Just a quickie this weekend, but it's a biggie. Major highs to major lows, and vice versa, do not move in straight lines. There are zigs and zags. That's where Fibonacci retracement levels come in as there is a recurring Fib relationships in those zigs and zags. A price move in one direction is often followed by a counter-price move that ends at a Fibonacci percentage of that initial leg, i.e., 32.8%, 50%, 61.8%. It is a key reversal and tradable under the highly probably assumption that the counter-trend move is over and price has returned to its initial, dominant trend. On Monday of last week the Dow, S&P 500 and Nasdaq completed an initial leg down from their respective all time highs. Each index had generated a system Sell Signal during that initial decline. They have now turned up in counter-trend moves to respective Fibonacci levels. The last time this happened was in Feb 2020; the "Covid Crash." Perfect Example: Feb 2020 QQQ - Current Four Elements Needed For Confirmation of New Leg Down: (1) Major High - in these cases all time highs. (2) Followed by a system sell signal (red down arrows). (3) Followed by a counter-trend back up reaching a Fib level (38%-50%-62%). (4) Followed by a price reversal back down. There is only one element missing for confirmation of an imminent new leg down: Price reversal back down. If these major market indexes reverse lower on Monday, or Tuesday, or anytime before exceeding the 79% retracement levels, new lows for the move are an absolute minimum expectation, with much lower prices possible, if not probable. To reiterate: A move down now, without making much more progress in these counter-trend retracements, is a trigger for new short positions via index puts or VXX calls. DJIA S&P 500
