There’s no shortage of tools, indicators, and frameworks designed to make trading and investing harder than it already is.
Early in my career, I fell into the same trap most people do. I kept adding things. More indicators. More overlays. More reasons to second-guess myself.
Over time, and usually the hard way, I learned the opposite lesson. Less is more.
Keep it simple stupid. K.I.S.S.
I look at an absurd number of charts every day. The last thing I want is unnecessary complexity. So when you see something on my charts, or hear me reference a specific dataset, it’s there for a reason.
I’m not interested in wasting your time, and I’m definitely not interested in wasting mine.
If I use a tool, it’s because ignoring it would be irresponsible.
You hear me talk about Fibonacci and the Golden Ratio all the time. What you do not hear very often is me pointing to ultra-specific levels in the S&P 500 and saying, this matters.
Today, we’re doing exactly that.
Before we get into the levels and why they matter so much right now, here’s a quick refresher on how Fibonacci extensions and the Golden Ratio are calculated.
Then we’ll look at what the market’s been telling us, very clearly, for months.
S&P 500 Fibonacci Extension Levels
The S&P 500 experienced a meaningful correction last spring that ultimately became one of the greatest buying opportunities in market history.
To frame what’s happened since, we measure Fibonacci extension levels from the high to the low of that correction.
When price recovered back to the prior highs around 6,100 to 6,150, that marked a full 100 percent retracement of the entire decline.
From there, the 161.8% extension gives us the Golden Ratio.
That level is not theoretical. It’s exactly where the S&P 500 stopped advancing in late October.
Since then, price has gone nowhere fast, grinding sideways for months:
This is not an exact science, even if it sometimes looks that way. We draw trendlines with crayons, not a sharp pencil.
In the chart above, I calculated the extension levels using both the initial high from December 2024 and the ultimate high in late February to create a reasonable range rather than a single precise number.
That range takes us directly to where price is trading today.
And that’s the key point.
This level for the S&P 500 is extremely important. Not because I say so, but because the market itself has been validating it for months.
If the S&P 500 can decisively break above 7,000 and hold there, it opens the door to a move north of 8,000, in my experience.
But first, it has to stick the landing.
So far, it hasn’t.
Fibonacci Levels Clustering Together
But wait, there’s more!
When in doubt, zoom out.
This chart steps back and looks at the S&P 500 through the entire 2021-22 bear market.
The 100% retracement of that decline brings us back to the early 2022 all-time highs.
As you can see, that former resistance turned into critical support during last year’s correction, just above 4,800:
Now focus on where price has been stalling more recently.
That resistance lines up almost perfectly with the 261.8% extension of the entire 2022 bear market decline.
Read that again.
The extension levels from the 2022 bear market are pointing to the exact same area as the extension levels from last year’s correction.
Different timeframes. Different swings. Same price zone.
That is not random.
When Fibonacci levels cluster together like this, they reinforce the importance of the level. And right now, that cluster sits right around 7,000.
A clean break and hold above 7,000 would be one of the most bullish developments for the S&P 500 that we have seen in a long time.
But markets don’t give away easy wins. These are serious levels for a reason.
We need to see it happen.
The longer the S&P 500 stays below 7,000, the bigger the problem becomes.
The faster it can reclaim and hold above 7,000, the more powerful the upside setup gets.
Plenty of people dismiss Fibonacci and the Golden Ratio as “voodoo.”
I used to be one of them. That was a mistake.
You’re welcome to do as you wish. I’ve already learned my lesson.
Some of you still have to.
And that’s OK.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs