RETRACEMENT TARGETS FOR SPY(zt Murphy)

RETRACEMENT TARGETS FOR SPY... If the 5-day EMA for SPY breaks above 120, it will be time to start thinking about some upside targets. However, keep in mind that the ETF has yet to actually reverse the current downswing. Tuesday's recovery was impressive, but strong follow through is what separates knee-jerk reactions from sustainable rallies. Even with a break above 120, I would still consider the long-term trend for SPY down. Chart 9 shows the 5-day EMA for SPY over the last 16 months. This chart captures the bear market thus far (October to September). The blue Fibonacci Retracements Tool extends the length of the first decline. Notice that the counter-trend advance retraced 50% of this decline and met resistance near broken support (yellow area). The red Fibonacci Retracements Tool extends the length of the second decline (thus far). A 50% retracement of this decline AND a move back to broken support would extend to around 128–129 (orange area). If the second counter-trend advance is anything like the first, then the target around 128–129 seems logical. Unfortunately, the market can be anything but logical! Think about this one for a moment. We have 34 days until the presidential election. If the last 34 days are anything like the next 34, we are in for one heck of a ride.