SPY Fibonacci Magic

You just have to love when the Fibonacci ratios trace out a "grid" for the market:

Very often a runaway gap will mark the 50% line for a strong drop or crash (for extra credit take a look at the gap in 1987. Imagine how much money you could have made with that information.) So I used my fibonacci projection technique and came up with this amazing picture. Today's gap is enormous. It's the third very large gap we've had in this correction. The other two were filled with retracements. Maybe this one will be too, in which case this analysis becomes less potent. For the time being I'll assume this gap will remain unfilled.

If we run a hypothetical Fibonacci retracement we can line up the .618 and .5 lines at the top and bottom of the gap almost to the penny! Further beauty can be found when one notices that the .382 of this projection lines up with the bottom of the crash (less the spike. Close examination will show that the day before and day after the spike showed support at that exact level). Finally that same level corresponds with the 2010 runaway gap (more extra credit. Project a Fibonacci from the 07/01/10 bottom with .50 landing at that runaway gap. Ta Da! You could have called that wave to the penny. This magic trick also works on the 12/01/10 gap to call the top of the market!)

Where does our projection land? 104.85. This is about a buck lower than the bottom of the 106 gap that we've long expected to get filled. It is a few pennies lower than the support bottom prior to that gap (less spikes).

This trick also worked nicely in the 1937 market which I've pointed out as an analog for today's market:

The blue arrow denotes the 50% gap in the final leg of that market crash which I believe is analogous to today's market action. It was not quite as startling a gap but then that crash was working on a much longer time scale and much larger price scale than today's market (keep in mind that I believe that today's market has a clock that wants a directional reversal on the 1st of the month. So we're essentially in a hurry up offense.)

The black arrows denote all the places where these Fibonacci lines were respected both prior to and after the projected retracement was actually made. Four points of respect prior to the projection would have given tremendous confidence I believe to sticking a short. The projection falls a few pennies lower than the actual low so as always one should be exiting trades before the projected price!

These marks continued to be respected after the bottom was made. This may be a possible roadmap for our own market. It's interesting to note that these lines continued to be respected considerably into the future:

These lines continued to be respected right up until the bombing of Pearl Harbor. The bottom of the "V" is 04/29/42. (If you look closely (click on chart) you'll see a gap that lies right on the 50% mark from the day before Pearl Harbor to the bottom of the "V"!). The 1938-1942 market was a hell of a market. That's a 45% climb from the 1938 bottom to the top just 6 months later. Then it's a 45% drop from the top down to the bottom of the "V" in 1942. That cliff dive in 1940 was a 25% drop in 9 days. Only 1929 and 1987 were steeper.