Below is a price chart of the S&P 500 from 10/1/07 through today. I have overlaid a Fibonacci retracement indicator on the price chart using the 2007 high and the 2009 low. Fibonacci was a mathematician who is credited with “discovering” the golden mean. The golden mean occurs everywhere in nature, and that includes the stock market which is moved as much by human nature as it is by fundamentals. The golden mean is the green line on the chart and you can see how this line has acted as resistance or support (marked by white circles).
It is mystical but very important nonetheless. After 9 out of 10 days down and a 4% (it’s getting worse as I write) down day today this level could provide some support even if temporary as in 2008. And it is here where we make a stand. If we get a bounce and unemotionally believe more selling will occur then we will most likley reduce risk. If this level fails to hold, which is very possible because tomorrow is payroll Friday adn the report could be pretty bad, then we may have to stop giving the bull the benefit of the doubt. But we must never panic because that is when mistakes are more likely to happen.
