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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 24 , 2011
Our Current Take:
Although everyone is waiting for the Ben Bernanke show on Friday morning, the market appears to be in the process of putting in a bottom here. Thus, we should expect to see some additional volatility (in both directions). The bulls see it as a positive that the 1120 support area has been tested several times over the past two weeks. We will not be surprised to see the market move up a bit into Bernanke's speech. However, we will also point out that the S&P was stopped in its tracks this morning at the 1175 resistance zone.
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: With the S&P having moved back above both its 5- and 10-day moving averages, we can upgrade the short-term trend rating to neutral. However, with the intermediate-term MA's still moving down hard, we will need to see further stabalization before upgrading further.
Intermediate-Term Trend: Although support has held up and the short-term trend is improving a bit, we'll continue to rate the I.T. trend as moderately negative.
Market Internals: As expected, our short-term TBC model did improve to neutral overnight. However, there is still a lot of ground to cover from a trend standpoint before any further improvement is likely.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models continue to wallow near the upper ends of the negative zone. Thus, if the bulls can get something going, these indicators could pick up relatively quickly.
Support/Resistance Zones for S&P 500:
- Current Support: 1120
- Current Resistance: 1175-1200
Early Warning Indicators:
Overbought/Oversold Condition: The short-term oversold condition has now given way to a neutral reading and our intermediate-term indicators are now only moderately positive. This remains an area to watch going forward.
Investor Sentiment: Our sentiment work continues to be a mixed bag. As we've been saying, the indicators are not at the extremes normally seen after such a steep decline.
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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