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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: August 18 , 2011
Our Current Take:
The "retest" phase of the waterfall decline appears to be in full force this morning. The key question now is if the indices will follow the script and break to new lows (more than 70% of the waterfall declines have seen the indices ultimately break down below the initial panic/emotional low). European markets finished down hard, which might cause our markets to sell-off into the close this afternoon. However, this is pure speculation. Bottom Line: Watch the 1120 lows and the resistance at 1175.
We would consider being short-term buyers at: A close over 1210 on the S&P 500
We would consider being short-term sellers: A close below 1175 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: After what amounted to a rather lackluster bounce (in terms of history and the intensity of the decline), the short-term trend has turned lower again this morning. But since there is some support, we'll call it a bottoming process unless the lows are violated.
Intermediate-Term Trend: No change in our view of the intermediate-term outlook... with the MA's pointing down, we'll continue to rate the I.T. trend as moderately negative.
Market Internals: Surprisingly, our s.t. TBC model moved to negative on yesterday's close. This confirms the bearish action seen in the indices right now.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models were starting to perk up (albeit by VERY small degrees relative to the size of the bounce) but will undoubtedly turn tail and run today.
Support/Resistance Zones for S&P 500:
- Current Support: 1120ish
- Current Resistance: 1175-1200
Early Warning Indicators:
Overbought/Oversold Condition: The short-term oversold condition is quickly returning. However, there is room for further improvement.
Investor Sentiment: As we've been saying this week, our sentiment models never fell to the levels one might have expected to see. Our guess is that this was due to so many people looking for the bounce off of the panic low. Thus, we will be watching these indicators closely going forward.
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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