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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 12, 2011
Our Current Take:
Stocks started today's session about even as investors continue to weigh the uncertainty over Italy's debt and a stalemate in talks regarding the debt ceiling. While stocks were flat for most of the morning, indices rallied in reaction to the FOMC Minutes of the 21-22 Meeting, as the statement revealed that there were some discussions over the possibility of QE3.
While markets are currently in rally mode following the Minutes release, it will be important to keep a close eye on A) Any headlines out of Europe (especially involving Italy); B) Q2 earnings, which kicked off yesterday after the closing bell with a decent report from Alcoa; and C) Thursday's economic data. The market's direction is currently news-driven, so we will be watching the news in the days to come.
1260 is the intermediate-term support, while 1320 is our short-term support. The next key resistance overhead looms around 1345- 1350 area, though with the recent developments in Italy, we may not revisit this level until contagion fears are once again quelled.
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 1315.66 (50-day moving average) on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Stocks posted a huge rally two weeks ago but have been struggling to hold gains since. With a sideways move last week and some negative action to kick off this week, we rate the short term trend neutral.
Intermediate-Term Trend: With some convincing action back above 1320, the intermediate term trend is not negative anymore. While the short term direction is neutral, and 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 moderately positive rating today.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models remain 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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