It’s not unusual for the market to explore different Fib levels within the cycle in which it’s trading. In this case we are in a cycle starting at 2064 and concluding at 2011.
It’s very rare the bulls will permit any pullback deeper than 78.6% which we saw on the 25th when the market visited 2077, several points above the 78.6% level show in the Fib shading on the left. Note how much time it has been in the middle between retracement levels of 38.2% and 61.8%.
I did not hear or read the Fed release but it’s abundantly clear it was market friendly which I more or less anticipated in suggesting a move up after a test of the 78.6% level. Compared to other levels, today’s level of 2099/2100 is not consequential and I fully expect tests of higher levels in the coming days.
What is of interest, though, is that if you use the three point Fib extension tool and apply it to the recent high, the shallow pullback and the lower high, you can generate ideas as to where the market might be heading. I did this and the outcome is called out and is only ½ point lower than today’s high.
Interesting to say the least.
The real tests, though, lie before us and of particular interest is ES_F 2097.75 or about $SPX 2103.25 which will be a challenge to break through to say the least.
The bulls seem to be in full control but to retain control they are need to make a higher high which they may or may not be able to do. Tomorrow the BOJ is slated to meet and there are expectations that the Bank of Japan might aggressively loosen policy with the implication being that the divergence trade would resurface along with a stronger dollar but with temporary juice.
Combined with worries, a stronger dollar will make newer highs all the more challenging. If we see one or more failed attempts to make a fresh high, I think the momentum will shift.