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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 28, 2011
Our Current Take:
With Santa having left the building, it appears that the bears are back at it today. And why shouldn't they be? Consider that (a) stocks had moved up 5.3% in 4 days, (b) the market had become overbought, (c) stocks were bumping into resistance, (d) there is no real support from a short-term perspective, and (e) there is nobody home to take the other side of the trades the computers will put on this week. So, after the short-term uptrend, it appears that a s.t. downtrend may be upon us - unless of course the Italian bond auctions go well tomorrow.
We would consider being short-term buyers at: A close above 1265 on the S&P 500
We would consider being short-term sellers: A close below 1240 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend had turned positive but is now threatening to break down.
Intermediate-Term Trend: As we've been saying for weeks now, despite the volatility, the int. term picture remains largely neutral.
Market Internals: Our TBC models were both positive coming into today's session. However, if the current selling holds, the s.t. model will undoubtedly turn neutral.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: As we've been saying for the past month or so, the momentum indicators have been great "tells". And with the momentum models only barely positive, this should be a concern to the bulls.
Support/Resistance Zones for S&P 500:
- Current Support: 1240
- Current Resistance: 1265
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain overbought from a short-term view but are neutral from an intermediate-term perspective.
Investor Sentiment: Our sentiment models continue be stuck in the neutral zone as the markets whip back and forth, not allowing one side or the other to take control from a sentiment perspective. In short, this market has little memory from one day to the next.
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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