The market is absolutely ripping right now.

We're watching something hardly anyone saw coming. The S&P 500 just crushed every prediction, clawing back from spring's selloff to hit fresh all-time highs in less than 80 days.

Bitcoin is blasting past $107K with no signs of slowing down.

Speculative stocks are launching into orbit while traditional investors stand frozen on the sidelines, trapped by the most dangerous emotion in finance: the fear of missing out.

Here's what's really happening behind the scenes...

While amateur traders are throwing money at anything that moves, the smartest players I know are using a mathematical principle that's older than the stock market itself.

In fact, it predates America by centuries.

This is pure mathematics - rediscovered over 800 years ago by Italian mathematician Leonardo Fibonacci.

The same mathematical sequence that governs the spiral of a nautilus shell, the arrangement of leaves on a stem, and the formation of distant galaxies.

And right now, it's helping me navigate this runaway market…

The Universal Law of Growth and Decay

In the early thirteenth century, Leonardo Fibonacci de Pisa brought an ancient number sequence to Europe. (He also introduced the decimal system in Liber Abaci, Book of Calculation.)

The Fibonacci number sequence yields the golden ratio — a mathematical structure found throughout the natural world. It’s often depicted with the nautilus shell, but exists in microscopic DNA molecules and expansive spinning galaxies light years away.

All matter subject to growth and decay adhere to this number sequence, including the markets.

You can use the Fibonacci sequence to calculate future price levels by analyzing previous swings, as prices tend to go through periods of trending up or down (growth) and then correcting sideways (decay).

And since the natural world respects this universal law on microscopic levels invisible to the naked eye and unfathomable scales along the outer reaches of space, Fibonacci analysis also applies to price action across all time frames.

Whether you’re a more conservative investor tracking monthly charts or a swashbuckling day trader navigating 5-minute charts, Fib levels provide incredible value.

Here’s how you can use Fib numbers to cut through the market froth and set profit targets for two important assets pushing to new highs…

Bitcoin’s Blue Sky Breakout

Check out the monthly Bitcoin chart overlaid with Fibonacci levels drawn from the 2011 correction:

I chose to use this period of contraction since price continues to respect potential extension levels. Notice how rallies have paused (red arrows) and corrections have bottomed at key Fib levels, most recently near $107K.

Now that Bitcoin has broken out, its next significant upside target stands at $172K.

I don’t know if Bitcoin will stop and reverse at the Fib level or rip right through it to another record high. However, Fib extensions suggest that this would be a good place to lighten my position and prepare for a pullback.

Moving onto the stock market…

The S&P Defies Gravity

Let’s use Fib levels to measure the bear market decline from the 2022 peak to the October lows:

The 6,900 level marks the next significant extension level and my next upside target for the U.S. benchmark.

I anticipated a market correction – or at the very least, a pause in the uptrend – as the averages retested their former highs last month. It was a logical area for sellers to come in and push the market lower.

Of course they did not, so I’m also tracking 6,100 as potential support for the S&P. A retest of this level or an extended pause/reset between 6,100 and 5,600 isn’t out of the question right now. Following this Fibonacci roadmap, the S&P will eventually firm up and embark on a move to that 6,900 extension. 

You might be skeptical of how a number sequence can help you navigate the markets. But it’s important to note that Fibonacci analysis isn’t voodoo. It’s math, pure and simple.

Fibonacci analysis isn’t about predicting the future. Instead, it helps us visualize the ebbs and flows of the market and how an asset could behave when taking into account past support and resistance levels.

Even the strongest markets won’t move in straight lines. There will be rallies that go on longer than most investors anticipate. And we’ll experience equally maddening pullbacks that test our patience and resolve.

(We’ve experienced both this year, and it’s only July!)

But having these Fibonacci levels as targets can help us keep a level head and better plan our trades. No magic 8-ball required!