between these 2 groups will make the market going sideways

2-Technically, something I look at just, as an indicator and not decision maker, are the oversold and overbought indicators , for instance the weekly chart with RSI and MFI. Usually in a strong bull or bear market when you approach the OB & OS line, we go through some break or slowdown time.

Once again .. NO ONE and I stress the fact that No One can say what happens next. We just trade based on what we think might happen and our biggest job is to manage our trade professionally, systematically with discipline.

There is no issue with us calling tops or bottoms, no one knows , might be profitable trade might be a loss. The only fact is just because you think something we happen you should not be wiped out of the trader list... take the loss and thin about the next opportunity/// have a great weekend

 

[jack hershey]

Quote from jem:

what is the the difference between trading what is happening and what you think will happen?

its a pithy zen like comment, but what does it mean?

Pithy zen is an important and holistic math science.

The pithiest part is the calculation of this difference. The absolute value of this difference is both quantitative and qualitative. Further, it equates to, the absent from the brain, amount of skill and knowledge that has not, as yet, been added to the brain.

Once a person, in the Present, the only pithy zen place, reaches the asymptotic operating point of what he thinks IS what is happening, he reaches "knowing that he knows".

Pithy zen is not iffy zen. The pithiest pithy zen is Having in the Present WMCN down cold. The iffyiest pithy zen is not knowing WMCN. WMCN is not a future thing. Knowing WMCN is a thing in the Present. It is "knowing that you know" in the Present. IF you just think what will happen is trading what IS happening, you are dealing with making money, i. e., the market's offer.

What is neat about trading is that a person does not deal in opposites. Making money's alternative is taking profits. In trading only two things are done: making money and taking profits. If you are making money, WMCN is taking profits. If you are taking profits, WMCN is making money.

Elswhere there is a discussion of trendfollowing. Trendfollowing is not good enough as revealed, at long last, by pithy zen in pithy zen's limiting cases: making money or taking profits. Making money or taking profits are not opposites.

So as things get pithier and pithier a person recognizes that he is always in a trend and that trends overlap. When Pring was asked about this he answered convincingly twice with the same answer: "I don't understand your qwestion". He has an accent or a lithp.

If a person doesn't understand trading BO's of trends always includes giving up profits at before the end of trading a trend, he has not gotten to the pithy zen stage. Pithy requires a person to reverse at the beginning of the overlap instead of at the BO of the trend (which is at the end of the overlap). A pithy zen guy just does profit making and then profit taking and omits sitting and giving up profits until the BO of the old trend comes and new profits are lost by not being in the new trend beginning at the pithiest zen moment.

There is a book called "Trading in the Pithy Zen" which is an expert version of "Trading in the Zone".

The moral of the story: jem is a pither. Tanks, as Pring would say.

 

[piezoe]

Quote from TheMan:

shit

that's two people that think it is going to happen

im in!!!!!!!!!!!!


lol

Make it three. I also have been expecting resistance at the 1122 area. I doubt you'll see the SPX sail through 1122 without stopping to catch its breath. The probability is very high that there will be at least a stutter step there. And perhaps more. Just have to wait and see. It's extremely important for traders to know where these resistance levels lie. You can laugh all you want to, but when we get to 1122 (or there abouts) you will see that the market responds in some way other than going straight through without hesitation..

 

[piezoe]

Quote from tomahawk:

Furthermore, this fib sets up nicely with the trendline drawn from the high.

If we are talking about a 50% retracement of the move down than perhaps you have the FIB levels upside down. But the 50% level is the same place regardless.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2608300>

 

[TheMan]

Quote from piezoe:

Make it three. I also have been expecting resistance at the 1122 area. I doubt you'll see the SPX sail through 1122 without stopping to catch its breath. The probability is very high that there will be at least a stutter step there. And perhaps more. Just have to wait and see. It's extremely important for traders to know where these resistance levels lie. You can laugh all you want to, but when we get to 1122 (or there abouts) you will see that the market responds in some way other than going straight through without hesitation..

so you are telling me that the market will stop/hesitate there

just because it is a 50% fib

and not due to something on the left side of the chart


it may be a coincidence if it lines up but it is not stopping due to the fib number

 

[TheMan]

Quote from piezoe:

Make it three. I also have been expecting resistance at the 1122 area. I doubt you'll see the SPX sail through 1122 without stopping to catch its breath. The probability is very high that there will be at least a stutter step there. And perhaps more. Just have to wait and see. It's extremely important for traders to know where these resistance levels lie. You can laugh all you want to, but when we get to 1122 (or there abouts) you will see that the market responds in some way other than going straight through without hesitation..

dbl post

 

[piezoe]

Quote from TheMan:

so you are telling me that the market will stop/hesitate there

just because it is a 50% fib

and not due to something on the left side of the chart


it may be a coincidence if it lines up but it is not stopping due to the fib number

That's precisely what I am saying. Likely this has to do with self-fulling prophecy and nothing to do with anything arcane associated with fibo ratios. But a lot of traders pay attention to these fibo levels and that's likely what makes them important to recognize.

Take a look at the 23% and 38 % levels in the chart I just posted. At 23the market seemed to roar through (if you look at the dailies, i have not, you're probably going to see some hesitation at 23), but then it return, the next week, right back to 23. Then 8 weeks later! it returns for one last visit before moving on.

Next, look at the 38. We get a stutter step, then it looks like the market will move on, but 4 weeks later it tries to return again to the 38 and gets very close, but this time it gets stopped by the very strong intersection of the weekly 20 ma and the trendline, which the market rebounds off of.

You can expect the 50% retracement level to be more important that either the 23 or the 38.

I hope I have helped you understand the importance of fib levels on weekly and monthly charts. They are not a joke. You don't need them to trade but it sure helps to be aware of where they are.

(Naturally there are other factors that are more important than Fib levels in determining support and resistance, but in my experience it is a mistake to ignore fib levels even though it might seem absurd that the market would pay any attention to them.)

Edit: Before I leave this topic, I wanted to add that In my opinion the 68% retracement near 1230 is stronger than the 50% because it corresponds with resistance from price action better. It could take a considerable length of time to kiss the 50% goodbye, but when we finally do, look to 1230 as the next stop. That is a prime candidate, in my view, for a platform from which to launch a serious correction of this latest bull move.

 

[piezoe]

Quote from madmaxer:

This is merely what I think will happen.
Here are my reasoning.

1- Right now traders mind set is this:

a:..... this is one of the strongest bull
market we have seen, So there will be a lot of people think they missed it and want to get in at the pull backs
b:..... the other group thinks that this sucker has gone up so much and needs a retracement.

the fight between these 2 groups will make the market going sideways

2-Technically, something I look at just, as an indicator and not decision maker, are the oversold and overbought indicators , for instance the weekly chart with RSI and MFI. Usually in a strong bull or bear market when you approach the OB & OS line, we go through some break or slowdown time.

Once again .. NO ONE and I stress the fact that No One can say what happens next. We just trade based on what we think might happen and our biggest job is to manage our trade professionally, systematically with discipline.

There is no issue with us calling tops or bottoms, no one knows , might be profitable trade might be a loss. The only fact is just because you think something we happen you should not be wiped out of the trader list... take the loss and thin about the next opportunity/// have a great weekend

Nice post!

 

[TheMan]

Quote from piezoe:

That's precisely what I am saying. Likely this has to do with self-fulling prophecy and nothing to do with anything arcane associated with fibo ratios. But a lot of traders pay attention to these fibo levels and that's likely what makes them important to recognize.

Take a look at the 23% and 38 % levels in the chart I just posted. At 23the market seemed to roar through (if you look at the dailies, i have not, you're probably going to see some hesitation at 23), but then it return, the next week, right back to 23. Then 8 weeks later! it returns for one last visit before moving on.

Next, look at the 38. We get a stutter step, then it looks like the market will move on, but 4 weeks later it tries to return again to the 38 and gets very close, but this time it gets stopped by the very strong intersection of the weekly 20 ma and the trendline, which the market rebounds off of.

You can expect the 50% retracement level to be more important that either the 23 or the 38.

I hope I have helped you understand the importance of fib levels on weekly and monthly charts. They are not a joke. You don't need them to trade but it sure helps to be aware of where they are.

(Naturally there are other factors that are more important than Fib levels in determining support and resistance, but in my experience it is a mistake to ignore fib levels even though it might seem absurd that the market would pay any attention to them.)

Edit: Before I leave this topic, I wanted to add that In my opinion the 68% retracement near 1230 is stronger than the 50% because it corresponds with resistance from price action better. It could take a considerable length of time to kiss the 50% goodbye, but when we finally do, look to 1230 as the next stop. That is a prime candidate, in my view, for a platform from which to launch a serious correction of this latest bull move.

that's precisely what i am saying

it doesn't have anything to do with the fibs

they just happen to line up with what matters "sometimes"

i am also leaving this thread

thanks for helping me understand the importance of fib levels

 

[Petsamo]

The way markets have been setting up these past few days, it'll probably just blast through Fibonacci's 50%. No hiccup.