As the chart below shows, the S&P 500 has arrived at a cluster of Fibonacci projections with potential to be the end of an ABC correction of the whole Global Financial Crisis decline
This is a potential example of a Gartley sell set up. This looks for corrections in a 3 swing or ABC structure. It then looks for clusters of Fibonacci projections . These provide a tradeable probability that the whole correction will be over if price stops at or close to the cluster.
I provided a pretty full explanation of how the set up works in a post on a EUR:CAD set up back on 19th October last year. You can easily access this in the blog archives if you’d like more details.
As this is a big picture set up, I’ve shown it in the weekly chart to provide perspective. The Fib cluster is at around the 1350 level and consists of 61.8% of the X/A move projected from B and and 161.8% of the A/B pullback projected from B.
There is no set up unless price actually makes a confirmed trend peak close to the FIB cluster
It’s not my intention to suggest a bearish outlook with this post. Personally, I try to avoid having pre conceived bullish or bearish mindsets with technical trading.
I believe it’s best just to look at each chart objectively and treat each set up that comes along on it’s merits, going with the flow of the market and applying a consistent strategy in each case.
The Gartley set up represents an opportunity to enter trades at a place that makes good risk reward sense. A level where you can have a close stop if the set up fails and the up trend resumes but where the reward is potentially large if this is the end of the whole rally since March 09
So it’s an interesting situation but there’s a long way to go before the outlook becomes “bearish” and justifies a long term negative point of view. We may or may not get a set up. If we do the set up may fail and stop out for a loss. If we do get a significant peak at these levels, to look truely bearish we would need to overlap below support shown by the dashed line under the peak a A . This level is right down at about 1170
If there are any readers who see this 1350 level as potentially significant, I’d really value a bit of feedback/dicsussion of your interpretation via a comment