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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 8, 2011
Our Current Take:
Today, stocks are down in yet another heavily volatile session. A disappointing June nonfarm payrolls report has sent major indices down ~1% back to their 5-day moving averages. After such a massive rally the past two weeks, some selling is to be expected, and investors are using the nonfarm payrolls report as a good excuse to do so.
Despite the nonfarm payroll data being particularly bad, Friday's session shouldn't mean too much from a technical perspective if we stay in the 1330's. A close above 1340 would be viewed as a positive, and would set the S&P 500 right on its 5-day moving average, as well as some solid support. Next week will be the true test to see if this rally is for real. Should we rally, the big question becomes, "is our economy really in better shape than it was during the April highs?" Until then, it looks like we will close out the week right around where it started.
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 may be tested again early next week should we get some good economic data.
We would consider being short-term buyers at: A pullback to 1330 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: We are overbought in the short term, though 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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