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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: October 25, 2011
Our Current Take:
It is difficult to be a pure technician (meaning you are news agnostic) in this environment. Normally, chartists look at the charts and don't worry about anything that may be happening from a macro perspective. After all, the motto is "the tape tells all." However, given that the game is all about the EU Summit and the "grand plan" to deal with the sovereign debt crisis, we wonder if we can really rely on the tape action these days. With that said, today's pullback isn't exactly surprising after the recent breakout. And normally, any successful retest of the breakout level would be a "second chance buy" opportunity. So, we'll be watching the 1225 area with great interest today and tomorrow.
We would consider being short-term buyers at: A successful retest of the 1225 area
We would consider being short-term sellers: A close below 1220 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Although the anticipated near-term pullback is occurring, the short-term trend remains positive here.
Intermediate-Term Trend: We will continue to call the i.t. trend moderately positive. However, a weekly close below 1220 might cause us to take another look.
Market Internals: All three of our TBC models remain positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum models continue to improve - albeit begrudgingly. Thus, this area is moderately positive. But again, the bulls really need to put some volume behind the next rally try if they want it to stick.
Support/Resistance Zones for S&P 500:
- Current Support: 1220
- Current Resistance: 1265
Early Warning Indicators:
Overbought/Oversold Condition: Nothing new today... The S&P remains very overbought from short-term perspective and is neutral from the intermediate-term view.
Investor Sentiment: Our sentiment indicators continue to lose steam as optimism has clearly returned to the market. This puts the indicator rating at neutral.
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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