Monday, September 22, 2008

S&P 500 Linear Regressions And Opening Range Levels

Below are three charts of the S&P 500 Index. These charts show levels based on the opening range of the calendar year and linear regressions of long, intermediate,and short term. Combining these two concepts, make it possible to estimate when and where potential turning points might be.

S&P 500 Opening Range Levels(click to enlarge)

S&P 500 3day Linear Regression Chart(click to enlarge)

S&P 500 3day Linear Regression Chart short term(click to enlarge)

The volatile moves lately have exceeded the two standard deviation lines(yellow) of the intermediate term linear regression. Friday's recovery reached back and touched the intermediate term linear regression line. To coincide with this move, prices closed just below the short term linear regression line. The move required to return to these levels was over a 100 S&P points. Typically there is consolidation after large moves like this. While the moves could be explained by the financial news last week, it was also enhanced by option expiration on Friday.

The next level on the opening range chart is 1290.63. After the large move last week, it might take a move lower before any attempt is made at this level. 1229.45 is the key level to watch as we consolidate. A failure of this level will lead to more selling. This will almost certainly lead to the market to test the minus two standard deviation levels of the linear regressions of both the short and intermediate term.

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