You are probably pretty bullish right now with all this positive sessions from previous days. It is true – change in sentiment is clear, but you still have to watch for possible resistance levels. I have mentioned one important resistance in my previous post here. But there are another levels you should be watching. Lets take today action from S&P500. It was going all well until price reached 1307 points (I am taking about S&P futures charts, on stock charts there is a few points difference, but all Fibonacci works the same).
From 1307 points level suddenly there was a strong sellout. Check this daily chart of S&P500:
Why, you ask?
I you are using Fibonacci extension tool, you know well why. You just have to check weekly and daily chart and draw extension for swing from 2011 lows to high in October 2011. as you can see, S&P500 is right now exactly at 118% extension level.
Is it the end of the world and return to falls? No (at least I think so).
It is natural that after such a big rise traders are taking profits from their trades. And what better place is to do that than 118% extension?
There is a chance that this is only a correction and price is going to move up. We will se. For now I just wanted to show you why the price has stopped at this level.