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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 19, 2011
Our Current Take:
The key question at this stage of the game is if the corrective phase has further to go or if we suddenly find ourselves in the midst of a trading range. Since the market continues to be driven by news/data at the present time, it is frankly difficult to determine the answer. Therefore, we will be watching to see how the market reacts at the key support and resistance levels for clues.
We would consider being short-term buyers at: A successful test of 1300 on the S&P 500
We would consider being short-term sellers at: A close below 1294 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend remains moderately negative. However, it does appear that traders are attempting to establish support at the 1300 zone.
Intermediate-Term Trend: The market has now been going sideways for the better part of two months. As such, the intermediate-term trend has been weakening. And although the uptrend could reassert itself at any time, this is something to keep in mind.
Market Internals: As expected, both of our TBC models have flipped to negative. Normally this portends more weakness ahead. However, we do need to keep in mind that this remains a news-driven environment.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models did take a hit from yesterday's selloff, but the damage was not as severe as one might have expected. This remains a modest positive for the time being.
Support/Resistance Zones for S&P 500:
- Current Support: 1300
- Current Resistance: 1310-1320
Early Warning Indicators:
Overbought/Oversold Condition: The indices remain modestly oversold on a short-term basis and are moving in that direction in our intermediate-term indicators. Remember, the best moves occur when these cycles are "lined up."
Investor Sentiment: Our sentiment indicators remain negative on balance. However, as we mentioned yesterday, further weakness would likely go a long way toward ruining the mood, which, of course, would be a good thing.
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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