Dow backs away from test of key Fibonacci retracement level
The Dow Jones Industrial Average dropped 295 points in midday trade Tuesday, as the blue-chip barometer backs away from a test of a key Fibonacci retracement level. Chart watchers use the Fibonacci ratio of 0.618, which is also known as the "Golden," or "Divine" ratio, given its existence through the natural world, as a key technical level to watch. They figure and retracement that stays within 61.8% of the previous trend's move remains governed by that previous trend. For the Dow, the previous trend was the 5,036-point, or 18.8% tumble, from the Oct. 3 record close of 26,828.39 to the 15-month low of 21,792.20 on Dec. 24; Friday's close at 24,706.35 represented a 57.9% retracement of that decline. A close above the 61.8% Fibo target of 24,904.57 would indicate that the recent rally was now part of a new uptrend.
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