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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: January 3, 2012
Our Current Take:
This morning's joyride to the upside is being sponsored by the better-than-expected economic data out of China, Europe, and the U.S. Although the move looks and feels great to anyone holding long positions, there are still some issues to deal with on a chart basis. If you are looking only at the DJIA, today's move appears to be a clean break and a big positive. However, the same cannot be said for the rest of the indices as the S&P, NASDAQ, Midcaps, and Smallcaps all have resistance to deal with. So, if you are a bull, you're hoping that the Dow's "generals" will be able to lead the rest of the "troops" higher. But with this divergence in place, rest assured the bears will try and "make a stop" here at some point.
We would consider being short-term buyers at: A successful retest of 1265 on the S&P 500
We would consider being short-term sellers: A close below 1249 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now positive but there remains the resistance from the October highs on the S&P chart.
Intermediate-Term Trend: The intermediate-term picture is improving - especially on the DJIA chart.
Market Internals: Our TBC models, like the short-term price trend are both positive.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum indicators continue to be an important area to watch. The bulls REALLY need to see some improvement over the next day or two here.
Support/Resistance Zones for S&P 500:
- Current Support: 1265
- Current Resistance: 1285
Early Warning Indicators:
Overbought/Oversold Condition: Stocks continue to be very overbought from a short-term view and are neutral from an intermediate-term perspective.
Investor Sentiment: No change here as the sentiment indicators remain a mixed bag at the present time. As we've been saying, the macro view is uber-negative, while shorter-term sentiment indicators flip flop with the market's volatility.
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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