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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: April 5, 2011
Current Strategy:
Same song, different day. In short, we will argue that stocks ought to be pulling back and as such, the fact that the indices continue to hang around the highs can be viewed as a positive. Yet at the same time, we recognize the bears' argument that the overhead resistance remains intact. Therefore, we're of the mind that we are now in a period of backing-and-filling.
We would consider being short-term buyers at: A pullback to 1320 or close above 1344 on the S&P 500
We would consider being short-term sellers at: A close below 1319 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend remains positive but does appear to be stalling here. So, as we wrote Monday, a pullback to test support (and fill the gap at 1320 on the S&P) would be logical.
Intermediate-Term Trend: Ditto from Monday: The intermediate-term trend remains moderately positive at the present time.
Market Internals: Both of our TBC models continue to be positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: With the major indices currently stalled, it is a plus that the momentum models are holding up as well as they are at the present time. However, should the sideways action continue, we would expect to see momentum start to sag.
Support/Resistance Zones for S&P 500:
- Current Support: 1320
- Current Resistance: 1344
Early Warning Indicators:
Overbought/Oversold Condition: As we mentioned yesterday, stocks are now overbought from a short-term perspective. But the good news for the bulls is the market is only neutral from the intermediate-term perspective.
Investor Sentiment: Sentiment is starting to pick up again. And while we are a long way from an extreme reading, our sentiment models are starting to sink again.
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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DOW THEORY FLASHES A BUY SIGNAL !! Yesterday, the DOW closed above its mid-February high which the DOW TRANSPORTS had already accomplished last week. Accodring to The Dow Theory, this is a STRONG Bullish Signal ,as investors are not using the old highs as an opportunity to cash out.