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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: November 1, 2011
Our Current Take:
With the market very overbought, a pullback was to be expected. However, another news-driven HFT event was not. Putting the news aside and looking strictly to the chart action, we will suggest that, so far at least, the pullback is playing out about as expected. The indices bumped their heads on resistance and have since fallen back to test the support levels. And so far at least, the support levels have held up well in the face of the renewed volatility. We're watching the 1220 level closely today for it this level gives way, we may see another 20 points disappear in a hurry.
We would consider being short-term buyers at: A close above 1240
We would consider being short-term sellers: A close below 1220 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: What a difference a couple of hours makes these days. The short-term trend has suddenly and violently changed direction and is now moderately negative. However, if the bulls can hold the line here...
Intermediate-Term Trend: The i.t. trend is also being tested. So far it appears that we're seeing a pullback within the context of an uptrend. But the bulls are on thin ice here.
Market Internals: Our S.T. TBC model flipped to neutral overnight and we are likely to see more weakness in these models.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum models have briefly improved. However, given the degree of violence being seen in the current decline, our models aren't likely to hold up for long.
Support/Resistance Zones for S&P 500:
- Current Support: 1200-1220
- Current Resistance: 1255-1285
Early Warning Indicators:
Overbought/Oversold Condition: The short-term overbought condition is now gone and the market is quickly becoming oversold. Such is life in the HFT world.
Investor Sentiment: Our sentiment indicators remain moderately negative today. However, given the pop in "fear" over the last few trading hours, we will expect to see optimism take a dive quickly.
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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