Technical Talk: Bears Worried About the "Coordinated Response" Bazooka
September 23, 2011
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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 23 , 2011
Our Current Take:
With the G-20, the IMF/World Bank, and the BRICs in town right now, the bears are undoubtedly concerned about a "coordinated response" headline (aka the "bazooka") coming out over the weekend. As such, there may be a fair amount of short-covering going on at the present time. From a technical perspective, we've got an "inside day" happening right now, which, in short, means that yesterday's trend remains dominant. So, while we'd be a little concerned (well, okay, more like a lot) about pressing the bet on the short side right here, we continue to see the risks to the downside. Remember, a consolidation move, usually (a key word) is resolved with the market heading in the direction it was going before the consolidation began.
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: This one is easy... the short-term trend is negative but there is support at 1120 that appears to be being defended at this time.
Intermediate-Term Trend: Although the indices remain stuck in a range, we will continue to call the i.t. trend moderately negative. And a break below 1120 on a closing basis turns the outlook red.
Market Internals: No change here... Our s.t. TBC models are both negative this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models edged lower again overnight. While not terribly surprising, it is worth noting that they are only moderately negative at this time.
Support/Resistance Zones for S&P 500:
- Current Support: 1120
- Current Resistance: 1160
Early Warning Indicators:
Overbought/Oversold Condition: Same as yesterday... The S&P is now oversold again from both a short- and intermediate-term perspective. As we've said a time or twenty, the best moves occur when these cycles "line up."
Investor Sentiment: While our sentiment models continue to favor the bulls, I am still hearing too many people "calling the bottom." This means that we have most definitely NOT seen a capitulation move. Remember, bottoms occur when no one is looking for them and everyone has given up.
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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