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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 31 , 2011
Our Current Take:
There are two primary points to make regarding the charts this morning. First and foremost, the "action" has to be considered positive lately. All news is good news seems to be the battle cry and the buy-the-dip crowd has clearly gotten more aggressive. The second is the fact that the S&P 500 bumped its head on the 50% Fibonacci retracement level this morning. While traders could easily decide to ignore resistance and simply plow through the 1229 zone later this afternoon, this remains an important level to watch.
We would consider being short-term buyers at: A close over 1230 on the S&P 500
We would consider being short-term sellers: A close below 1200 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend rating is clearly positive at this time with the 5-day above the 10-day, which is also above the 18-day. And with all three shorter-term ma's moving higher, the trend favors the bulls at this point. However, we do need to watch the resistance levels.
Intermediate-Term Trend: We will continue to call the i.t. trend negative for now. We would need to see the S&P move back above its 50-day or 9-week moving averages and for the ma's themselves to start to flatten out.
Market Internals: Both of our TBC models remain positive at this point. This is the lone bright spot in the momentum picture at the present time.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models have moved up into the neutral zone but have yet to break into any sort of positive reading. Remember, these models are based on closing data, so it takes some real oomph over a prolonged period in order to be rated positive.
Support/Resistance Zones for S&P 500:
- Current Support: 1230
- Current Resistance: 1210-1200
Early Warning Indicators:
Overbought/Oversold Condition: The indices are now overbought on a short-term basis, which should represent a good test for the bulls.
Investor Sentiment: While sentiment is becoming positive overall, we remain concerned about the complacency of traders seen during the August swoon. In other words, our sentiment indicators did not reach levels normally seen during waterfall declines. This would seem to argue in favor of a retest in the next month or so.
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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