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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 22 , 2011
Our Current Take:
Although today's thrashing certainly doesn't "feel" good to anyone holding long positions, it also doesn't change much from a chart perspective. Just as we said when the market was at the top of its range and threatening to break out, the range remains intact. However, for those feeling a little bearish, the smallcaps are breaking down, and the DJIA and midcaps are threatening to do so. So, as we've been saying, we need to continue to watch those lines in the sand. How the market reacts at important support will be the key going forward.
We would consider being short-term buyers at: A close over 1160 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: Okay, this isn't too tough this morning - the short-term trend is down and down hard. However there IS support just below.
Intermediate-Term Trend: With the indices at the low end of the range and back below the weekly ma's we watch, we will continue to call the i.t. trend moderately negative. But again, how the market reacts at the August lows is the key thing to watch.
Market Internals: Our s.t. TBC models are both negative this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Since the needle on the momentum indicators never moved very far into the green zone, it isn't surprising to see them sagging here. This remains a key area to watch. Remember, these indicators were unimpressed with the recent move to the upside.
Support/Resistance Zones for S&P 500:
- Current Support: 1120
- Current Resistance: 1160
Early Warning Indicators:
Overbought/Oversold Condition: The S&P is now oversold again from both a short- and intermediate-term perspective. As such, the stars are aligned if the bulls can find a reason to rally.
Investor Sentiment: I've said this before but I'd like to repeat it again this morning. While some of the sentiment indicators are negative, there continues to be a fair amount of bravado coming from traders on the floor. Until EVERYONE gives up, a true bottom may not occur.
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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