AFTER RISING MORE THAN 20% DURING MARCH, MARKET INDEXES ARE ENTITLED TO A PULLBACK -- FIBONACCI RETRACEMENT LINES SHOW POTENTIAL SUPPORT LEVELS

RETRACEMENT SUPPORT LEVELS... The market has risen more than 20% since March 9 and is certainly entitled to a pullback. And it got one today. The good news is that the day's decline occurred on relatively light volume. While most groups fell, the biggest selling was seen in banks and autos (mainly General Motors). Commodity stocks also lost ground. A rising dollar pushed most commodities lower. Even gold ended in the red. Bond prices rose as stocks fell. All major indexes (except for the Nasdaq) fell back below their 50-day moving averages which suggests that stocks could retrace more of their March advance. The three charts below apply Fibonacci retacement lines to hourly charts of the S&P, the Dow, and the Nasdaq Composite to show some potential support levels. A minimum retracement is usually 38% of a prior bounce. Chart 1 shows that a 38% retracement in the S&P 500 falls right around the lows of the previous week near 766. A 50% retracement would put support at 750 and a 62% retracement at 730. Those are numbers worth keeping an eye on if the current pullback deepens. Charts 2 and 3 show similar support levels for the Dow and Nasdaq. I'm inclined to view the current setback as part of an intermediate basing process. That view is based largely on the fact that most weekly indicators are still positive. That suggests that any short-term pullback is still part of an intermediate upturn.

Chart 1

Chart 2

Chart 3