Jump to content



Photo

VST SPX projected high


  • Please log in to reply
No replies to this topic

#1 Net

Net

    Member

  • Traders-Talk User
  • 527 posts

Posted 28 December 2006 - 01:46 PM

It's been quite a while since I've posted expansion targets. This is also represents my first post with a look at the SPX using this analysis. On the SPX, based on intraday numbers last two trading days, if the SPX finds a bottom between 1420 and 1422 today, the upside expansion target is between 1431 and 1432. There's confluence of resistance in this area, (including flatline with the previous high) suggesting there will be either a retest of the high, or a marginal new high. For those not familiar with this technique: Expansion targets are calculated from fibonacci ratios of the previous measured moves (i.e., a fibonacci ratio of the previous wave length is added to the subsequent higher low for upside targets). Confluence adds to resistance (or support). Confluence of support or resistance is when the calculated targets from different time frames and different fib ratios are closely aligned. Like wave analysis, it's subjective as to what time frame(s) are used what waves are measured, and then what subsequent lows are used to project from. That said, there is confluence of resistance in the 1431 area (matching flat line resistance with the previous high). VST there is another confluence area of resistance at about 1428.25. Some personal observations about expansion and retracement targets relative to market action: With confluence of resistance or support, the market will very often react at the levels. For the current move, the upside targets have additional confluence of resistance when combined with the flatline resistance at the previous high at about 1431.8. (I've also often seen targets align with sloping trend lines). When upside targets are easily achieved and then exceeded slightly, it's very bullish, the same as when downside retracement targets are never achieved by a small margin. In bearish moves, the opposite is true. The opposite scenario occurs (i.e., showing weakness) when the expansion targets are missed (and retracement levels slightly exceeded), showing weakness in the impulsive move (main market direction) and the increased potential for a reversal. A recent upside target (for the move that ended at the close yesterday) was 1428.25. The actual high of the previous move to 1427.72 missed by half a point. This resistance area is still in play. For current fib retracement levels, the 38.2% support level is at 1421 and 50% support level is at about 1419. The bullish case suggests we would not reach these levels, i.e., the correction bottoms at 1420 to 1422 (a point above either the 50% and 38.2% levels). I've just started looking at these targets on the SPX, so I will be watching with interest as to whether these targets are reached or breached, as well at the reaction at these price levels (assuming the market rallies for a retest of the highs). In any event, IMHO, the VST low should be in now or make a marginal new low today and bounce in order for the restest of the highs to remain likely. I have short entry on the ES at 1442.25 based on this analysis with a 4 point stop. Otherwize, failing to achieve the 1428.25 target could have already marked the end of the rally short term (i.e., top in prior to 2007), well ahead of what it appears many are calling, i.e., for a a top sometime in mid January.