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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: September 2 , 2011
Our Current Take:
The bottom line to the current technical action is that this week's breakout above key resistance at 1205 has turned into a "breakout fakeout." So, with the indices now back in the range, we will have to resume the process of establishing support once again. We see the near-term support levels at 1180 being tested (so far successfully) today. Finally, remember that old support at 1205ish is once again new resistance.
We would consider being short-term buyers at: A close over 1220 on the S&P 500
We would consider being short-term sellers: A close below 1180 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend has reversed course and can no longer be rated as positive. The good news is (a) the s.t. ma's have been moving up nicely of late and (b) there is near-term support.
Intermediate-Term Trend: No change today as 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 before upgrading the i.t. trend.
Market Internals: Our short-term TBC models moved back to neutral overnight and both could flip to negative if the current decline holds up.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: As we wrote earlier this week, our momentum models have moved up into the neutral zone but that's as far as they got. We will need to see a rally accompanied by some real momentum (i.e. something besides the HFT/program stuff) in order to get excited about any real upside.
Support/Resistance Zones for S&P 500:
- Current Support: 1180
- Current Resistance: 1205-1220
Early Warning Indicators:
Overbought/Oversold Condition: At the moment, the indices are no longer overbought on a short-term basis and remain oversold on an i.t. basis. If we could get a short-term oversold reading alongside the int. term reading, we'd feel better about the upside potential.
Investor Sentiment: Sentiment is currently only moderately positive. As we've been saying, we'd like to see sentiment become more negative in order to set up a nice year-end rally.
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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Been in Bear Market trend since late July in line with Ned Davis composite of 1 yr, 4 yr & 10 stock market cycles. NO EMPLOYMENT GROWTH IN AUGUST will be revised to NEGATIVE at end of Sept & next report. Washington TOO PARTISAN to get anything done to really help the economy. The FOMC has very few if any bullets left to help the economy.