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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 7, 2011
Our Current Take:
Today, stocks are higher once again. A better than expected drop in jobless claims, a positive ADP employment report, and the ECB's decision to suspend Portugese collateral requirements helped back the notion that the economy is improving, and quell ongoing European debt woes.
Currently, the S&P 500 is wrestling with key resistance at 1350. While the market is now overbought in the short term, a close above 1350 today or some decent employment data tomorrow morning could have us up to 1365 (the 2011 high) in no time. Currently, the market is being driven by US economic data and headlines out of Europe. These have both been quite good since last week, so technicals may not be as important should the data continue to come in above expectations. That being said, it will be interesting to watch the action this afternoon, as it will give us an indication of just how strong a statement the bulls want to make given today's data. A close above 1350 ahead of tomorrow's data would be a good start.
1260 is the intermediate-term support, while 1320 is our short-term support. There is key resistance at 1350 that is currently being tested, and overhead resistance at the yearly highs of 1365.
We would consider being short-term buyers at: A pullback to 1330 or a close above 1350 on the S&P 500
We would consider being short-term sellers at: A close below 1317.44 (50-day moving average) on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Stocks rallied hard last week, and are at it again late this week. Thus, we rate the short-term trend positive.
Intermediate-Term Trend: With some convincing action back up to 1350, the recent rally has allowed stocks to break above February price levels and push towards the 2011 highs. Thus, we rate the intermediate term trend moderately positive.
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: 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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