2/2 Morningline

Near-range trading on all of my indicators this morning, except for gold (GLD), which has gapped up again.

Blue chip stocks (SPY) are up slightly from yesterday's range and contnues to hover around the 50 percent Fibonacci retracement level.

23.6%, 38.2%, 50%, 61.8% -- What's so magic about these retracement levels?

The retracement levels are based on a series of whole numbers associated with Leonardo Fibonacci, an Italian merchant who lived from around 1170 to 1250. In the Fibonacci numbers, each number is the sum of the two prior numbers. The percentages are ratios of those numbers. As in, 0 1 1 2 3 5 8 13 21 34 55 ... Fib numbers were applied to stocks by Ralph Nelson Elliott in the 1930s and publicized for today's traders by Bob Prechter, a former Merrill Lynch analyst who since publication of his book on Elliott Waves in 1979 has operated out of Gainesville, Ga.

The question is, do those levels have intrinsic properties that make them pausing points for stocks after a trend change? Or do prices pause at those levels because traders expect them to and set their orders and stops accordingly?

It's almost a Zen koan: If a tree falls in the forest with no one around, does it make a sound? If a Fibonacci retracement level is touched unknown to the minds of traders, is it a place where prices pause?

(The sound of one hand clapping, I know the answer. It's "swish" through the air, a close kin to Nike's swoosh.)

Enough musing. Let's run the numbers . . .

Indicators, at about 10:05 a.m. Eastern:

• Blue chip stocks (SPY) is trading at $108.98, entered macd bear mode at close on Jan. 20 (at $113.89)
• Fear index or volatility (VIX) 22.73, bull (bearish for stocks), Jan.20 (18.68)
• Treasury long bonds (TLT) $91.40, bull, Jan. 12 ($90.32)
• Corporate junk bonds (JNK) $38.61, bear, Jan. 19 ($39.87) 
• Emerging markets (EEM) $39.12, bear, Jan. 15 ($41.95)
• Gold (GLD) $108.76, bear, Jan. 12 ($107.37)
• Oil (USO) $36.88, bear, Jan. 15, ($38.40)

 Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3937, bear, Jan. 20 ($1.4106)
• Yen per dollar (USD/JPY) ¥90.33, bear, Jan. 12 (90.97) (The macd is right on the zero line. I antiticpate a new macd signal by the close.)

Stock options holdings, February expiry:

• CVS, iron condor (p29/-p31/-c34/c36) $33.09, bear, Jan. 21 ($33.24) (Earnings is Feb. 8. Should I hold and risk a surprise?)
  
• ERTS, iron condor (p15/-p16/-c18/c19)  $17.01, bear, Jan. 12 ($16.85) (Earnings also Feb. 8.)
• MCO, covered call (-c30) $28.35, bull, Jan. 28 (28.32) (Earnings Feb. 4)
• PALM, covered call (s/-c13)  $10.92, bear, Jan. 26 ($11.17)

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Topics:
S&P 500, SPDR, Spiders, Treasury bonds, high-yield corporate junk bonds, emerging markets, gold, precious metals, oil, petroleum, CVS, pharmacies, drugs, Electronic Arts games, Moodys bond rating, Palm smartphone Pixi Pri.