Fibonacci Retracement Levels

In a prior post, Bear Market Rally, I stated that I believe the market will rally to somewhere between 40 and 60 percent of the previous move to the downside. This corresponds to between 129 and 134.5. In fact, the current rally may have peaked on 8/11 at 131.51 when it kissed the 50% retracement level. The chart below illustrates my thinking. Using an indicator called Fibonacci Retracements lines are drawn to indicate these levels. Most bear market rallies will come to somewhere in this range and make a reversal in trend and move in the opposite direction to continue the major trend which is down. Should this rally go above the 61.8% retracement level it has a better chance of continuing in rally mode and taking out the previous high of 144 (1440 on S&P500). Though I am looking for a retest of the July low it may not happen and we could have a continued rally here. We will just have to wait and see. Click on chart to enlarge.