The Magical 76.4 Fibonacci Retracement Level

Germany has basically decided to save Greece and own all of Europe.  The market had a huge green gap and at the peak SPY was up as much as 2.88% with the Dow up over 300 points.  I began to worry as SPY gapped over the 118 resistance that I was counting on.  And through 2 pm the market was rallying with abandonment.   I was afraid to add to my short and only added as much as 200 SPXU and sold 1 TZA 38 put.

As soon as SPY retraced 76.4% (see 60 min chart below) between the September high and low, the rally began to wane.   It started to look like the green gap was going to be filled until when the intraday price retraced 76.4% (see 5 min chart below) which happened to be the 50 MA on the 60 minute chart as well.  This demonstrates that the Fibonacci levels are widely traded and have to be a part of one’s trading arsenals.

I’m now just over 40% short and getting a bit more nervous as the market bounces higher. I feel a bit better than before as my cost basis is better than the last time I was 40% short.  Nevertheless, it is still dampening that my portfolio is $3,000 lower today than yesterday.  Needless to say, it was another roller coaster day due to greed and fear.  As the day’s rally went relentless, I wished I had taken more profit last week and didn’t hasten to short more yesterday.   As the day’s sell-off increased intensity, I wished I had shorted more in the morning.   My humanly weaknesses basically guarantee that I would never be happy on any given day.

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