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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: May 17, 2011
Our Current Take:
The linkage between the Euro/Dollar/Stock Market is clearly still functioning. However, it is beginning to look like there may be more to the decline than just some program trades designed to print money for the fastest of the fast-money traders. Exhibit A is the break of important support on both the S&P and NASDAQ charts. As such, traders may now be searching for the next support zone today. From there, we'd expect to see a bounce to test the old support (new resistance) levels. But then again, this may still be all about "the trade."
We would consider being short-term buyers at: A close above 1340 area on the S&P 500
We would consider being short-term sellers at: A close below 1320 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend has broken down and is now in a clear downtrend. We'd be looking for a bounce shortly.
Intermediate-Term Trend: Although the intermediate-term uptrend is still largely intact, the strength of the trend is starting to deteriorate. A close below 1300 would create a lower low and become a problem for the bulls.
Market Internals: Both of our TBC models are now negative. This effectively confirms the current downtrend. (Unless, of course, the Euro rallies, then all bets are off!)
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Ditto from yesterday: Our momentum models continue to show some signs of wear and are no better than neutral currently.
Support/Resistance Zones for S&P 500:
- Current Support: 1320
- Current Resistance: 1340ish
Early Warning Indicators:
Overbought/Oversold Condition: The S&P is now oversold from a near-term perspective and now neutral from an i.t. perspective.
Investor Sentiment: Sentiment hasn't budged much lately. However, we'd expect to see some movement in the indicators later in the week.
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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