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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 15, 2011
Our Current Take:
The stock market is (a) stuck in the middle of the current range, (b) a slave to the news flow, and (c) controlled by computers at the present time. Thus, there is quite a bit of volatility being created by "traders" that don't look at charts. And because of this, we believe it is best to stay patient at the present time. The bottom line is that we've seen horrible tape action over the past six sessions, but the indices are still only in the middle of the range. So, while it is the bears' game to lose, the selling pressure has not been terrible so far.
We would consider being short-term buyers at: A successful test of 1300 or a close above 1325 on the S&P 500
We would consider being short-term sellers at: A close below 1295 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is currently moderately negative, due primarily to the fact that all rallies have been sold into over the past six sessions. However, stocks are quickly becoming oversold and the bulls argue that some good news has to show up at some point, right?
Intermediate-Term Trend: The intermediate-term trend remains neutral at the present time as stocks have now been moving sideways for nearly five months.
Market Internals: While it may be surprising, our short-term model is neutral while the intermediate-term model remains - wait for it - positive. This tells us that the selling pressure has been fairly light to date.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: We see a similar story being told by our momentum models. In short, with our TBC and Momentum models both rated moderately positive, it is tough to be overly negative from a technical standpoint.
Support/Resistance Zones for S&P 500:
- Current Support: 1305ish
- Current Resistance: 1320 and 1340
Early Warning Indicators:
Overbought/Oversold Condition: The indices are quickly working off the overbought condition created by June's 8-day blast higher. However, we will not call the market oversold enough to warrant a strong rally at this point.
Investor Sentiment: Sentiment continues to be mixed with several of our indicators now neutral. This is likely caused by the great deal of uncertainty currently gripping the market.
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: 50 day weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 4 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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