S&P500 update: Did Fibonacci leave the building?

First of all I would like to wish everybody a Happy New Year. As you may recall from my last post, see here, Intelligent Investing was closed until January 5 for the Holidays, and last week was the first full week of the year.

Since it is the new year it is great to start off on the right foot and share with you this weekend’s market digest, which normally is available to premium members only. In addition, it will show you how things have changed since my last post on December 24, see here, as well as how I
multifacetedly approach the markets for determining accurately and reliable the next higher or lower price targets and most likely path forward, which is also shown in the chart below.

Fig 1. S&P500 and most likely path forward shown

You can download this week’s premium member market digest here or simple copy/past the link below into your browser: https://investingintelligent.com/wp-content/uploads/2019/01/weekend-update-01122019.pdf

So what has changed since December 24?

  1. Fibonacci did NOT leave the building as the S&P500 bottomed almost at the 1.382x a extension, falling just 10p short, while the DJIA did hit its own 1.618x extension to the T.
  2. Back then I anticipated a low at around SPX2334 and a bounce to up to SPX2520. The S&P500 got to SPX2344 and when price moved over SPX2525 we knew it be knocking on the door of SPX2600+ soon as the final c-wave down simple became three waves instead of the much more usual five waves. There’s your healthy dose of “all we can work with are the probabilities of the possibilities. There are NO guarantees when it comes to the financial markets.”
  3. Fibonacci is still alive and well, and with major-a having bottomed we can now anticipate how high major-b will go and how it should ideally move forward. Since B-waves always consist of three waves –a, b, c– we can anticipate with good accuracy where wave-a of -B tops. Namely, if we add Fibonacci (percent) retrace levels of the prior major-a wave -as shown in Fig.1 – we get nice overlap of the smaller waves that comprise wave-a for almost all most indices at around the 50% level. For the S&P500 this would be at around SPX2625-2640.
  4. From there a decent decline for wave-b should materialize before wave-c takes hold. See Fig. 1.

At this point in time I do not want to look to far ahead into the future and try to forecast the next 10 moves into 2020 and beyond. That is an exercise in futility, because nobody knows. But, what I do want to point out is -and this may be a bit of semantics, albeit important- that you always read me making market forecasts and not predictions. This is because forecasts always involve time, whereas predictions do not. I can namely predict your mother wears pink underwear. There’s no time aspect involved in that. Either she wears it or not. But, if I say “Your mother will wear pink underwear tomorrow” than it becomes a forecast. Of course my prediction and/or forecast about your mother’s underwear can be wrong, who knows… 😉 , but since financial markets always move forward (either up or down) in time, all we do is forecast. With that I would like to wish everybody good healthy, prosperity, happiness, love, peace, and peace-of-mind for 2019 and beyond. My next free post will be in one or two weeks from now: stay tuned.

Arnout, Ph.D.

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Founder and President Intelligent Investing, LLC

Vice President and co-Founder NorthPost Partners, LP

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