The U.S. indices had a sharp drop on Monday that took the Dow just slightly below the 61.8% Fibonacci retracement level of the rally from the Sep 24 low to the Oct 12 high. The Dow got a 300 point intraday bounce late in Monday’s session, but failed to continue the rally on Tuesday.
The S&P and NDX have not reached 61.8% Fib. yet, which makes me think we could have one more woosh down to make that happen.
If 61.8% Fib. were to clearly fail on all three indices, I would have to say that this drop is bigger than what would be expected if my longer-term bullish view remains correct. But in an environment of high market volatility and panic sentiment in the media like we have now, I tend to think that it is better to look at the big picture and not read too much into every market swing.
Nevertheless, the September lows are where I draw the line. A drop below there on either the Dow or S&P would suggest a return to the bear market from 2018.
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