Since I discussed the YM in last week's column on this site, I thought that we'd take a look at the TF, ICE eMini Russell, in looking at current Fibonacci support and resistance. Here's a current daily chart for the June contract:

Click on image to enlarge!

Note the black trendlines identifying the swing into the low and the calculated upside target. Price hit this target on Tuesday and the most important factor is that the target came in below the .786 resistance ratio from the entire daily high to low swing. Without that 856 level broken, we don’t have a clear path to the targets representing a new daily swing high. So in effect, reaching the target from the swing into the low had provided all of the gains that prior resistance breaks had “promised” to us. But failure to break that key resistance level left this susceptible to price failure at that point. Targets from swings directly into lows or highs are often reversal points if the move into the target was corrective. It’s a good area to watch price action closely!

An additional reinforcing factor can be seen at the top of the chart. Counting the number of bars in prior rallies since the major daily high was established shows that the previous bounces ran from 2 to 4 bars. Tuesday, when the target was met, was day 4 of the bounce off the low. If the pattern was going to continue, we expected to see a drop yesterday.

Now we’ll have to see if price breaks below the key .786 support to indicate that we’ll see a new swing low on the daily chart.

If you’d like to watch a short video explaining how the chart was constructed, step by step, it’s available at this link.

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