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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 6, 2011
Current Strategy:
With the earnings parade on tap and questions/concerns about the impact of rising commodity on profits increasing daily, the current battle over the recent highs is to be expected. While the bulls have tried to push the issue and break out above the February highs on the Dow, S&P, and Nasdaq, the bears have been able to thwart the attempts thus far. It is fairly obvious that sell programs are being run each time the indices approach the breakout zone, so it will be interesting to see if the bears can continue to hold their ground as the day progresses.
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 is up but looking a little tired. Thus, a pullback to retest support would be logical.
Intermediate-Term Trend: The sloppy action this morning does nothing to change the intermediate-term trend - we'll call it moderately positive for now.
Market Internals: Both of our TBC models remain positive this morning. However, if the bears can produce a key reversal today, we'd expect to see the breadth start to fall off.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Momentum remains moderately positive at the moment. But we will be interested to see if the bears can produce any "oomph" on the anticipated test of support.
Support/Resistance Zones for S&P 500:
- Current Support: 1320
- Current Resistance: 1344
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain overbought from a short-term perspective. This leaves the indices vulnerable to attack.
Investor Sentiment: As evidenced by today's surveys from NAAIM and Investor's Intelligence, the sentiment is starting to get a little too optimistic at the moment.
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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Well we are trading a little above the old highs right now as the bears have been unable to cause a downtrend --- encouraging ---- and the PE of the market is 15% below the 5 year average--- and earnings projected significantly higher in 2011 vs 2010 --- a lot for the Bulls to cheer about. The tide will turn further in Bulls favor before too long---have to have a little time to digest last 2 weeks nice gains.