We have been following the news cycles for many months regarding the prognosticators that believe “the sky is falling” in the global markets and we find it interesting to see how quickly the bulls turn to bears when the market rotates 4~5% or more. The reality is that in traditional market price rotation, a 3~5% market price rotation is a very healthy component of price advance or price declines.
When we consider the price swings within the SPY from early 2017 till now, we are looking at a total of at least 18% total Low to High price swings with a number of large 6~8% price rotations and many 2~4% smaller price rotations. The natural rotation of price, as Fibonacci price theory teaches, is that price will always attempt to establish a new higher high or lower low in the process of extended trends. This means that price is always attempting to find and establish some new price high or low by rotating/trending within existing/past high or low price levels.
This is fairly obvious to see in the chart, above, where the initial downside price rotation in February 2018 established the deeper price low. This low price level was still higher than the previous price low on the left edge of this chart. As you can see, after the February 2018 price low, price continued to rotate in an attempt to establish a new “price high” or “price low” beyond the existing highest and lowest price levels. It failed many time to accomplish this new price high or low and, in doing so, continued to rotate within a narrower price range.
Until May 2018 when price pushed above the most recent price high channels and established a NEW Breakout Price High. This established the price trend as Bullish again and began a normal type of price rotation higher.In the process, it established a number of price lows that we can use as reference points for prior support and for our analysis of Fibonacci Price Theory as it relates to this current price move lower.
