We’re seeing a healthy bounce from the target extension at 1017.95. The red trendlines on the daily chart below show how this target was calculated:

Click on image to enlarge!

But we’ve also broken support calling the larger target at 996.82 into play. It’s not uncommon to see substantial rallies from interim targets derived from smaller clearly defined swings, only to see resistance hold for another push down to a more major target. The S&P often respects the 50 percent retracement level from the last outstanding high to low swing, which lands at 1071. Beyond that, there’s also a 61.8 percent retracement at 1085. But the most important resistance factors on the daily at this point are tightly together from 1101 to 1105. This area is key since it includes a 100 percent price projection of the most recent low to high, representing the rhythm of the decline, as well as the 78.6 percent retracement of the most recent high to low swing. That level would have to break in order to call any additional daily upside targets into play. A break of that zone would target 1163; calling for a significant additional rally and breaking the overall rhythm of the downtrend.

While we can’t say for sure that we’ll even see the 1101 – 1105 area, we do know that any resistance levels encountered next week will be substantially amplified in strength by Fibonacci Timing factors. Measuring the amount of time it took before prior corrective rallies failed since the April high and projecting these time factors forward from the July 1st low shows that we’ll have a similar number of daily bars in this rally landing from Tuesday – Thursday of next week, July 13th to July 15th, with a focus on Wednesday July 14th. If we’re rallying into these timing ratios and the overall downside pattern is to continue, we should a shift back to short side!

For more from Mark including his “Chart of the Day”, visit MJBraun.net.