S&P 500 key levels update from T Theory by Terry Laundry

Terry Laundry has issued his Monday update based on his T Theory work at his T Theory website. Here's his chart on that website (which is always included in the "other sites of interest" at the right side of the page on this blogspot):


And here is Terry's discussion of the chart (quoted below). You can get more information on his T Theory work by browsing his website.

Today's chart features my estimate of the implied black arrowed upper and lower arrowed channels that I believe best represent the eventual high and low S&P 500 trend channel limits as derived from the adaptive channels. Basically the trend of the S&P 500 should generally be limited by the upper black arrows and will be limited on the downside by the lower black arrows over the next month or two. I believe a lower channel limit will be reached in March and will comment on its development in my next update March 2 2009

More specifically it is important to note that the way I set up the equations for the adaptive channels (i.e. the red dashed upper line and green dashed lower line) any oversold condition that might be important for the very short term require the S&P to penetrate below the lower bound as stated at the upper right of the chart. Currently the lower channel is stated as 734 for the cash S&P but it is falling lower each day. As the chart illustrates, key oversold conditions like that seen in mid September 08, October 08 lows, mid Nov 08 low, require a downside penetration by some 10 points + before a significant rally can be expected for the current down trend.

Based on this criteria today's decline, starting from 770 on Friday couldn't make an interesting oversold condition until the S&P went well below the current 734 lower adaptive bound. When I see an interesting level in the days ahead I will post a special update.