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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: December 12, 2011
Our Current Take:
Stock trading continues to be driven by both the events and the outlook in Europe as well as the programs connected to movements in the dollar (but make no mistake about, the machines are in control today). So, with the dollar moving up strongly as the Euro dives, risk assets such as stocks and commodities are being sold. From a technical perspective, the S&P is once again back to the lower end of the near-term trading range and testing the line in the sand. A break below 1230 will likely bring in additional selling and a quick trip down to 1220.
We would consider being short-term buyers at: A close above 1260 on the S&P 500
We would consider being short-term sellers: A close below 1230 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend has not officially broken down, but it is wobbling badly at the moment. Again, a break below 1230 will cause us to downgrade the short-term trend.
Intermediate-Term Trend: Our rating of the intermediate-term trend continues to be somewhere between moderately positive and neutral.
Market Internals: Our TBC models came into this morning's session positive, but will likely turn mixed given the veracity of the selloff.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models, like the market continue to waver back and forth between neutral and moderately positive. But in light of the fact that the selloff appears to be picking up steam, we will likely see these indicators falter a bit.
Support/Resistance Zones for S&P 500:
- Current Support: 1200
- Current Resistance: 1260-80
Early Warning Indicators:
Overbought/Oversold Condition: Although the market is down, stocks remain overbought this morning from a near-term perspective while the intermediate-term indicators are neutral. Again, when you go sideways, these conditions don't change much.
Investor Sentiment: Given the extreme volatility, the intensity of the correlations, and the fact that programs are 100% in control of the market, sentiment indicators have become relatively useless lately. However, for the record, they remain dead 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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