With the markets putting in another solid performance today, I believe it’s now worth discussing how far the markets have actually rebounded since they hit their lows earlier this year. Let’s look at the two major US indices - the Dow Jones and the S&P 500, to see how far we have come.

If you plot the high point (back in 2007) and the low point (earlier this year) for both these indices and use fibonacci retracement levels as a guide, you will see that both the Dow Jones and the S&P 500 have recently hit their 38.2% retracement level at 9422 and 1014 respectively.

Therefore this means that there is still a lot more upside if the economy continues to recover and the markets continue to rally. The 50% level would give us price targets of 10334 and 1121 for both these indices and a 61.8% retracement would give us targets of 11246 and 1228.

However it has to be said that if the markets do recover, we are unlikely to see these targets hit in the foreseeable future. In my opinion the markets will fall back down again before that happens because the rise to date has been very fast, and it’s almost inevitable that we will see a major sell-off at some point.

 

 

Filed under: Indices

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