Interesting Fibonacci Retracement

Is The Rally Over, or Just Starting? It's been a nice bounce off the "devil's bottom" (666 on SPX, March 6), if it was indeed a bottom. We've been there before, so caution is warranted. However, some signs are there that this 'could be different' this time around. New lows seemed to have peaked at the November lows and while price made a dash lower, there is a positive divergence. Perhaps the situation may not improve but it's may not get much worse, either. Fear is another factor, another positive divergence. A new high in the VIX was not seen at the recent lows in March. Many out there are non-believers in this rally, too...after being burned time and again. Finally, bond yields were lower on March than in November...another positive. While inflation is an issue to be reckoned with someday, the stimulation methods seem to be putting a stop to a deflationary cycle.
The following chart shows an interesting 50% retracement level we reached on Thursday's close, which is based on previous 1000 highs and the 666 low in the S&P 500 Index (SPX). 50% is a Fibonacci Number, but also is a logical retracement point on rallies.

Anecdotal Evidence The complexities still exist around our economy and cannot be solved with a few Fed plans, banking or credit. However, some small 'signs' are out there, I'll share with you what I am seeing. The house next door to us was a foreclosure last year and had been on the market for about eight months. It was recently sold, albeit for a big discount. In fact, I've seen more sold signs around the city than I've seen in years. In retail, stores are seeing traffic again, and it's not just window shopping. Restaurants are starting to get patrons back, too. Finally, my parents bought a new car recently, first one in six years. Did they need one? No, but they got such a great deal that it was tough to pass up. A couple of other family members also bought new cars lately. Small but notable signs...we'll see if they turn out to be meaningful. Sentiment - Improving, but... The economy and the stock market are all about sentiment. Good feelings tend to flow to positive action, and vice versa. Let's be honest, the economy was literally frozen for the last six months, and it wasn't just credit. They say borrowing is the lifeblood of the economy, yet the savings rate has been on the rise, its largest increase in decades. Could it be this rise is due to the lack of confidence by the public in investment? Recent sentiment figures show a modest improvement but like any trend momentum is key here. Jobs are still being lost at an alarming rate and confidence, while on the rise is still fragile. It won't take much bad news to get that turned back. Bonds, Gold and the Greenback I was completely stunned by the action of these three on March 18 following the Fed announcement. With Bernanke stating the Fed would be buying treasuries in a big hurry and in a big swoop, along with other programs...bonds rallied huge in about thirty minutes. Gold went higher by nearly $70 while the dollar plunged. Since then these markets have settled down somewhat. However, I can't recall such a large move simultaneously. This was clearly the nuclear option by the Fed, going 'all in' attempting to pull the economy up from the bottom. Will it work? History shows that printing your way out of a problem, inflating the economy has never worked for any nation. Why would it work for the US in this instance? There is a high risk in this approach and consequences will be severe if it fails. A market reaction such as that seen on March 18 tells us so.