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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 11, 2011
Current Strategy:
Although the news flow is bad, the bulls are trying their darndest not to fall off the cliff. In short, the major indices are sitting at the lower reaches of what could be considered support (and this may be a rather generous assessment) on an intraday basis. However, when viewed from a closing basis, the charts have broken down. As such, the technical analysis tea leaves tell us to become more cautious. But, at the same time, experience tells us that these types of pullbacks have happened several times over the last two years and with the exception of the big correction last summer, each wound up being another buying opportunity. So, unless/until the bears can really break the will of the dip-buyers, we'd think twice about bombing into the dark side here.
We would consider being short-term buyers at: A close above 1305 on the S&P 500
We would consider being short-term sellers at: A close below 1291
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is clearly negative at this stage. About the only positive is the fact that the shorter-term moving averages have not moved below the intermediate-term MA's (50-day).
Intermediate-Term Trend: One can argue that a "lower low" was put in with yesterday's close. However, that would assume a short-term perspective. Using a longer-term view (weekly chart), the uptrend that began on 9/1/10 remains intact.
Market Internals: As expected, our TBC models flipped to negative. This is a clear indication that the technical health of the market is in question.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models confirm that things aren't all that hot at the moment. However, it is worth noting that none of the three models has actually issued a sell signal yet.
Support/Resistance Zones for S&P 500:
- Current Support: 1280-1295
- Current Resistance: 1330 - 1330
Early Warning Indicators:
Overbought/Oversold Condition: Stocks are now very oversold from a short-term perspective and the intermediate-term models have moved to neutral.
Investor Sentiment: Sentiment is slowly improving (becoming less optimistic). However, it has a long way to go before anyone will call this a positive environment from a sentiment perspective.
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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