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Although we disagree with the idea that "the tape tells all," it is important for all traders to stay on top of key technical happenings on the charts. Below is our current "executive summary" take on the State of the Tape.
Technical Talk: February 25, 2011
Current Strategy:
Although I believe that much of yesterday's "reversal" was artificial, technical analysis has no use whatsoever for the "why" behind a move. So, from a purely technical standpoint, we saw a reversal yesterday on decent (but not stellar) volume and then today we are getting some follow-through. Thus, it would appear that one of two things is happening. First, we could be seeing the start of a sideways consolidation phase. If so, we will want to watch the top and bottom ends of the range. Or we could argue that the recent pullback was "it" and the bulls will take over from here. Personally I favor the former, but I'm keeping my mind open at this stage of the game. P.S. I wouldn't be surprised to see the shorts run for cover this afternoon.
We would consider being short-term buyers at: A successful retest of 1300 or a close above 1325 on the S&P 500
We would consider being short-term sellers at: A close below 1300
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend can be upgraded to neutral today, but that's as far as we can go at the present time.
Intermediate-Term Trend: As we've been saying, although the corrective phase is "on," the uptrend that began in September remains intact. Thus, unless the bears can produce a close below 1275, the I.T. trend remains positive.
Market Internals: The TBC models are mixed but are both on the cusp of making more decisive moves. Stay tuned.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum indicators are waffling back and forth at the present time. Thus, this category of indicators is inconclusive today.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1325 - 1340
Early Warning Indicators:
Overbought/Oversold Condition: Given that the market immediately rebounded from yesterday's lows, stocks did not have much of a chance to become oversold. Currently the indicators are neutral.
Investor Sentiment: No real change in the sentiment arena today and since the brief decline didn't put much fear back into the mix, these indicators remain moderately negative.
Chart Watch:
Below are snapshots of the two main charts we watch closely each day from a technical perspective. The indicators we display on the charts below include: 50 day weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 4 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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