\u201cThis is how big bear-market rallies have been in the past nine decades\u201d<\/a> \u2014 showed how unique the rally from the March 2020 low was, compared with other \u201cworst of the worst\u201d bear market rallies (1929, 1987, 2008). It also noted that a move above the following resistance levels (38.2% Fibonacci retracement) would unlock even higher targets:<\/p>\n\u2022\u2009 S&P 500 SPX: 2,640<\/p>\n
\u2022\u2009Dow Jones Industrial Average: 22,600<\/p>\n
\u2022\u2009Nasaq Composite Index\u2019s Nasdaq<\/p>\n
On April 6, the S&P 500 moved above resistance at 2,640 (38.2% Fibonacci retracement level) and the other indexes moved above their respective resistance levels.<\/p>\n
What are Fibonacci retracement levels and why do they matter?<\/p>\n
The most common Fibonacci retracement levels are 38.2%, 50% and 61.8%. Those levels tend to provide resistance for bear market rallies. For example, the bear market rallies during the crash phases of 1929, 1987, 2008 failed to make it above the 38.2% Fibonacci level.<\/p>\n
So, the move above the 38.2% Fibonacci resistance level (2,640 for the S&P 500) was important. That\u2019s why I published the following analysis in the April 7 Profit Radar Report:<\/p>\n
\u201cIt took the S&P 500 just 11 days to retrace more than a Fibonacci 38.2% of the previous losses. This is a very quick retracement. Since 1970, there were only five other times where the S&P 500 retraced more than 34% that quickly. The chart below shows the forward performance of those five times, along with the average. As you can see, returns were rock-solid.\u201d<\/p>\n
![\"Dow](\"\/blog\/wp-content\/uploads\/2020\/04\/MW-IE674_simon1_20200417101601_NS.png\")
<\/p>\n
Below is an updated version of the same chart. The red graph shows that the S&P 500 rally since the March 23 low is unlike anything we\u2019ve seen before (just like the preceding decline).<\/p>\n
![\"Dow](\"https:\/\/www.maxlee.info\/blog\/wp-content\/uploads\/2020\/04\/MW-IE675_simon2_20200417101602_NS.png\")
<\/p>\n
Too far, too fast?<\/strong><\/p>\nDoes this mean that stocks have rallied too far, too fast? As the above charts show, a strong rebound has been long-term bullish and \u201ctoo far, too fast\u201d could also be interpreted as the escape velocity needed to carve out a major low.<\/p>\n
In terms of historic precedents, the 2020 crash has many similarities to the one of 1987 (see chart below).<\/p>\n
![\"S](\"\/blog\/wp-content\/uploads\/2020\/04\/MW-IE676_simon3_20200417101603_NS.png\")
<\/p>\n
In 1987, the S&P 500 tested the initial panic low before moving higher. What are the odds of the S&P 500 re-testing its 2020 panic low (2,191)?<\/p>\n
I don\u2019t know the exact odds, but the simplest way to protect against a possible drop toward 2,191 is to watch support at 2,730-2,700.<\/p>\n
It will take a drop below that support to increase the odds of further weakness. As with any early warning system, there\u2019s only danger after the alarm sounds.<\/p>\n
Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report.<\/em><\/p>\nSource: www.marketwatch.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Watch the S&P 500\u2019s support at 2,730-2,700 points to see if the benchmark index will test its March low<\/p>\n","protected":false},"author":1,"featured_media":2734,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-2733","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/posts\/2733","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/comments?post=2733"}],"version-history":[{"count":0,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/posts\/2733\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/media\/2734"}],"wp:attachment":[{"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/media?parent=2733"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/categories?post=2733"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.maxlee.info\/blog\/wp-json\/wp\/v2\/tags?post=2733"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"The](\"\/blog\/wp-content\/uploads\/2020\/04\/MW-HU638_Danger_20191104175842_ZG-1200x675.jpg\")
<\/p>\n