How High Can the S&P 500 Bounce?

I thought I’d share what I’m watching in the S&P 500.  For the purposes of today’s chart, we’ll use the S&P 500 SPDRs (SPY: 109.47 +1.01 +0.93%) …

You can see that the S&P 500 declined for 9 out of 10 days before finally bouncing today. That’s pretty darned bearish. On the bottom of the chart is a momentum oscillator called “RSI.”  It is oversold when it gets to a reading of 30 or lower.  You can see that the S&P 500 touched the “30” line before bouncing. 

I’ve also put two dotted lines on the chart at 107.2 and 111.2.  These represent 50% Fibonacci retracements of the declines from June 21 and April 26th respectively.  These are the two targets I would use depending on if you are more or less bullish.

To be sure, the SPY doesn’t have to touch these retracement lines.  It’s just likely that it will at least bounce to 107.2.  And if you’re more bullish, 111.20 can come into play.

Finally, we could see a fundamental change that could send the market higher than these levels.  I’m not sure what that development would be, but any good trader would have to allow that something could happen.

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