Market Action

H

hwaxen

The low close on the S&P 500 was 776.76. The close this past Thursday was 998.51. This gives a range of 221.75. I take one third of this range and 73.92.

Subtracting 73.92 from 998.51 gives me 924.59. The 50 day moving average is currently 926.68. The combination of points presents the first major area of support for the S&P 500.

This support is dynamic as the 50 day average changes daily and the high point can increase.
 
So what conclusions can we draw from this? Also, how often have you used this practice? Why did you use Thursday's price?
 
Thursday's price was the high (to date) for the move so that price was used to establish the range (low to high).

I would use the information to determine where a pull back might take the market. In any move higher there are minor pullbacks that do not impact the major trend. There are also pull backs which mark the end of a trend.

A pullback that took the market under major support (as defined in the first post of this thread) would signal a change in trend.
 
With the S&P 500 making a new high on Monday 6/16/03 at 1010.74 the new range becomes the difference between 1010.74 and the low at 776.76.

Dividing that range into thirds and taking one third of the range from the high close 1010.74 we get major support at 932.75

The 50 day average moved higher as well and as of the close was at 929.98. The combination of the two points yields a band of major resistance.

Again this is a dynamic not static band.
 
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