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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: July 6, 2011
Our Current Take:
Today, stocks are a tad higher after rallying back from early-morning losses. China hiked interest rates by 25 basis points, and a slightly weaker than expected ISM Non-Manufacturing report had indices start the day off lower. After the first hour of trading, buyers took over and we've been pushing higher ever since.
It can be viewed as a positive that A) There was little selling pressure after such a massive rally last week, -and-, B) Despite some not-so-positive news this morning, buyers are still around and putting upward pressure on the markets. While this morning and yesterday's session would have been a great chance for some of the major players to ramp up the selling and take profits, the S&P 500 is still hovering over all major moving averages, and sitting in good shape.
1260 is now the intermediate-term support, while 1320 is our short-term support. The next key resistance overhead looms around 1345-1350 area, which will be tested with one more significant push upward.
We would consider being short-term buyers at: A pullback to 1320 or a break above 1350 on the S&P 500
We would consider being short-term sellers at: A close below 1315 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Stocks posted a huge rally last week, and are holding up well this week. Thus, we rate the short-term trend positive.
Intermediate-Term Trend: With some convincing action back above 1320, 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 starting last week, our momentum models are now positive.
Support/Resistance Zones for S&P 500:
- Current Support: 1320
- Current Resistance: 1345-1350
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 has been improving, and is moderately positive in the short term. This favors the bears, though it's important to note that sentiment was negative throughout all of May and June.
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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