Current Fibonacci Levels of the Markets

03/11/2010 12:01 am EST

Focus: STRATEGIES

Corey Rosenbloom

Founder and President, Afraid to Trade

A few MoneyShow.com readers have been asking for updates on the current Fibonacci retracement levels on the major US equity indexes, and I thought it would be a valuable resource to organize the four main US equity indexes with their respective Fibonacci retracement levels to watch, as drawn from each index's top in late 2007 to their bottoms in early 2009.

Traders and investors monitor Fibonacci retracement levels for the following reasons:

  • To take profits once a level is reached,
  • To consider shorting if price finds resistance at a level,
  • To signal the “all clear” to continue trading long once a resistance level is broken to the upside

This post can serve as your reference to these unchanging and important levels traders of all methods are monitoring— and you should too.

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The Fibonacci retracement levels on the Dow Jones are as follows:
61.8%:  11,246
50.0%:  10,334
38.2%:  9,422

S&P 500

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The Fibonacci retracement levels on the S&P are as follows:
61.8%:  1,228
50.0%:  1,121
38.2%:  1,014

NEXT: Key Fibonacci Levels for NASDAQ and Russell 2000

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NASDAQ:

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The Fibonacci retracement levels on the Nasdaq are as follows:
61.8%:  2,252
50.0%:  2,063
38.2%:  1,875

Russell 2000:

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The Fibonacci retracement levels on the Russell 2000 are as follows:
61.8%:  660
50.0%:  599
38.2%:  539

Keep in mind that many traders have these levels memorized for their respective index, and that's generally a good idea.

It's not that Fibonacci is magic, but that traders monitor what happens at these levels, whether price retraces back to the downside, or pauses an upward advance (both as a spot to take profits or potentially enter a countertrend position and as a spot to re-enter or add to existing long (buy) positions once a major retracement level has been broken). 

The thought process is that "Now that price has cleared that hurdle, it is safe to expect price to continue rallying to the next level."

As a quick note, the Nasdaq and Russell 2000 indexes have recently cleared the important 61.8% retracement hurdle, which is a very bullish sign.

The S&P 500 and Dow Jones index recently cleared their 50% retracement level, which suggests that price could continue the rally to challenge their respective 61.8% levels as shown above.

Use these grids as a reference for levels to watch, both for targets to play for, and for "all clear" signals once price officially rises above a key level.

By Corey Rosenbloom of AfraidToTrade.com

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