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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: March 2, 2011
Current Strategy:
Despite higher oil prices this morning, the bulls are attempting to put a stop to the selling at last week's support zone. However, with crude continuing to rise this morning, we're not sure how well the bulls will be able to hold up. As such, we're watching the technical levels today and will expect to see the sellers become more emboldened should the 1305 area be violated to the downside. But, with oil spiking to new highs as I type, it looks like we can forget the charts of the stock market and just watch oil.
We would consider being short-term buyers at: A successful retest of 1300 or a close above 1327 on the S&P 500
We would consider being short-term sellers at: A close below 1305
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend remains neutral and vulnerable this morning. Watch those support levels.
Intermediate-Term Trend: Although the uptrend that began in September remains intact, the prospect of a "lower low" being established could put the trend at risk. Thus, the 1300 level on a closing basis appears to be key.
Market Internals: Our TBC models turned down with yesterday's plunge and would move into the negative zone should the selling resume.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models are clearly not all on the same page at the moment. Thus, the overall message from the three models is "neutral." In short, this means the game could go either way.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1325 - 1340
Early Warning Indicators:
Overbought/Oversold Condition: Stocks are quickly becoming oversold. But again, with crude's rude rise, this has little impact.
Investor Sentiment: Bullish sentiment has backed off a bit but remains elevated. Call it a moderately negative input for today.
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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