Friday’s stock market decline will have market bulls looking to the Dow Jones Industrial Average to hold significant support tied to market gyrations since the 2007-09 financial crisis, technical analyst Chris Kimble said on Friday.
In the chart below, the founder of Kimble Charting Solutions applied Fibonacci analysis to the blue-chip indicator DJIA,
2007 monthly highs and 2009 lows. He found that the “423% Fibonacci extension level” seemed to be influencing the Dow over the last six months.
Kimble Graphics Solutions
Many technical analysts pay attention to what is known as the Fibonacci ratio, attributed to a 13th century Italian mathematician known as Leonardo “Fibonacci” of Pisa. It is based on a sequence of whole numbers, in which the sum of two adjacent numbers is equal to the next higher number (0,1,1,2,3,5,8,13, 21…).
Technical analysts see key retracement targets for rallies or sell-offs at 38.2%, 50% and 61.8%, while retracements to 23.6% and 76.4% are seen as secondary targets. Chart watchers also use multiples, such as 23.6%, 161.8%, 423%, etc.
“If the Dow closes the month below 33,000, the odds are that the Dow will experience more selling. What the Dow Jones does at support appears to be very important to both bulls and bears,” Kimble wrote.
A test of 33,000 would mark a 2.4% drop from its Friday close of 33,811.40. The Dow plunged 981.36 points, or 2.8%, on Friday, its biggest one-day percentage drop since October 2020, leaving it with its lowest close since March 15. The S&P 500SPX,
fell 2.8%, while the Nasdaq Composite COMP,
lost 2.5%.
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