USING FIBONACCI RETRACEMENT LINES FOR POTENTIAL DOWNSIDE TARGETS

INFLATION REMAINS THE BIGGEST THREAT TO MARKETS... It was reported this morning that April's Producer Price Index for the past year came in at 11%.   That followed yesterday's report that the Consumer Price Index was 8.3%.   Both reports confirm that inflation remains dangerously high with no sign of easing.   That spells continuing trouble for bonds and stocks which are negatively effected by a more hawkish Fed which has just started raising interest rates.   That has pushed major stock indexes into a major price decline which is likely to get worse.   The Nasdaq market is already in a bear market with a loss of -30%.   The Dow and S&P 500 are heading in that direction.   The three weekly charts shown below use Fibonacci retracement lines to determine some potential downside targets.

POTENTIAL DOWNSIDE TARGETS... The weekly bars in Chart 1 apply Fibonacci retracement lines to the Dow Jones Industrials.  Those lines measure the distance from the 2020 low to the peak formed near the start of this year.  The Dow has fallen the least of the major stock indexes but is clearly in a downtrend.  It's next potential downside target is the 38% retracement line near 30000.

The weekly bars in Chart 2 show the S&P 500 nearing a test of its 38% retracement line.   If that doesn't hold, the next potential support would be at its 50% retracement line.

The retracement lines in Chart 3 are measured from the peak formed by the  Invesco QQQ Trust during the fourth quarter of 2021.   The chart shows the Nasdaq 100 already testing its 50% retracement line.   If that doesn't hold, a further drop to its 62% line would be possible.  One encouraging sign on all three charts is that their 14 week RSI lines in the upper boxes are nearing oversold territory below 30.  That might help stabilize prices and lead to a rebound attempt.   The overall look of the charts, however, show no convincing signs of a bottom.