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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: June 30, 2011
Our Current Take:
Today, stocks are climbing higher for a fourth straight session. The Greek Parliament has passed its second vote to implement austerity measures, and a much better than expected Chicago PMI report sent stocks straight up this morning. The uncertainty that had marred the month of June, namely the fear of a Greek default and subsequent contagion to EU banks, has been temporarily laid to rest, thus we may see a shift back to analyzing economic data to see if this "soft patch" is through.
1260 has now become more intermediate-term support (barring imminent market disasters), with 1300 taking over as the short-term support. 1320 will be the next big test for the bulls. Though we have gained quite a bit in four days, the heavy thrust and significant volume are worth noting. We will be watching the action this afternoon, and looking to see how the market reacts to Friday's economic data.
We would consider being short-term buyers at: A close above 1320 on the S&P 500
We would consider being short-term sellers at: A close below 1300 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Stocks have rallied for four straight sessions, from what was nearly the low of the year up to (and currently through) indices' 50-day moving averages. Thus, we rate the short-term trend positive.
Intermediate-Term Trend: With some convincing action back above 1300, the intermediate term trend is not negative anymore. While the short term direction is straight up, we really haven't made any progress from our price levels in February. Thus, we rate the intermediate term trend neutral.
Market Internals: Our TBC models give us a positive rating today.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Given the heavy upward thrust this week, our momentum models have been pushed from neutral up to moderately positive.
Support/Resistance Zones for S&P 500:
- Current Support: 1300
- Current Resistance: 1320-1325
Early Warning Indicators:
Overbought/Oversold Condition: While we are overbought in the short term, we are still slightly oversold in the intermediate term.
Investor Sentiment: Sentiment is moderately negative, which favors the bulls. In essence, this means that those who wanted to sell have likely done so.
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: 150 day weighted ma (light orange), 50 day weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 5 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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