Leonardo of Pisa Would Have Been Proud

Leonardo of Pisa, also known as Fibonacci introduced Europe to the concept now know as the Fibonacci series. The ratio of one number in the series to the next forms a ratio that appears throughout nature. It defines the spiral shape of seashells as well as the ratio of the length of the human head, to the torso to the full body. The ratio is also useful in watching movements in the stock market. Take a look at yesterday and today's action for the SPY (S&P500 ETF). The dotted lines represent the Fibonacci levels between the recent low and high. As the the SPY declined it 1) bounced off the first level before continuing its decline; 2) it paused at the second level, the 50% level and 3)bounced significantly at the third level, went back to the second level and come back down. As a trader, I don't make bets based on this (I know people who do) but I find it fascinating to watch.