Yesterday, we talked about the key level to watch on the S&P 500 — specifically the 38.2% Fibonacci retracement level (about 5339), and how it could serve as a pivot point for the market’s next move.
Well, as predicted, the market bounced back up to that level by the end of yesterday’s trading session, and we saw it waffle around there overnight. As I write this, the market is starting to peek just above it.
So, where do we go from here?
Eyeing the 50% Level
Yesterday, I talked about how I like to use Fibonacci retracement levels to help identify potential areas where the market might reverse its trend.
After hitting that 38.2% level, the next target is the 50% mark, which is the halfway point between the high the S&P hit back on July 16 and the low it hit just before this past Monday’s open.
If we start to creep towards it — and especially if we break out above it — it could indicate that the market is trying to regain some strength.
But remember, this is a slow week for news. We didn’t see a lot of economic data or major events, so the market is, and h as been, trading on its own merit this week.
That means it’s moving based on sentiment, technicals, and whatever news trickles in.
Next week, though, things might start to heat up again.
We’ve got some big reports and events on the horizon, including:
- Monday:
- World Agricultural Supply and Demand Estimates
- World Agricultural Supply and Demand Estimates
- Tuesday:
- Producer Price Index (PPI)
- Home Depot (HD) earnings
- Wednesday:
- Consumer Price Index (CPI)
- Crude Oil Inventories
- Cisco (CSCO) earnings
- Thursday:
- Retail Sales numbers
- Initial Jobless Claims
- Philadelphia Fed Manufacturing Index
- Earnings for Walmart (WMT), John Deere (DE), Applied Materials (AMAT) and Alibaba (BABA) earnings (and those are just the “big ones”)
As you can see, we’ll be going from a lazy news week to one where there are plenty of potentially market-moving pieces of news coming out.
So, what does all this mean for us as traders?
If the market continues to push through that 50% Fibonacci level, it could be a sign of strength.
But with all the data coming out next week, the market won’t be trading on its own merit anymore — any one of those reports could send the market flying in one direction or the other.
So staying up-to-the-minute and flexible will be key.
While the market’s movement this week (not counting Monday) may have been like watching paint dry, next week could give us more excitement.
Keep watching those key levels, and be ready for whatever the market throws our way.
Stay tuned!
— Geof Smith
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