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Fibonacci Retracement Levels

Thanks JC @allstarcharts for the cool Fibonacci T-Shirt!

S&P 500 rallied 114% from the March 2020 pandemic low to
the January 4, 2022, all-time-high. Fibonacci retracement sequence shows
S&P tracing out the 38.2% retracement at 3800. The 50% retracement around
3500 sits near the top of that fall-2020 swing bottom and the 61.8% retracement
level around 3200 is near the pre-pandemic highs.

Where it bottoms is anyone’s guess. We
have relayed some of ours.
Bottoms are not necessarily a technical level on
chart or fundamental valuation, they are a perception, an exhaustion of
selling. There are still too many bottom callers out there. When we start
hearing, “should I sell, should I sell,” that’s more likely the bottom. Perhaps
it’s when somebody big blows up or goes bankrupt. When the market harpoons a
big whale. Maybe a crypto guy, a hedge fund like Long Term Capital Management
or big public company like Enron or investment bank like Lehman.

Remember we are currently in the midst of the weakest two
quarters of the 4-Year Cycle, Q2-Q3 of the Midterm Year, but this sets up the “Sweet
Spot,”
which runs from Q4 of the Midterm Year through Q2 of the
Pre-Election Year, averaging gains of 19.3% for DJIA and 20.0% for S&P 500
since 1949, and 29.3% for NASDAQ since 1971.

Whatever it is that creates or signals the bottom we still
expect a classic midterm bottom over the next several months. It could be here
in May
like 1970
or it could come in June like 1962 or October like 1974 and so
many others or somewhere in between. Either way, patience and fortitude are in
order. Stick to the system. Our April
7 MACD Sell Signal
was fortuitous, and our stops took care of most of the
rest. For now, cash is still king as we wait for that fatter pitch.

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