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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 10, 2011
Current Strategy:
Let the games begin! While stocks appear to be breaking down on a closing basis, the 1300 level appears to the new battleground for the technically inclined. During any corrective phase, there is usually at least one scary period where stocks look to be "whooshing" lower with no end in sight. However, at some point, the buyers come in and put a stop to the bleeding. So far at least, this appears to be what is occurring. But if the bears can put in a close below 1300, the momentum would clearly swing their way.
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: Yesterday we wrote that the chart formation suggested that a resolution to the current wedge formation might be close at hand. If the bears can hold their ground, the short-term trend would turn negative.
Intermediate-Term Trend: The "lower low" we've been talking about recently in terms of the intermediate-term trend appears to be happening here. If so, we would be forced to downgrade the trend.
Market Internals: It is a safe bet that our short-term TBC model will flip from positive to negative should the selling continue. However, the jury is still out on our intermediate-term model. Stay tuned.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models actually upticked a hair after yesterday's action, which, until this morning, would be considered a positive. However, with the market currently dancing to the downside, we would expect to see the momentum indicators weaken
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1330 - 1340
Early Warning Indicators:
Overbought/Oversold Condition: Stocks are now oversold from a short-term perspective.
Investor Sentiment: Sentiment remains a modest negative input.
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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