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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 9, 2011
Current Strategy:
Taking a step back from the news flow (the latest is that Gadhafi forces have hit an oil pipeline), picture being painted by the chart action is one of a very nice consolidation pattern. Call it a flag, a wedge, or whatever you'd like; the major indices are rapidly approaching an important juncture from a technical analysis perspective. Some chartists will say you will want to buy/sell based on the trendline break - either up or down here. However, others might suggest that you wait until the upper or lower reaches of the current range breaks. Since this remains a news-driven environment, we'd probably stick with the latter.
We would consider being short-term buyers at: A close above 1331 on the S&P 500
We would consider being short-term sellers at: A close below 1300
Trend and Momentum Indicators:
Short-Term Trend: Although prices are lower this morning, the short-term trend remains neutral at this time. We'll also note that the shorter-term moving averages are converging on the same spot at the present time. This suggests a break in one direction or the other is likely close at hand.
Intermediate-Term Trend: Ditto from yesterday (and the day before that): As long as the market does not put in a "lower low" on the charts, the intermediate-term trend remains constructive and this remains a consolidation phase.
Market Internals: It is a bit surprising to report that both of our TBC models are positve this morning. If these models can remain positive, the advantage would go to the bulls.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models remain mixed with one positive, one neutral, and one moderately positive. Thus, the message would appear to be to lean toward the bulls side of the field at this point.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1330 - 1340
Early Warning Indicators:
Overbought/Oversold Condition: Nothing new today. The market is neutral from a short-term perspective but the moderately overbought condition seen in the intermediate-term picture remains.
Investor Sentiment: There were no big changes in our sentiment indicators today. It appears that investors continue to lean bullish at this phase and that the extreme optimism is starting to be worked off.
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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