On Friday, the SPX had a follow through day after Thursday's late afternoon rebound off of the 38.2% Fibonacci support near 3860.
Price hammered out a double topping pattern when it closed below the "neckline" last week with weary investors watching for SPX to repair some of the technical damage that has been done to the chart and reclaim the neckline near 4180, being the first hurdle bulls need to overcome. Here's the visual:
Source: Bloomberg
38.2% Fibonacci Support: Should the SPX continue to close above the 38.2% Fibonacci support near 3860, that would increase the likelihood of a continuation of the bull market with the next price objective being a path towards reclaiming the 4200 level then on to new highs. However, should the SPX lose that widely watched Fibonacci support level (3860), that would increase the odds of a re-test of the next support near the confluence of Fibonacci support near the January lows around 3750 with the 50% Fibonacci support being close by near 3558.
Head and Shoulders Topping Pattern confirmed? Noteworthy, is that the Head and Shoulders pattern confirmed when the index closed below the neckline; price remaining below the neckline and ending up being near the 50% Fibonacci support level shown above.
Options Alerts: On Friday at the close when SPDR® S&P 500 (NYSE:SPY) was trading at $400.9, the 430 strike saw an order for $221.9k on calls expiring on 6-17 just after another order for $156.3k of the 405 strike expiring 5-16 when SPY was trading at 401,33. Likely options traders locking gains after the pump? It sure seems so.
Risk On?: With investors willingness to buy and hold stocks over the long weekend vs the typical Friday afternoon sell off we've been seeing, that in itself is a refreshing change of character welcomed by Wall Street as investors step into selective buying opportunities at widely watched Fibonacci support levels. The price action on Monday will enlighten us as to whether Fridays strength was just a short covering going into the weekend or something more. Will the rally from Friday turn out to be nothing more than a short covering and continue the slide next week or will Thursdays swing lows hold, stay tuned!
This unabridged version of this article was originally featured on DayTradersGroup.com