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Nick BucheleresMarch 10, 2011

Recent bearish signals in international markets may not be as bad as perceived. The USequity sell-off has been fueled by higher oil prices for the most part. Higher oil pricesinfluenced Thursdays jobs reports, which indicated that more filed jobless claims thanexpected. 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. Thereare 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, whichis around $1,300. The S&P closed the week at $1,307. This leaves a little bit of downsideroom for the S&P (and equities in general), and we should see the beginning of the nextup-trend by next week as long as oil prices are tamed:

This level will prove to be a good place to buy stock at a discount:

The down move were seeing today is a corrective phase within a longer-term uptrend,said Christopher Verrone, lead technical analyst at New York-based Strategas ResearchPartners. The 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, well probably come down to1,260. And thats a range which we would look at as a buying opportunity. Bloomberg

I believe that even the $1,300 is a nice place to buy, as long as oil prices remain quelled.

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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.

Theres a feeling that the (crude) market overshot. If you look at the wider fundamentalsoutside of Libya, were heading into a seasonally soft period for the market. Normally thisis when you would expect the market to soften. Cooler heads are prevailing, recognizingthat even if Libya is off-line, there is capacity to make up supplies, 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 appreciatingAustralian dollar, which are votes of confidence for the future of the global economicrecovery.

Fibonacci Retracements

Fibonacci retracement levels provide support/resistance levels for price movements andhelp to determine reversals. They are drawn from the lowest and highest points of a pricemove. 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 forinvestors to aggregate their dollar votes around.

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

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

March/April is usually a soft period for stock prices, as the thrill/speculation of a new yearis 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 oilprices. Oil prices seem to be stabilizing, and if they remain so, I posit that next week couldprove to be the start of another bullish cycle.

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

The Dow and the S&P both closed above their psychological levels of $12,000 and $1,300respectively. 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