Applying Fibonacci ratios to the time axis of a chart can alert us to when there may be pullback within a trend, or even the termination of a strong trend, particularly when the charts show that the current move is extended.

A close examination of the current S&P cash daily chart shows that these cycles are now in play:

Click on image to enlarge!

Price is currently holding the high made last Thursday, April 15th. That date was 100% of the time between the last 2 major swing highs, projected forward from the last pivot. If the cycle is going to repeat, that primes the pump for at least a pullback. You can see that time projection at the top of the chart.

Now we’re in the focus of additional time cycles. The amount of time between the November 2nd 2009 low to the January 19th, 2010 high projected from the pivot low on February 5th shows that today is the 100% timing projection of the duration of the last rally, projected from the start of the current rally. Additional timing cycles based on comparing the time between major pivots show strong Fibonacci ratios bracketing this projection. This gives us a timing “window” from now into the very start of next week, with the focus on today. These projections are visible towards the bottom of the price section on the daily chart.

While there’s no guarantee that the market will react to these timing cycles, the projections tell us when to look for a reversal if the pattern is going to repeat. Typically we’ll see at least consolidation through this phase, as the market “debates” whether to drop from here. If we see support continue to hold, and a new swing high put in after this timing zone clears, it would indicate that the pattern has been disrupted. That generally calls for an upside acceleration. So in any event, the next few sessions are key!

An additional consideration; the weekly chart shows that price is currently at overlapping extension targets with considerable resistance just beyond this point:

Click on image to enlarge!

So how can we get an early warning as to whether this combination is going to bring a significant decline? In my chat room, one of the contracts we focus on for intraday trading is the ES (CME emini S&P futures). My favorite chart for directionality is the 45 minute. Very often, a significant shift on the 45 minute chart gives us a heads up on daily reversals too. So far the 45 minute chart is maintaining all important support.

Click on image to enlarge!

If we should see a break of the labeled support level on this chart in the 1185 area before making a new swing high, it would be the first sign of a possible breakdown. From that point we’d examine intraday time and price support factors for a hold or break. A continued breakdown would be the alert that we’re looking for. Another possible spot for a reversal would be the target levels, starting with the initial daily upside target at 1218.75 if met within the next couple of days.

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