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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 22 , 2011
Our Current Take:
It appears that both teams are being tested this morning. The good news - at least for the bull camp - is that we have yet another "test" of the 1120 level this morning and so far, at least, it would appear to be successful. This means that traders from both teams can use this level as a guide. However, after a quick pop of 180 Dow points or so, the bears appear to be also taking a stand. So, while the markets are indeed oversold and there is some near-term support, the direction of the next move is not set in stone just yet.
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 1120 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Although it is a positive that the 1120 level has held, the bears are likely one headline away from blowing through it. Thus, unless the bears can put together something more than an oversold bounce, the short-term trend will remain negative.
Intermediate-Term Trend: No change again today as we'll continue to rate the I.T. trend as moderately negative.
Market Internals: Same song, different day. Both of our TBC models remain negative. The bulls have got to be able to flip at least the short-term TBC model to positive before they can have any hope for a meaningful reversal.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models aren't improving just yet, which is another sign that it might pay to remain cautious for a while.
Support/Resistance Zones for S&P 500:
- Current Support: 1120ish
- Current Resistance: 1175
Early Warning Indicators:
Overbought/Oversold Condition: The short-term oversold condition is being worked off a little this morning, but the intermediate-term models are still solidly oversold. Thus, with both models now "aligned," the bulls at least have a fighting chance to get something started - but they will need a trigger.
Investor Sentiment: As we've been saying, it is odd that our sentiment models do not display an out-and-out fearful environment. The bears argue that this means there is more downside potential.
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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