Many might use a different word to describe last week other than wild, yet this is a PG rated blog! Most likely the action over the past two weeks was an outcome of the neckline break in the Wilshire 5000 index (see post here) From a technical analysis/macro sense, the break of the neckline is a negative event for sure!
From a shorter-term perspective some important “Wicks at Fibonacci support/resistance levels” took place during the wild week! (see below)
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Fibonacci support in stocks took place a year ago at (1) and last week Fibonacci support looks to have come into play again at (2). At the same time Fibonacci resistance looks to have come into play, again in the bond market at (4). Both of these situations took place as large wicks were developing.
The “Power of the Pattern” suggested one year ago to Long stocks (see post here) and short bonds (see post here)” due to key Fibonacci support/resistance levels and extremes in sentiment. Fear levels were very high a year ago, with very few investors bullish and fear levels are very high again (see post here)
From a macro perspective I respect that the neckline has been broken…. yet from a short-term perspective, a rally in stocks and a decline in bonds could start from these important Fibonacci levels! If a stock rally does take place, the test of overhead resistance will be a place to harvest long stock positions.