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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 18, 2011
Our Current Take:
The technical picture isn't pretty at the moment. The S&P 500 has broken down through its 50-day moving average, is now testing the 1300 level, and traders appear to be pricing in the worst. But in reality, investors may also be voting with their feet in reaction to the lack of a solution in both Washington and Europe. And if the professional politicians on both sides of the pond don't get their act together pretty darn soon, it looks as if the S&P could easily revisit levels MUCH lower than the lower reaches of the current range. However, from a purely technical perspective, the market remains trapped in the range that has been with us now for 5 months and looks to be bent on testing the lower end.
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 continues to weaken as just about every blip upward is being met with selling lately. In short, the buyers are nowhere to be found right now. But stocks are quickly becoming oversold.
Intermediate-Term Trend: While the indicators continue to give up ground, with the market still range-bound, we'll call the intermediate-term trend neutral.
Market Internals: Our TBC models are likely to see big changes if today's shellacking continues. The model combination currently presents as neutral, but I'll bet the red light is going to come on shortly.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: While our momentum indicators have been holding up fairly well, the incessant selling is likely to have an impact shortly.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1320 and 1340
Early Warning Indicators:
Overbought/Oversold Condition: With stocks falling almost every day lately, the indices are quickly becoming oversold from both the short- and intermediate-term views. Thus, the bulls argue that the market may be setting up for a nice long-side trade.
Investor Sentiment: Sentiment continues to grow more bearish with each passing day in response to the political bickering and the growing contagion in Europe. But, from an intermediate-term standpoint, this type of scenario tends to create buying opportunities.
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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