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Recent bearish signals in international markets may not be as bad as perceived. The US
equity sell-off has been fueled by higher oil prices for the most part. Higher oil prices
influenced Thursdayǯs jobs reports, which indicated that more filed jobless claims than
expected. Also released Thursday, US imports rose due to elevated oil prices, widening the
US trade deficit. Below is a chart of the S&P 500 since its bottom in March of 2009. There
are 4 Fibonacci Retracements drawn over the 4 major up-trends. After every up-trend,
there is a retracement back to the first Fibo level (23.6%), and then prices continue to rise.

As you can see in the fourth Fibo, we are currently at the first level of retracement, which
is around $1,300. The S&P closed the week at $1,307. This leaves a little bit of downside
room for the S&P (and equities in general), and we should see the beginning of the next
up-trend by next week as long as oil prices are tamed:


  






DzThe down move weǯre seeing today is a corrective phase within a longer-term uptrend,dz
said Christopher Verrone, lead technical analyst at New York-based Strategas Research
Partners. DzThe integrity of the uptrend since the 2009 low is still intact, but if the 1,294-
level on the S&P 500 fails to hold in the next couple of days, weǯll probably come down to
1,260. And thatǯs a range which we would look at as a buying opportunity.dz ȂBloomberg

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The Middle East crisis, as I thought, over-inflated oil prices. This is not surprising, though,
as stable oil prices are the backbone of the current global economic recovery.

DzThereǯs a feeling that the (crude) market overshot. If you look at the wider fundamentals
outside of Libya, weǯre heading into a seasonally soft period for the market. Normally this
is when you would expect the market to soften. Cooler heads are prevailing, recognizing
that even if Libya is off-line, there is capacity to make up supplies,dz said Rick Mueller,
director of oil markets at Energy Security Analysis Inc. in Massachusetts. --MarketWatch

Falling crude prices were accompanied by rising copper prices and an appreciating
Australian dollar, which are votes of confidence for the future of the global economic
recovery.

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Fibonacci retracement levels provide support/resistance levels for price movements and
help to determine reversals. They are drawn from the lowest and highest points of a price
move. Each retracement level represents a ratio of price movement. They are directly
correlated to the Elliot Wave theory, in that they offer psychological price levels for
investors to aggregate their dollar votes around.

As you can see in the chart, after the first 3 prices moves, investors only allowed prices to
correct to the first Fibonacci level. When prices break through the first retracement, they
are usually caught by the second, and so on.

The chart implies that we have reached a peak in the most recent bullish cycle. The Fibo
retracement that I have drawn over this price move suggests that we are currently at the
first retracement level, and that prices should turn around soon and continue the next leg
of the bullish market trend.

March/April is usually a soft period for stock prices, as the thrill/speculation of a new year
is fading, and prices are correcting to represent speculation free prices.

This was catalyzed this year a bit prematurely by the Middle East unrest and high oil
prices. Oil prices seem to be stabilizing, and if they remain so, I posit that next week could
prove to be the start of another bullish cycle.

Rising oil prices are not the end of the speculated economic recovery, but rather gave way
to a natural correction in stock prices.

The Dow and the S&P both closed above their psychological levels of $12,000 and $1,300
respectively. For every 2 stocks that declined on Friday, 3 advanced.

Next week will be a great time to buy US equities. I would look at technology stocks
(AAPL, IBM), industrials and exporters (CAT, DE, FCX), and blue chips in general.

njb