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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 12, 2012
Our Current Take:
As we said yesterday, a pullback to test new support zone is to be expected after the type run the bulls have had over the past 16 sessions. As such, we would expect to see the 1280 zone tested - perhaps emphatically so. However, if the bulls can hold the line at 1280, we would consider such a successful test as a "second chance buy point." But on the other hand, if the bears prevail, a break of 1280 to any meaningful degree would likely bring with it a test of the 1265 zone, which could occur quickly. So from my perch, it appears that we have a line in the sand to watch.
We would consider being short-term buyers at: A pullback to test 1280-85 or a close over 1297 on S&P 500
We would consider being short-term sellers: A close below 1279 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Despite the ongoing sloppiness, the short-term trend remains positive today. Price is above the s.t. ma's, which is above the i.t. ma, which is above...
Intermediate-Term Trend: The intermediate-term picture remains moderately positive. However, a break below 1260 would likely cause a downgrade to neutral.
Market Internals: No change again today. Our TBC models are both still positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: All three of our momentum models remain positive again this morning. As I've said recently, there is definitely room for improvement in these models as they are by no means at max positive levels. But as long as the models remain green, the bulls should be given the benefit of the doubt.
Support/Resistance Zones for S&P 500:
- Current Support: 1285
- Current Resistance: 1300
Early Warning Indicators:
Overbought/Oversold Condition: Nothing new to report: Stocks remain very overbought from a short-term view but and are neutral from an intermediate-term perspective.
Investor Sentiment: With the market hovering near its recent highs it is surprising that our sentiment indicators continue to be neutral overall. However, there appears to be a massive amount of skepticism toward the current rally - which is a plus for the bulls.
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: 5 day weighted ma moved forward two days (blue dash), 10 day weighted ma offset by 2 days (orange), 18 day weithged ma (cyan), and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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