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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 27, 2011
Our Current Take:
It's on! The breakout game, that is, as traders and investors of all shapes and sizes appear to be scrambling to cover shorts and "get longer" into the good news out of Europe. We've seen at least one major institutional research firm increase their equity exposure today and our guess is that we will see more of this in the coming days/weeks. So, with the indices in breakout mode the next part of the game is to look for (a) overhead resistance and (b) the next pullback. So far at least, the Dow and S&P have broken above the obvious resistance at 11,900 and 1265 respectively. As such, it is important to remember that old resistance becomes new support. And on the topic of a pullback, unless HFT is involved, the indices shouldn't violate the support zones to any meaningful degree for a while.
We would consider being short-term buyers at: A successful retest of the 1250 area
We would consider being short-term sellers: A close below 1225 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Ah, I wish all days were this easy... The short-term trend - she's up and looking good.
Intermediate-Term Trend: Although the rally is impressive and the short-term breakout has held, the i.t. trend remains only moderately positive.
Market Internals: Not surprisingly, all three of our TBC models are positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum models have perked up a bit again this morning (I know, this goes in the "duh" category) but our volume indicators continue to be a bit of a problem. They aren't negative but they aren't positive either. I'd like to see these models improve.
Support/Resistance Zones for S&P 500:
- Current Support: 1220
- Current Resistance: 1265
Early Warning Indicators:
Overbought/Oversold Condition: The short-term overbought condition is back this morning, which is actually a plus. Remember, when a market gets overbought and stays overbought, it is a sign of strength.
Investor Sentiment: Our sentiment indicators remain neutral on balance. We will expect to see these indicators start to head south in earnest in the coming days.
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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