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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 13, 2011
Our Current Take:
Stocks are higher today for numerous reasons. Overnight, better than expected China GDP and industrial output data led indices to open higher. A testimony by Ben Bernanke mid-morning boosted stocks further after he mentioned the possibility of yet another round of security purchases (QE3).
Stocks have been very volatile this month and very sensitive to any headlines, whether they be about Europe's debt situation, the US economy, the debt ceiling debate, Fed policy, etc. etc. The point is that stocks are reacting to what is being said, with little differentiation as to what peice of news is more important than the next. While Bernanke's comments did give stocks a big boost, until (or more appropriately, if) QE3 is actually announced, I just don't see the whisper of such a program generating enough positive sentiment to A) offset the worries coming from Italy or B) give the market meaningful action above 1350.
Currently, we have short-term support at 1320 and intermediate-term support at 1260. Resistance is overhead in the 1345-1350 region.
We would consider being short-term buyers at: A pullback to 1320 (around the 50-day moving average) or a break above 1350 on the S&P 500
We would consider being short-term sellers at: A close below the 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 currently neither overbought or oversold. With some volatile sideways action, the market is neutral in this respect.
Investor Sentiment: Sentiment is neutral today, as a good Chinese GDP figure and comments from Ben Bernanke helped offset a whole heap of negativity coming from Italy and the Eurozone debt crisis.
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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